Why Was Texas So Vulnerable To The Recent Freeze?

by Chris Martenson

The point of being resilient is to be able to weather life’s storms, metaphorically and literally.

Yet the state of Texas recently failed at handling a few days of cold temperatures. Big time.

Poorly-insulated houses exploded, more or less, when their pipes burst and the resulting water flows easily brought down ceilings and walls:

burst pipes

This happened to so many homes that water pressure dropped below critical levels and entire communities suddenly lost their access to water.

So why was Texas so vulnerable?

Sure, the temperatures were far colder than the state normally experiences. But the real culprits here are the same ones that will sink our future in other areas: greed and short-sightedness.

By skimping on insulation a house can be made more cheaply. Hence the greed. By skimping on insulation, the future is sacrificed (because these homes will require massively more energy to heat and cool over their lifetimes). Hence the shortsightedness.

It’s really not all that hard or much more expensive to deeply insulate a home — say to “R40/R60”, meaning an R-rating of 40 in the walls and 60 in the ceilings. By doing this a few more dollars are spent up front, but then many multiples of those dollars are saved over time, which is to say nothing of the preservation of the future energy BTUs that won’t be wasted.

In many ways Texas’ experience with the cold snap is a huge object lesson in how the future is going to (continue to) unfold.

Common home construction practices reveal a profound disregard for the future. Wouldn’t a more mature culture somehow manage to build homes that can withstand a few days of cold temperatures? And if that were done, wouldn’t it also be true that those same homes would also be more efficiently cooled during the hot days, too?

The only reasons you might fail to insulate properly is because, well, you simply are operating under the false assumption that the future will be more or less exactly the same as the present. That the climate will remain stable and that sufficient energy will always be there to heat and cool our homes.

These are two very awful assumptions, each easily proven to be illogical and erroneous.

A Systematic Nightmare

One thing the Texas cold snap laid bare was just how unprepared its electrical and energy distribution systems were for this event.

Natural gas pipelines with too much water vapor in them froze solid cutting off gas supplies to electrical generating stations. The further loss of nearly all the wind generation and solar inputs further starved the system of needed juice. The entire system very nearly crashed, forcing the utilities to turn to rolling blackouts to compensate.

These, in turn, were (predictably) often executed in a manner that betrayed the poor and favored money:

Lit-Up Downtown Skylines Are Enraging Powerless Texans

Feb 17, 2021

As night fell over the state on Tuesday, local leaders urged residents to do their part to reduce strain on the grid, describing a dire situation that was only getting worse. Texans whose lights and heat were still on were asked to live as if they weren’t, and to set their thermostats even lower. That’s sound advice. We all need to do our part—those who’ve been collecting the water dripping out of their faucets to prevent a freeze may have noted how quickly drops accumulate in a bucket—but individual effort didn’t get us into this crisis, and it’s not enough to get us out.

That brings us to the crux of the problem: While many Texans are suffering, it seems like the sacrifices are unevenly distributed. Indeed, Texans on social media have kept warm by burning the fuel of white-hot rage as photos circulated on Sunday and Monday nights of brightly lit city skylines. The illuminated parking garages and glowing, empty high-rises towering over cities were taken as a slap in the face by residents shivering in dark homes or dropping the thermostat another degree in order to save a marginal amount of energy.

Of course it’s a very difficult thing to figure out how to cut power to major cities because it often has to be done in giant contiguous areas, not building by building.

Any block with a hospital on it cannot have its power cut. The same is true for areas with other emergency services such as 911 call centers or the pump stations supplying water.

But even with that, the residents of Texas noted there was a striking disparity between wealthier neigborhoods and poorer ones:

Texas power outages during freeze

This is a ‘tell’ about how the future will unfold. It’s wrapped into the Great Reset narrative. It’s also how nearly all of history has unfolded. The elites seem to skate by with few real sacrifices while the majority of the burdens and pains are borne by the lower classes. Same as it ever was.

Another telling moment was in the shocking prices for electrical service that were billed out to customers.

Electricity, priced in an open and mostly deregulated market in Texas, shot from a few cents per kilowatt hour to $9,000.00 per kilowatt hour at the peak.

Some say this was the market working as intended. A moment of severe supply constraints forced prices to adjust higher, thereby causing consumers to self-ration. However, because the price spikes happened in real time and bills are sent out monthly, this ‘explanation’ isn’t really all that satisfactory. Sending some poor retiree a $16,000 monthly electricity bill two weeks after the event has no effect on supply/demand at the decision point when it might have mattered.

Instead, what we can take from this debacle is that when there’s a very rare event that comes along and disrupts things, the “free market” demands that those bills be paid because, after all, a deal’s a deal.

Ordinary folks will be paying off $50B in Texas freeze costs for decades

After days of freezing temperatures with no power, the lights are back on in Texas. Now, there are bills to pay.

The state’s energy grid didn’t come back all at once and the high demand sent costs from 12 cents to $9 per kilowatt-hour, reported The Associated Press (AP), which added up quickly. Gov. Greg Abbott (R) and Texas lawmakers are promising relief, and electric companies aren’t turning off power to those who aren’t able to cover their bills, reports the Texas Tribune, at least for now.

But someone will have to pay what BloombergNEF estimates is $50.6 billion in costs from the beginning of the Blackouts until Friday morning. CPS Energy, which serves San Antonio, is among those withholding storm charges for now, saying online that they are trying to spread the costs over 10 years or longer. Either way, however, the customers will likely foot the bill.

Anybody with a memory knows that a deal is only a deal when the bill foots to the average person…but when the rich get caught in a squeeze they demand “do overs”. And they get them.

Remember the “Flash Crash” of 2010?

Chart of May 2010 Flash Crash

That happened in ‘a market’ where ‘a deal is a deal.’ I knew people who made, for a brief period, a lot of money by being positioned for just such a crash. Why a brief period? Because that crash was going to cost a lot of well-connected brokerage houses a lot of money and so, predictably, the SEC stepped in and busted these losing trades. They imply undid them.

They enforced a “do-over” for those in power:

Regulators ended up cancelling trades in U.S.-listed securities that saw declines of 60% and worse during the five-minute meltdown. About 70% of the busted trades involved ETFs, the Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint report on the day’s chaos.

(Source – MW)

Rich people losing money? Oh well, then I guess we have to bust those trades. Hedge funds losing a lot of money on their GameStop naked shorts? Oh well, then I guess we just have to ask the Robinhood trading app to limit their clients activities to selling only.

Electricity prices spike many tens of thousands of percent due to ‘unforeseen’ circumstances that were entirely predictable after all?   Oh well, then I guess ordinary Texas citizens will still have to pay those bills.

That’s the pattern here. Head they win, tails you lose.

You know what I cannot find anywhere, except for one small article about a relatively small amount of the $50 billion Texas electricity price tag? Who’s on the other end of that $50 billion windfall. It’s a legit question…who’s getting all that money?

I understand ‘market forces’ and all that, but strip away the mumbo-jumbo and you’ll quickly deduce that, in terms of capital utilization, the exact same power plants and service lines were in use during the days of the cold snap as in the days before it. No new infrastructure was built. No capital expended. Costs simply shot up.

So if one set of parties is out $50 billion, who’s got it? Where did it go? To whom?

This is a surprisingly difficult question to answer, although it really shouldn’t be.

Here’s that one, relatively insignificant article that allows us to track a few hundred million of the cash flows:

Texas energy woes are windfall for Australian bank

The deep freeze that plunged millions of Texans into darkness is rippling through energy markets in unexpected ways, producing a financial windfall for an Australian bank and severe pain for other companies caught up in the disruption.

The turbulence led to a bonanza for commodity traders at Australia’s Macquarie Group Ltd., whose ability to funnel gas and electricity around the country enabled them to capitalize on soaring demand and prices in states such as Texas.

The bank bumped up its guidance Monday for earnings in the year through March to reflect the windfall. It said that net profit after tax would be 5% to 10% higher than in the 2020 fiscal year. That equates to an increase of up to 273.1 million Australian dollars, equivalent to around $215 million. In its previous guidance, issued Feb. 9, Macquarie said it expected profits to be slightly down on 2020.

Oh good. A bank. A foreign bank.

That should help ease the pain of ordinary Texans as they confront budget-busting electricity bills. Commodity traders win, ordinary people lose. Same as it ever was, especially in a financialized economy without a heart.

Again, this is a metaphor for what we can expect going forward. Heads they win, tails you lose. The rules is simple – if a windfall is headed in the correct direction (towards power and money) it will be allowed to stand. If it heads in the wrong direction, the trades will be broken, the rules will be changed, and if it’s serious enough, there will be instant lawsuits and Congressional hearings, as we saw around the GameStop debacle.

The Most Expensive Disaster in Texas History?

We might want to ask ourselves too, about the larger lesson here. How is it that a simply cold snap – albeit historically rare – could well prove to be the costliest disaster in a state that is no stranger to disasters?

Winter storm could cost Texas more money than any disaster in state history

Feb 25, 2021

The winter storm that left dozens of Texans dead, millions without power and nearly 15 million with water issues could be the costliest disaster in state history, potentially exceeding the $125 billion in damage from Hurricane Harvey.

The deadly 2017 hurricane devastated the Gulf Coast region. Last week’s winter storm impacted every region of the state, a reason why experts and officials are discussing the possibility of damage and cost exceeding those from Hurricane Harvey.

“All 254 counties will have been impacted in some way by the freeze,” said Lee Loftis, director of government affairs for the Independent Insurance Agents of Texas. “That is just unheard of.”

We now live in a world of what I now term ‘climate instability.’ The remarkable – and geologically rare – climate stability of the Holocene granted humans the ability to really settle down and organize.

Climate instability makes it difficult to do things like farm and build up civilizations in any one spot. The cold snap in Texas destroyed a lot of crops. Droughts, floods, heatwaves and cold snaps are all agriculturally limiting events. Pack enough of them together and you suddenly have a real predicament on your hands.

Are we leaving a period of awesome climate stability and heading into a period of climate instability? Sure seems like it.

The more immediate lesson here is that even a relatively small amount of climate instability – such as what Texas experienced when the jet stream got wobbly and allowed a blob of cold air to escape its fencing embrace – can be enormously expensive to an unprepared civilization.

Texas was unprepared, just as we are all largely unprepared for a future of extremes. We can measure that in costs, in dollars, but really we should be thinking of it in terms of the energy costs required to rebuild and reshape our entire built infrastructure to be both more energy frugal and resilient to whatever extremes are coming next.

That’s the main lesson from Texas that ought to be front and center in people’s minds; the fragility of it all. The obvious lack of readiness on display. Maybe too elevating the reasonable concern that we’re going to face more and more of these sorts of events as greed and short-sightedness prove to be a poor match for the future we’ve created for ourselves.

Conclusion

I think we should really sit back and reflect on Texas and what it tells us about our current state of readiness and what the future might hold.

The obvious conclusion is that Texas was not ready and was not resilient. At least not at the systems level. Not as a political culture either.

This means that individuals and communities in Texas (and elsewhere) really ought to apply their efforts towards becoming more resilient on their own terms.

Distributed energy systems can be created, houses can be more deeply insulated, and networks of neighbors can help each other during such periods of stress.

One example: as a homeowner in the northeast I know how to shut off my water and drain pipes, which I would do defensively and proactively during a sustained power outage and cold snap. Doesn’t take all that long.

But you have to know how to do it, and even that it has to be done.

Because if you don’t…

Texas storm damage to ceiling

That cultural awareness and skill set wasn’t part of the Texas DNA, which only makes sense given the rarity of the event. But it was certainly there in some of the people, in some old-timers I bet. The resilience skill set was out there and with appropriate social capital in play, it could have been brought to use and been tremendously helpful.

The larger lesson here is that your skill sets really will make all the difference in a world of rapid changes and increasingly large,potentially chaotic, events.

I’d love to hear from our many Texas readers about their own experiences during the recent freeze. I’ve talked with several of you by phone, and your stories are really important for others to hear.

So if you feel like sharing them, please do in the Comments section below.

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