With all the plaudits given this book and the importance of the topic, I really wanted to give it a favorable review. I am sorry that I must be the one to say that I found it to be full of misunderstandings and apparently unintended misleading data analysis that is being used by advocates for a bloated full Capacity Energy Grid (such as unions, both political parties and both nuclear and renewable energy interests), all in the name of lowering utility bills for consumers. I will let readers decide for themselves if the book's author is being promoted by special interests as the new Rachel Carson of the Clean Power Capacity Grid policy at the expense of electricity customers at the end of this book review. The book's author is a highly qualified air pollution chemist and advocate for nuclear power in Vermont, a hot bed of renewable power and environmentalism.
I worked for 20 years as a public utility appraiser for the largest urban water agency in the nation in California. I organized a task force for that agency to deal with the 2001 California Energy Crisis mentioned by the author in her book as an example of grid unreliability. Earlier in my career, I was a project coordinator for the installation of solar hot water heating systems in thousands of units of public housing. I have also been a water and energy analyst for a think tank and have written for several energy policy websites. I have also valued private stock-held utility companies regulated by the California PUC. As an independent and impartial utility appraiser, I am not captured by either of the ideologies of the Left or Right on this issue and no one paid me for this review.
I have read the author’s book and listened to two of her online video presentations and find it hard to believe she has funded all this as a citizen energy activist. Nonetheless, I shall address the central premises of her book as objectively as possible.
Premise 1: No One is Responsible for Reliability of Regional Transmission Organizations. Patently False. This is apparently meant to cast blame for electrical blackouts on grid operators who the author fails to mention are appointed by government (e.g., the California Independent System Operator is not independent and serves at the whim of the governor). A grid operator is responsible for holding daily wholesale energy auctions to assure scheduling of delivery of sufficient wholesale power to power retailers over a large regional area. But the responsibility of building and maintaining enough power plants to assure reliability, especially during extreme weather events, is held by public utility commissions (PUC’s), not specifically mentioned by the author.
The author also curiously avoided mentioning that FERC (Federal Energy Regulatory Commission) and NERC (North American Electric Reliability Corporation) oversee the reliability of interstate electric transmission for all grids but Texas. The Texas Grid is unregulated by the Federal government because it is a self-contained grid that does not import or export power across state lines. This does not mean it is “deregulated” however (a term which really means not bloated with overbuilt backup power).
The author asserts the Texas power grid (ERCOT-Electric Reliability Council of Texas) is unreliable because it is an Energy-Only Power Grid and not a full Capacity Grid, which she advocates. But this is a caricature because Energy-Only Grids like Texas also have backup reserves embedded in their prices. The author fails to disclose that a Capacity Grid is a bloated, redundant green power grid that has higher electric rates than an Energy-Only Grid. For example, California is a Capacity-Grid, and its average electric price is 16.89 cents per kilowatt hour while Texas’s Energy-Only Grid is 8.6 cents. Bottom line, if a Capacity Grid comes to Texas, it likely means many working-class households would not be able to afford running air conditioning or even heating especially during extreme weather events. This has already happened in the Central Valley and desert areas of California.
The author’s book is slanted to hide the responsibility of state governments for electric unreliability and instead shifts blame to grid operators and fossil fuel power producers (who are nonetheless government regulated by CPUC’s).
Premise 2: Electricity auctions are patchwork and do not lower prices, as they are not a true market. False. First, merchant power plant companies do not submit purely unregulated competitive auction prices, but cost-plus bids based on how much it costs to build power plants and generate power plus a regulated profit margin. The high bidder at each auction sets the price for all the other bidders only because they all must cover their costs plus a return. Without covering their costs energy producers would have no incentive to maintain the reliability of the grid.
Moreover, there is no such thing as a consumer market in the wholesale energy business where the lowest price gets the most sales as there is with food, gasoline, or other commodities. Electric utilities are unavoidable monopolies because cities cannot have all the clutter and redundant cost of powerlines for multiple power companies in the streets. The regulated electricity market is more like a real estate market where the highest price of a home in a neighborhood sets the price for all other nearby homes. But the prices for electricity are regulated and home prices are not.
The author fails to mention that municipal power entities are unregulated by CPUC’s, FERC and NERC but oddly she does not call them out as “deregulated”. During the February Freeze of 2021, Denton Municipal Energy was a designated backup natural gas power plant for the Texas grid but irresponsibly failed to procure backup gas in the event of an emergency in part because the city has embraced a 100% green power goal by 2025. This cost the City of Denton $200 million to buy natural gas in the emergency spot market to run its power plant for a couple of weeks during the February Freeze (its annual budget was $83 million). The $200 million reflects the true price of reliability in an extreme weather event. Wood-Mackenzie Energy Research reports ERCOT comes down to just 10 hours each year of vulnerability to high price spikes.
The unreliability of a green power Capacity Grid is like a cheap and unsafe, but energy efficient electric car, where the price of safety is not discovered until it is in a head-on collision and all passengers die resulting in mega millions of dollars of insurance payouts.
A Texas full Capacity Grid would remedy the cost and risk of reliability with a corrupt, patronage-filled Capacity Grid that is being advertised as pro-consumer. By analogy, if your community knew only one building fire would occur per decade or quarter century would it form a voluntary fire department or a bloated full capacity municipal fire department?
Premise 3: Regional Transmission Organizations (RTO’s) are closed organizations with no accountability to customers. False again. RTO’s convey wholesale power to retailers who, in turn, sell power to residential and business customers. The customers of RTO’s are not households or businesses but private merchant power companies, non-profit rural power cooperatives or municipal power entities. This is a bogus assertion because it is like saying a farmer who sells its products at a wholesale price to a middleman grocery retailer runs its business without holding meetings with residents or restaurants who are not their direct customers.
The author says regional power grids are going to suffer continued blackouts like those purportedly caused by Enron during the 2001 California Energy Crisis. She contends that Enron gamed the California market, took power plants offline and raised prices on the grid by manipulating scarcity. But if this is the case, why does she oppose ERCOT’s 5-minute market bid structure which is less prone to gaming than California’s Capacity Market? The notion that Enron caused it has been invented whole cloth from fake news and “pop” books and movies (The Smartest Guys in the Room). Enron was a company that fraudulently relied on manipulated accounting and continual subsidies from governments for their vanguard green power programs somewhat like subsidized solar and wind power does today. But Enron never had enough market share to cause the California Energy Crisis of 2001. Moreover, I tracked down the infamous trade where Enron allegedly withheld power from a plant in Nevada, and the reason they did that was to avoid higher grid prices due to line congestion.
Furthermore, many municipal power entities like LADWP reaped hundreds of millions of dollars in windfalls selling arbitraged power during the crisis and were never made to refund the customers whose power companies bought that power. What is illegal for the private sector is legal in the public sector.
I would recommend reading Donn Dears book “The Looming Energy Crisis: Are Blackouts Inevitable?”, as an antidote to Shorting-The-Grid. Downs points out that the reliability of California’s grid was compromised when its legislature shifted responsibility from electric utilities to the grid operator that was politicized to bump reliable energy out and replace it with unreliable energy. Downs writes that energy grids are not only threatened by grid manipulation but by ideologies that are promoting fattened power prices that serve special interests rather than customers. Nonetheless, I give “Shorting the Grid” five stars for provoking a conversation about what’s behind increasing blackouts in green power grids but a one for uninformed framing of the problem and data analysis.
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