How Texas’ Grid Beat the Heat

Rewarding businesses that cut power use the most during peak times sparks a conservation race

- Naureen Malik

In February 2021, an extreme winter storm hit the Texas power grid hard, triggering widespread blackouts. This summer’s waves of extreme heat are again putting the electricity network to the test. But this time the system has kept running, thanks in large part to a regulatory quirk that has little to do with environmental sensitivity or civic responsibility and everything to do with cold hard cash.

The state provides a big financial carrot for businesses that reduce their power demand the most on certain peak days, coupled with the smack of a painful stick for those that aren’t as successful doing so. The result: Big companies are slashing electricity use at critical moments to minimize their share of expenses to maintain the grid, saving them millions of dollars in the process.

The setup is complex but potentially lucrative. In addition to paying for the electricity they use, factories, cryptocurrency miners, and other large Texas power consumers are responsible for helping cover about $4 billion in annual expenses to build and maintain transmission lines. Each company’s share of the total is based on how much electricity it uses during periods when demand is highest. So any time demand spikes, companies have an incentive to throttle back operations, dim lights, start backup generators, and do whatever else they can to avoid getting saddled with a big chunk of the expense.