How we're weathering the storm in Texas
Michael Lee, CEO of Octopus Energy US, blogs about how his team worked relentlessly to help customers through Texas' unprecedented storm and power grid failure.
He chats about Octopus Energy US' new Bill Forgiveness Plan to ensure no customers are unfairly exposed to unprecedented soaring energy prices; and how a 100% green, flexible grid can make Texas resilient to weather events like this in the future.
What happened in Texas?
A week of unprecedented cold weather made Texas' power grid fail, leading to massive state-wide power outages that left many many millions of homes without power in freezing weather.
Why did the grid fail?
Because Texas doesn't usually see weather like this, a lot of energy generation isn't 'weatherised' to withstand cold. Natural gas production ground to a halt as the incredibly un-Texan sub-zero temperature weather literally froze gas plants and pipelines. Many energy sources were affected, from wind turbines and solar panels freezing over to coal and crude oil staying frozen in the ground. At the same time, demand for energy shot up as people attempted to heat their homes.
Not enough power paired with a far higher heating demand through the grid out of balance, meaning a few things: first, rolling outages over a number of days as the grid frantically tried to conserve power and rebalance. Second, the wholesale price of energy skyrocketed. The average wholesale price for a kilowatt hour of electricity is usually around 10c. During last week's crisis, that price shot as high as $9 per kilowatt hour.
A few energy suppliers in Texas offer customers energy tariffs tied to the wholesale price. Though this usually means cheaper rates, last week's incredible volatility left some customers with surprise bills for tens of thousands of dollars.
(We think dynamic, wholesale tariffs are the future, but of course customers should never have to shoulder the cost of this unprecedented disaster – that's why Octopus Energy US have launched a Bill Forgiveness Plan capping last week's prices at the Texas average, and why they're working on a price cap for their wholesale-based dynamic tariff going forward.)
How we're helping affected customers
This crisis affected 90% of the state, resulting in catastrophic loss, and leaving customers stranded in unbearable conditions: loss of heat in below freezing temperatures and lack of access to water, food and other essentials.
As many of our own employees didn’t have heat or water for days, we understand the pain and frustration customers feel to our core.
Simultaneously, while the storm was forecasted to be a single-day event, we announced to the world that Evolve Energy is now Octopus Energy US. We’d been waiting for the right time to launch – and we did so one day before the forecasts for the coming week went from somewhat manageable to downright terrifying. As power plants began to drop offline, we stopped everything and immediately began figuring out ways to help our customers get through this.
- We've adopted a one-time Bill Forgiveness Plan for all of our Texas customers. We're capping charges for any energy usage between February 13-19th at 12.20¢/kWh (the Energy Information Administration of Texas’ average price) for customers on our OctoFlex dynamic wholesale-priced tariff. (For context, wholesale rates during this week soared up to $9 / kWh, so this means forgiving millions of dollars worth of energy charges).
- We're also urgently working to initiate a price-cap on any dynamic wholesale-priced products to protect customers from extreme events in the future
Why did we do this?
Not for profit, not for good publicity, but because we genuinely care. Our customers, are at the heart of what we do. And as we look to recover from this unprecedented crisis and provide Texas residents support, we hope our customers understand that we did our best.
So now, as we look to recover from an unprecedented week, we ask ourselves: Where do we go from here?
I went on CBS7 Midland to discuss how Texas can transform to be greener and more resilient against future weather events...
Renewable energy creates grid resiliency
Despite what fossil fuel enthusiasts may tell you, more fossil fuels are not the answer. It’s important to note that fossil-fuel generators are even more susceptible to extremely cold temperatures than renewable generators.
Ultimately, the grid is best served by a diverse mix of advanced energy technologies. Wind, solar, energy efficiency, and energy storage — both distributed and large-scale — strengthen grid resilience and reliability. Unlike fossil-fuel generators which froze across the state of Texas last week, these resources have fewer mechanical parts to freeze or fail if properly weatherised (that's why wind turbines spin beautifully in freezing cold places like Antarctica!). They also don’t rely on delivered fuels that can freeze or become inaccessible during a crisis.
In fact, if there’s one thing we can count on every day, it’s that somewhere, the sun will be shining and the wind will be blowing.
We expect to see increased interest in residential solar panels coupled with battery storage as a result of this event.
Energy innovation is key
As climate change increases the frequency and intensity of extreme weather, events like last week will only become more common, requiring forward-thinking, sustainable solutions rather than a continued “business-as-usual” approach.
Wholesale pricing is key to building a sustainable grid and has the potential to revolutionise energy. Dynamic pricing not only motivates consumers to use clean energy when it is abundant, but it is also essential for allowing more battery storage to come online when it is needed most.
We realise, however, that certain events are unpredictable. Last week we saw energy prices jump incredibly, resulting in massive energy bills for wholesale customers. That’s why we’re working to introduce price caps to protect our customers from system-wide collapse and astronomical energy prices. We want our customers to feel good about choosing wholesale energy and know that they are ultimately protected.
Private companies shouldn't receive government bailouts
There’s been talk of government entities bailing out private energy companies in Texas. But, private companies assume a certain level of responsibility as a willing participant of a free-market system. Because of this, they have to manage their own risks and determine ways to best serve their customers even when things go wrong. Government entities should not be required to rescue private corporations when they’ve miscalculated, especially as for-profit entities. To do so would create a moral hazard — or lack of incentive to guard against risk when one is protected from its consequences — for future events. As we see more extreme weather related events due to climate change, it’s imperative that market players who have the potential to see huge profits should hedge their bets accordingly.
Starting as we mean to go on
This was certainly an incredible way to start Octopus Energy US' journey in Texas. We'll continue to fighting for customers and a greener future, long after this crisis has passed. To learn more about Octopus Energy US (or if you've found your way to this page from Texas and want to switch your home) head to octopusenergy.com.
If you have any questions or feedback as to how we can make your electricity experience better, I’m always available at michael@octopusenergy.com. We are grateful to our wonderful customers in Texas and look forward to building a cheaper and greener modern energy grid together.
Published on 7th December 2022 by:
Hey I'm Constantine, welcome to Octopus Energy!
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