Texas’ power failure: Limited chance for profits vs. huge social costs

Enlarge / Winterizing every wind turbine in Texas makes economic sense. So why wasn't it done? (credit: Ted Horowitz / Getty Images)

Just over a year ago, a cold front moved into Texas and stayed there. As demand for electricity soared, various generating sources fell offline, leading to extensive grid failures that left customers without power for days. Nearly every form of power generation suffered from failures, as did the system supplying generators with natural gas. The total cost in terms of lost business and lives is estimated at roughly $130 billion.

Initial analyses provided some suggestions on how Texas could restructure its grid to provide better protection against future events like this. But a new study has asked a related question. Texas has economic incentives that should induce commercial generators to install winterization equipment on their own. Why weren't those incentives enough to get generating companies to install cold-weather hardware?

The new analysis finds that the financial incentives for winterization carry a high degree of risk. And the total incentives for winterization are far lower than Texas paid for the failure to winterize.

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