Texas Targets the Free Market

R emember the biblical storm that swept Texas in February 2021, shutting down the state’s utility grid, plunging millions of residents into Dantean cold and dark for days, and leaving at least 246 people dead?

This week, that storm may claim another victim: the Lone Star State’s successful energy market.

Citing the collapse of the power grid two years ago, Texas lawmakers are considering nine bills that would put Texas firmly in the economic-protection business. If enacted, the legislation would box out any alternatives to incumbent natural gas, coal, and nuclear energy.

The package of bills, backed by Governor Greg Abbott, embodies a kind of confidence that we’re familiar with in California, hubris that triggers our Hayekian anxiety around government regulators who believe they’ve conquered the knowledge problem.

You don’t have to imagine that Texas will one day look like the Golden State. With this legislative package, it already does.

For about a decade, Texas’s power grid reliably delivered electricity generated from a variety of sources. With its emphasis on price, abundance, and choice, that free-ish market in energy fueled Texas’s remarkable economic growth. We Californians — saddled with the nation’s highest energy costs, seasonal blackouts, and wildfires sparked by downed long-distance transmission lines — could only look on with envy. Or not only look on: Many of us moved there.

Now that success is imperiled.

Even before the storm had cleared, Abbott and others seized on the crisis to declare renewables the weakest link in the Texas grid.

“Texas is blessed with multiple sources of energy, such as natural gas and oil and nuclear,” Abbott told Fox News’s Sean Hannity with Texas still in the freezer. “But you saw from what [inaudible] said, and that is our wind and our solar got shut down, . . . and that thrust Texas into a situation where it was lacking power in a statewide basis. . . . As a result, it just shows that fossil fuel is necessary for the state of Texas, as well as other states, to make sure that we’ll be able to heat our homes in the wintertime and cool our homes in the summertime.”

Given all that, Abbott says, what Texas needs now is a massive bailout of natural gas–electricity generation. That bailout includes the elimination of competition from renewables and new technologies including grid-stabilizing battery-energy storage and fast-ramping natural gas.

It’s possible this is merely the reaction of a politician who, like California governor Gavin Newsom, is so obsessed with being seen as the Indispensable Man, the white-paper Oracle of Delphi, the Ken Jennings of public policy.

But there’s certainly something darker afoot in the Texas capitol — something more California. Just as Gavin Newsom has worked aggressively to bar fossil fuels from the marketplace and allow only renewables, Greg Abbott is working to do the opposite. Just as Abbott has seized on human tragedy as a way to score political points, Gavin Newsom caravans news crews into smoldering Northern California towns to use human tragedy as a backdrop for jeremiads about “dog-eat-dog capitalism,” about “corporate greed meeting climate change.” Abbott would boost the fortunes of some capitalists over others; Newsom would, he claims theatrically, eliminate capitalism itself.

Both governors, it turns out, don’t care much for free markets or free people.

What Really Happened in Texas?

Sober analysis of the storm of 2021 indicates that Texas was — and remains — unprepared for extreme weather. The Wall Street Journal may have put it best: “Sure, some wind turbines glitched under cold weather conditions, but so did natural gas- and coal-fired power. That is partly because water intake facilities froze for these generators, just as they did in the last extreme winter, seen in February 2011.”

So, how to best prep for such extreme weather? Federal regulators recommend hardening infrastructure for extremes of cold and hot. Others recommend requiring grid participants to sign delivery guarantees and creating an insurance market behind energy producers who fail to meet those promised deliveries. Still others suggest running an extension cord from Texas’s famously go-it-alone grid to the systems of neighboring states that could help power up the Lone Star State in a future crisis.

Instead, Abbott jumped into the debate with the sort of terrifying self-confidence — the speed, the imperial omniscience — that we’ve come to expect from Gavin Newsom: He bet everything on one thing — in this case, incumbent natural gas, coal, and nuclear.

Five months after the storm, on July 6, 2021, Abbott summed up his mandate in a memo to the Texas Public Utilities Commission. In just under two pages, he declared any alternative to natural gas, coal, and nuclear power unnecessary, even dangerous.

First, the governor ordered the commission to “foster the development and maintenance of adequate and reliable sources of power, like natural gas, coal, and nuclear power.” The use of the word “like” would seem to suggest that there are other such sources. It does not. The rest of the document makes it clear that gas, coal, and nuclear are the only options. Everything else is, by implication, unreliable.

Second, in case you missed his point, Abbott directed the commission to green-light “natural gas, coal, and nuclear power plants [because they] are essential for the reliability and stability of the electric grid because they can be scheduled to provide power to the grid at any time.” Allowing others to participate in the market — wind, solar — would be dangerous.

Third, in case you missed points one and two, the PUC must direct the state’s grid operator “to establish a maintenance schedule for natural gas, coal, nuclear, and other non-renewable electricity generators to ensure that there is always an adequate supply of power.” My emphasis is added in the hope you’ll notice that the governor is cool with alternatives so long as they’re natural gas, coal, and nuclear power. That’s because, Abbot insists, only natural gas, coal, and nuclear power are reliable fuels that need only the lightest regulatory touch: In the advent of extreme weather, commissioners should break the glass and use the giant foam finger therein to nudge generators away from routine-maintenance shutdowns. Renewable generators and new technologies need not apply.

Only one of the governor’s four demands even hints at a true, Texas-style free-market response to the problem: the creation of incentives — he calls them “reliability costs,” like, perhaps, an insurance market for producers — that would help guarantee delivery during periods of peak demand. But hold, please: Abbott ordered the Texas PUC to impose these reliability costs on just one market segment: “generation resources that cannot guarantee their own availability, such as wind or solar power.”

An All-of-the-Above Menu

You don’t have to love renewables in order to allow investors and customers the freedom to take advantage of them. Love alternatives to fossil fuels or hate them, it’s something of an American ideal to preserve consumer choice, the kind of freedom we California conservatives see as a feature of free markets; the sort of liberty we’ve generally admired about Texas even as we’ve watched our family, friends, and neighbors move there.

In Texas, a remarkable coalition wants to preserve the freedom for the market to produce and buy any kind of energy that consumers want — freedom that Abbott’s plan would eliminate. Yes, some of these coalition members are authoritarian, California-style faith-inspired progressives and such blue-check environmental groups as the Sierra Club who would, given a minute, eliminate natural gas, coal, and nuclear.

But the coalition also includes fans of markets. Opponents of Abbott’s Lou Costello energy plan include such business associations as the acronymically challenged Coalition for Dispatchable Reliability Reserve Service (“a diverse group of small and large commercial businesses and industrial consumers, Retail Electric Providers, Electric Co-Operatives, Municipally Owned Utilities, energy storage providers, renewable and thermal energy interests, emerging technology providers, Aggregators of Distributed Energy Resources, and electricity brokers”), the Texas Oil and Gas Association, the Texas Industrial Energy Consumers (“large industrial manufacturers and chemical plants in electric consumer issues”), and the Texas Association of Manufacturers (TAM).

Like the others, TAM is skeptical about Abbott’s plan to impose any energy product on Texas consumers. The governor is working from “flawed assumptions,” TAM declared, and called instead for “operational flexibility” — that is, an all-of-the-above menu of options that sounds remarkably like a free market.

That’s the Texas we California conservatives think we know. The other stuff — Abbott’s sell out to a favored group — is just a reminder that energy isn’t a simple binary issue of fossil fuels vs. alternatives, a proxy for Left-versus-Right battles, a civil war pitting patriots against communists. It’s not former-Californian-turned-Texan Joe Rogan calling a mixed-martial-arts brawl between Dan Crenshaw and Greta Thunberg. No, the nine bills now before the Texas legislature are a reminder that we have no option to be ruled by angels. In America, we’re generally ruled by mere politicians, men such as Gavin Newsom and Greg Abbott.