One Final Thought About Texas’s Catastrophe
This weekend, I wrote about Texas’s catastrophic blackouts for The Atlantic:
Many of the same issues that hampered [Texas also limited] the United States in its response to the COVID-19 pandemic. Too many crucial systems in this country are run on an ad hoc basis. A lack of planning, a reliance on just-in-time logistics, and a self-defeating trust in the profit motive are withering the American economy and way of life.
There’s one point I want to make about Texas’s grid, called ERCOT, that I didn’t make in that piece. ERCOT has two defining traits: More than any other state’s power sector, it is structured to work like a free market, and it is cut off from the rest of America’s electricity infrastructure in order to escape federal regulation. Many commentators, including me, blame the state’s total trust in those two traits for its deadly failure last week.
So what should replace it? The crowning institution of early-20th-century electricity is the Tennessee Valley Authority. In many ways, the TVA is the anti-ERCOT: Franklin D. Roosevelt imagined it as “a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise.” You can see, in that quote, FDR’s good liberal trust in institutions and bureaucracy—as well as a more general 1930s optimism about the power of institutions to bring order to chaos.
ERCOT represents a different sort of excitement—a post-1980s trust in the self-regulating power of markets and their ability to find order in chaos. As a market, ERCOT can reach a societally optimal outcome even if some of its participating firms, the ones that actually make energy, are incompetent or wasteful. Theoretically, ERCOT automatically punishes those firms. The TVA could never permit this kind of humility! A “corporation clothed with the power of government” only works if the organization is, itself, highly competent.
ERCOT was revealed last week to be highly ineffective as a market. (The TVA, which still exists, didn’t lose power.) Many people now rightly doubt that ERCOT’s core principle can work at all. As my colleague Adam Serwer wrote, there is no replacement for good state-level governance.
Yet if lawmakers were to remake ERCOT, what organizational design would they choose? Many investor-owned utilities have not covered themselves in glory. More broadly, what types of institutions excite people today the way that federal bureaucracy inspired the 1930s, or markets seemed to shine in the 1990s? Could there be an Amazon.com of electricity? A BlackRock of power? A mutual-aid group of transmission?
I’m not talking only about electricity here. If climate change is to be addressed, I suspect that Americans will need new modes of organization, new types of governance, to corral state capacity and build enthusiasm.