Deep freeze sends Texas electricity prices soaring 10,000%

Oil refineries in the US are shutting down as temperatures in the Permian Basin plunged below zero degrees. CNN's John Defterios reports on what is driving prices higher.

Posted: Feb 16, 2021 9:30 PM
Updated: Feb 16, 2021 9:30 PM

Editor's Note: A version of this story appeared in CNN Business' Nightcap newsletter. To get it in your inbox, sign up for free, here.

Tonight: A deep freeze sends Texas electricity prices soaring 10,000%; Citibank can't fix a $500 million oopsie; and vegan KitKats are now a thing. Let's get into it.

FROZEN OVER

Unthinkably cold temperatures have knocked Texas' energy facilities offline.

Electricity prices spiked more than 10,000% when the winter storm hit this week. There are blackouts across the state. More than 4 million Texans were without power early Tuesday.

POINTING FINGERS

Although some are attempting to pin the blame on one fuel source or another, the reality is that the Arctic temperatures are hobbling fossil fuels and renewable energy alike, my colleague Matt Egan explains.

It's striking that these power outages are happening in mighty Texas, the energy powerhouse of America. A bit of context:

  • Texas produces more electricity than any other US state — generating almost twice as much as Florida, the next-closest, according to federal statistics.

  • Texas is the No. 1 state in both crude oil and natural gas.

  • Wind power is also booming in Texas, which produced about 28% of all the US wind-powered electricity in 2019.


WHAT HAPPENED?

So how did such a powerhouse get knocked so thoroughly offline?

We may not know the full definitive reason for a while, but a few things are clear:

  • Obviously, Texas winters ain't usually this cold. The state's infrastructure is simply not prepared for a deep freeze. 

  • Critics of renewables will try to blame wind turbines, but experts note that wind makes up a small share of Texas' energy consumption.

  • It's also worth poinitng out that a lot of chillier places have wind turbines that don't buckle in the cold — hello, Iowa; hej hej, Denmark — they just need to be winterized, a step experts said Texas has skipped. 

  • The Lone Star State is ... all alone. Texas made a conscious decision to isolate its energy grid from the rest of the country. That means that when things are running smoothly, it can't export excess power to neighboring states. And in the current crisis, it can't import power either. 


In other words: "When it comes to electricity, what happens in Texas stays in Texas," said Dan Cohan, associate professor of environmental engineering at Rice University. "That has really come back to bite us."

RELATED: Ford is shutting its Kansas City assembly plant, which makes its best-selling F-150 pickup, because of a shortage of natural gas caused by severe winter weather hitting much of the country .

QUOTE OF THE DAY

To believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1 billion — would have been borderline irrational.

— US District Court Judge Jesse Furman

Citi just lost a bid to fix a major oopsie. Last year, the bank fat-fingered $900 million to lenders for cosmetics company Revlon. Some lenders returned the erroneous funds, but others refused, prompting Citi to sue to recover half a billion dollars. On Tuesday, a federal judge said — and I'm paraphrasing here — lol no.

THE FOOD BUSINESS

BIG CHICKEN

Another day, another escalation of the Chicken Sandwich Wars. At this point, you gotta do something special to make your sandwich stand out, so McDonald's is building buzz for its three new chickie sammies with a limited edition $5 swag bundle, which includes a hoodie, a vinyl recording of a custom song and, of course, a sandwich. (The star has got to be the hoodie, which comes in a hue that I can best describe as a "light fried chicken color.")

BIG VEGAN

Now for basically the opposite of chicken sandwiches: We have vegan KitKats now. Instead of dairy, KitKat V will use a rice-based alternative. Healthier? Nah. But more inclusive of people who eat plant-based diets? Yes!

NUMBER OF THE DAY

$50,000

Bitcoin hit an all-time high above $50,000 on Tuesday. That statement might have sounded like a joke a year ago, when the crypto cost $10,000. But bitcoin has skyrocketed during the pandemic thanks to rock-bottom interest rates that have severely weakened the US dollar. That makes bitcoin, a comparatively attractive currency.

WHAT ELSE IS GOING ON

  • Move over, Robinhood, here comes Goldman Sachs. The investment bank unveiled Marcus Invest, a new robo-adviser geared toward the average investor.

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