mixed greens

Weighing the costs

Posted 3/10/21

What began on February 9 as a 40-second conversation about approaching cold weather at a board meeting of the Electric Reliability Council of Texas (ERCOT) has turned into one of the most disastrous …

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mixed greens

Weighing the costs


What began on February 9 as a 40-second conversation about approaching cold weather at a board meeting of the Electric Reliability Council of Texas (ERCOT) has turned into one of the most disastrous power failures in recent memory. It may be months before the full cost in human lives is known; medical examiners are still investigating upticks in deaths from hypothermia, carbon monoxide poisoning and house fires. The cascading disaster represents the convergence of decisions in three policy areas that prolonged the outage and maximized the misery: the peculiar structural deficiencies of Texas’ “go it alone” power grid, a political culture of climate-change denial and an ideological aversion to basic regulatory action and consumer protection. While these foibles might seem unique to Texas, there are plenty of lessons for all of us.

Lesson number 1: Weather-related disasters are increasing and we need to plan for them. The National Oceanographic and Atmospheric Administration (NOAA) estimates that between 1980 and 2020 there were 285 “billion-dollar” weather and climate disasters; the agency estimates the cost of these 285 events exceeds $1.875 trillion. The unhappy hour I spent doom-scrolling through NOAA’s year-by-year data confirmed that these costly wildfires, hurricanes, winter storms, floods, tornadoes, hailstorms, heat waves and droughts have increased in frequency and severity over that 40-year period. In fact, 2020 set a new annual record with 22 events, the sixth consecutive year in which 10 or more billion-dollar weather and climate disaster events have occurred. The previous record of 16 such events occurred in 2011 and 2017. All fifty states have experienced at least one, but none so many as Texas, which sets the record at 124 events since 1980 and also produces more greenhouse gas emissions than any other state.

Lesson number 2: Grid modernization will save lives and money. A groundbreaking 2004 study by the Lawrence Berkeley National Laboratory at UC-Berkeley estimated that power outages and reliability events (shorter interruptions and power quality events) cost the U.S. an average of $80 billion a year. This figure could approach $135 billion in a single year depending on the number and type of event, duration, time of day, day of the week and season, and the number of customers in the affected region and the category of customer: residential, commercial or industrial. In 2013, the U.S. Department of Energy zeroed in on outages caused by severe weather and identified 679 widespread weather-related power outages between 2003 and 2012 with an average annual cost ranging from $18 billion to $33 billion. A 2019 survey of manufacturing, data center, health care, small franchise and education sector businesses across the country—including New York and Pennsylvania—found that one in four businesses experienced a power outage at a rate of one per month, and that the costs could range into the millions of dollars per hour. Power outages at large data centers can cost as much as $8,851 per minute of downtime.

Lesson number 3: The benefits of grid upgrades outweigh the costs. By identifying gaps in data and creating a baseline understanding of the issues and variables involved, the 2004 Berkeley study provided a framework essential to the “benefit” side of a benefit-cost analysis of needed investments in grid infrastructure. In 2010, the U.S. Department of Energy’s National Energy Technology Laboratory reported on the economic benefits of a nationwide smart grid, which would reduce the incidence of power failures and improve the reliability and quality of power while delivering energy efficiency benefits. At that time, the independent Electric Power Research Institute estimated that the required grid modernizations would cost $165 billion over the next 20 years, and that the benefits would be $638 to $802 billion—a benefit-to-cost ratio of four or five to one.

For all the ample data on the economic costs of infrastructure failures, none of the studies I’ve cited can capture the human misery experienced by residents of Texas last month, the grief over a child who froze to death in his own bed or a family asphyxiated trying to keep warm in their car. No study can quantify the social cost of the trauma experienced throughout the country by families affected by climate disasters, or the ways those experiences, lived or only anticipated and feared, might damage our health and mental well-being, or erode our confidence in the future. And no benefit-to-cost ratio can adequately weigh the value of a life saved or a family preserved. That’s the real lesson Texas is offering us.   

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