Millions of Texans face power outages as grid problems continue

NBC's Jay Gray reports millions of Texans continue to be affected by the power outage. Pipes are also freezing and breaking, leading to high demand for plumbers to fix the issue. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

Millions in Texas are still in the dark following the deadly winter storm that caused the state’s worst blackouts in decades, leaving households without power as temperatures dropped to record lows.

While the state scrambles to restore power, questions are arising about why Texas was so ill-equipped, and what can be done to ensure this doesn’t happen again.

A confluence of factors led to the historic blackouts, and officials are already calling for investigations into the chain of events.

Looking forward, experts say there are a number of steps the state can take to combat future issues, including weatherizing equipment and increasing reserve margins.

“We need to better realize how vulnerable our energy systems are — both electricity and the vulnerability of electricity and natural gas systems together,” said Daniel Cohan, associate professor at Rice University. “This is going to take some regrouping and there’s not going to be a single step. We’re going to need a portfolio of steps.”

The storm dumped snow and ice across the Midwest and South, taking power production offline just as consumers turned up their thermostats amid the frigid temperatures.

No power source was immune — coal, natural gas, crude, wind and solar production all dipped. Pipeline freezes impeded the flow of natural gas and crude oil. The outages were concentrated in Texas as the grid was forced to shed load, unable to keep pace with the spike in demand. At one point, more than four million people were without power.

“It was a black swan event from the demand side and supply side, and the freeze-off created this supply issue,” said Michael Bradley, managing director at Tudor, Pickering, Holt & Co. He noted that equipment freezing is not a headline event.

However, over the weekend all 254 Texas counties were placed under weather advisory warnings, which is rare. Typically if a cold front hits one area, production moves elsewhere. That wasn’t possible this time around, and icy roads meant equipment couldn’t be serviced.

Of course, power equipment operates in places that are much colder than Texas, so one step that can be taken would be to winterize equipment. The state is used to extreme heat and drought, but its infrastructure simply is not equipped to operate in extreme cold.

“They have the infrastructure in place that meets the needs 99.9% of the time,” said Rebecca Babin, senior equity trader at CIBC Private Wealth. “On these tail events, they’re really ill equipped. They’re not incentivized to invest in the infrastructure to make those improvements.”

Texas has the only deregulated power market in the U.S.

The majority of the state’s power is controlled by the Electric Reliability Council of Texas, which is known as ERCOT. It’s a competitive pricing market, meaning it trades on supply and demand. Companies are trying to bring the cheapest form of energy to the market, which can come at the expense of building out more reliable infrastructure systems.

“Texas has chosen to operate its power grid as an island,” noted Rice University’s Cohan, which means the state can’t import power from other states when it’s most needed. He added that the impacts are also felt in the summer, when Texas has an abundance of power that it can’t export.

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