Texas ERCOT Power Grid leads U.S. wind generation yet faces isolated interconnection, FERC exemption, and high industrial energy use, with distinct electricity and natural gas prices managed by a single balancing authority.
Key Points
The state-run interconnection that balances Texas electricity, isolated from FERC oversight and other U.S. grids.
✅ Largest U.S. wind power producer, high industrial demand
✅ Operates one balancing authority, independent interconnection
✅ Pays lower electricity, higher natural gas vs national average
For nearly two decades, the Lone Star State has generated more wind-sourced electricity than any other state in the U.S., according to the Energy Information Administration, or EIA.
In 2022, EIA reported Texas produced more electricity than any other state and generated twice as much as second-place Florida.
However, Texas also leads the country in another category. According to EIA, Texas is the largest energy-consuming state in the nation across all sectors with more than half of the state’s energy being used by the industrial sector.
As of May 2023, Texas residents paid 43% more for natural gas and around 10% less for electricity compared to the national average, according to EIA, and in competitive areas shopping for electricity is getting cheaper as well. Commercial and industrial sectors on average for the same month paid 25% less for electricity compared to the national average.
U.S. electric system compared to Texas
The U.S. electric system is essentially split into three regions called interconnections and are managed by a total of 74 entities called balancing authorities that ensure that power supply and demand are balanced throughout the region to prevent the possibility of blackouts, according to EIA.
The three regions (Interconnections):
Eastern Interconnection: Covers all U.S. states east of the Rocky Mountains, a portion of northern Texas, and consists of 36 balancing authorities.
Western Interconnection: Covers all U.S. states west of the Rockies and consists of 37 balancing authorities.
ERCOT: Covers the majority of Texas and consists of one balancing authority (itself).
During the 2021 winter storm, Texas electric cooperatives were credited with helping maintain service in many communities.
“ERCOT is unique in that the balancing authority, interconnection, and the regional transmission organization are all the same entity and physical system,” according to EIA, a structure often discussed in analyses of Texas power grid challenges today.
With this being the case, Texas is the only state in the U.S. that balances itself, the only state that is not subject to the jurisdiction of the Federal Energy Regulatory Commission, or FERC, and the only state that is not synchronously interconnected to the grid in the rest of the United States in the event of tight grid conditions, highlighting ongoing discussions about improving Texas grid reliability before peak seasons, according to EIA.
Every other state in the U.S. is connected to a web of multiple balancing authorities that contribute to ensuring power supply and demand are met.
California, for example, was the fourth largest electricity producer and the third largest electricity consumer in the nation in 2022, according to EIA, and California imports the most electricity from other states while Pennsylvania exports the most.
Although California produces significantly less electricity than Texas, it has the ability to connect with more than 10 neighboring balancing authorities within the Western Interconnection to interchange electricity, a dynamic that can see clean states importing dirty electricity under certain market conditions. ERCOT being independent only has electricity interchange with two balancing authorities, one of which is in Mexico.
Regardless of Texas’ unique power structure compared to the rest of the nation, the vast majority of the U.S. risked electricity supplies during this summer’s high heat, as outlined in severe heat blackout risks reports, according to EIA.
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