alix: hey, everybody. welcome to this special edition of "commodities edge, america's energy crisis." we are diving indeed to the energy crisis in texas where an arctic chill wreak havoc. the main player is the electric reliability council of texas, which manages power to 26% of

the state load in the grid is independent from the rest of the country with a deregulated competitive market and as it got colder and snow year they instituted rolling blackouts and now 5 million customers don't have electricity and this had a cascading effect throughout the u.s. the southwest power pool spanning from north dakota to oklahoma were hit very hard and are dealing with outages. to put this in perspective, texas has been short 15 to 25 gigawatts for two straight days and in the searing heat wave of last summer the state lost one to two gigawatts for just two evenings. the blame was quickly placed on the doorstep of alternative energy. wind shut down accounted for less then 13% of the total adages as it made only 23% of total capacity. texas gets more of -- more than half of their power from natural gas. those plants comprise most of the shutdown. we don't know yet why.

was it shut because of mechanical issues, transmission problems, or capacity? over the next half-hour we will try to answer those questions, where to go from here, and how to fix it. joining me for the next 30 minutes, romaine, joe, thanks for letting me crash your party. romaine: reverberation across the board, in crude oil we saw wti crude get above the $60 per barrel range. you can see the trend line was already up but that was to a certain degree a demand story. now it's a supply story and i guess how soon it's sorted out could determine whether we come back down to earth, back to where we were before the energy crisis. there is of course also a story going on in the natural gas phase and we saw those chokepoints and the drop there in production with backward gradation there in the market outpacing the further contracts

out down the pipe. they got above the three dollar level on the short side and you of course saw those prices really skyrocket. looking at the stocks that were affected as well. a lot of names, including apache , occidental, marathon, a lot of them being looked at as potential beneficiaries and potentially in the long term. alix: joe, it's been a while since i have been unset with you. you have family in texas, are they doing ok? joe: it's cold and there are pipe issues in the house i think. alix: what are you watching? joe: the price of electricity absolutely exploding higher. these moves that we are seeing in the various electricity markets, just look, just look at spot power.

$9,000 cap, up 53,000%. there's all kinds of church. we could go to the hubs that only alex knows about in oklahoma, but electricity is gonna blow. alix: for more on the market impact, i want to welcome the founder of [indiscernible] in terms of the moves we are seeing in the market, how long do these go for? >> all we know is that it's mandatory and we have to consider the long-term impact that we can see and when we look out it's really a two week shortfall. if we just look at how bad some of this freezing has been when you level in natural gas, oil, and then the refining side. a lot of them had to trip up their equipment freezing with power failure and we have seen

about 10 bang per day get lost on national gas sites. when we kind of way it out, it's a proxy where you have to see a lot of the price increases we have already started and that is going to pull additional's into europe to help to backstop and open that up so that we will see additional imports. >> we have seen freeport lm geez -- stopping sending it out. do you think that we will see a clampdown? romaine: it's an ability to protect a certain amount of gates. is the issue about getting nerdy and the whole thing talking about coal gas and other gas, but there needs to be in

integrity system and when we start looking through it and it moved on to protect residential industrial. alix: you are in good company, we are nerdy here. are you playing at all? >> some of the ones that we played on this were on the upside, general, a longer-term play as the people stay home and want to increase their reliability as work from home becomes more unstable. to be honest with you, i have not been wearing the bearish chat. things moving higher and we have seen some adjustments. that's one that we think has a lot of face and natural gas is one where we think it will start to fullback.

alix: when we take a look at what caused it, what is to blame , a lot of different opinions coming out. as a trader and investor, where do you think the issue lies? >> it's a mixture of problems and i have been very active on twitter and youtube on what the underlying problem was. when we look at the lack of availability and pipeline capacitors for generators with interruptible supply contracts. if i have solar by wind i will have a natural gas backup that comes on whenever it's needed. so, at that point they had to interrupt supply contracts, meaning that they are not facing demand, they are getting supplies as they need it and the supply went away quickly,

pulling out the pipeline complex. we saw that happen and it caused failures on the thermal side. it couldn't get what is needed in into the -- we mandated a dual healing set up and right now a lot of the bad guys don't have that capacity. the next level, a lot of this capacity that have allowed this neighborhood is exposed to the elements and there will be a lot of shutdown on the transmission side. alix: that was a perfect set up, mark. thank you so much. coming up, as the energy crisis cripples the power grid, political groups are sparring over energy policy and we will talk to our industry fellow about that debate. and the fallout from texas. what kinds of vote -- federal

policies are going to see. all of that, coming up and more. this is bloomberg. ♪

alix: bill magness is speaking, talking about the blackouts. 2 million to 3 million texans are without power and a total of 45,000 megawatt generation is off-line and a bulk of that is coal, natural gas, nuclear. 15,000 of those are wind power knockoff line. joe, when you take a look at this from your texan perspective , what's the biggest to take away in terms of reforming the

power grid in texas? joe: the main thing is i just cannot believe these images are real. it's like seeing a gigantic snow cover on hawaii. i lived there for several years, gone back several times. the thing that strikes me is that this is the trade-off that we pay for with the efficiency around competitive texan electricity markets. in the good times it's cheap and in the good times it works well and then you get a moment like this and you see the price you pay for the lack of buffer. romaine: that's the thing you wonder, are we going to upend the system where you have this what is likely a rare storm. unless you believe in climate change. alix: great point, but it also makes a difference with how you deal for things going forward and the tweaks you make. earlier we spoke with the texas railroad commissioner.

>> we are going to have to take a stronger look at who is the priority on the grid system right now. right now renewable energy has the priority, which is discouraging our reliable energy source, which seems to be more natural gas fossil fuel related. what we are experiencing today is the fact that we don't have enough plants to keep up with demand during times like these. alix: joining us now is our street institute resident senior fellow who advises the energy team that works to advance the well-defined role on government for shaping these decisions. in some ways that is part of the issue and what we are seeing in the market. josiah, what are we going to see reform was? what will be fixed to make sure this doesn't happen again? >> that's a good question. right now there is a lot of justified anger out there and politicians are looking for

someone to blame for these outages. people are kind of shooting wildly at all sorts of different targets. everything from different energy sources to renewals and a natural gas. the cities, the generators. i think we need to calm down a bit because we don't know the facts of what happened and i think the picture will become clearer as the data comes in over the next few days and we will be able to get a better sense of what needs to change, if anything. alix: there are things that we do know, that wind generation has grown in texas. we know that there were a lot of outages at natural gas plants. we know that texas is an unregulated power market. there are things that we knew that we knew back in 2011 as well. in your early assessment, what are some things we can start

talking about in terms of fixing? >> that's a good question. the texas electricity market, peak demand is typically in the summer, so the grid is typically focused on optimization for the summer. not for when things over the cold because we don't expect that. so, a lot of, for example, the plants are not properly weatherized. turbines are exposed so that they can freeze when it gets cold. there is also inherent competition between the use of gas for heating versus gas for electricity that you don't have in the summer but it is an issue in the winter and i expect a lot of focus will be on weatherization. there will probably be some other things like that. you are talking about fuel mixes where the storm kind of hit all generation types. everyone was struggling. i don't think that that is going

to be the focus. romaine: the issues, to a large degree, seem to be at the endpoints. i'm curious, if there was a more homogenous energy market there, with the outcome have been any different? >> i doubt it. if you look, pretty much everybody across the board underestimated the potential for this kind of event. from the generators to the utilities to the regulators. if you look at their forecast, we are talking about significantly worse in terms of what the outages would be and what the generation capacity would be. so, i think that when everybody kind of makes the same mistake, i don't think that giving a greater role for any decentralized part of it would have made a big difference. in retrospect, obviously everybody knows this is something we should have planned for. joe: speaking of that, obviously

the texas energy market is highly competitive. lots of consumer choice. but i guess that makes things very cutthroat amongst delivery providers to be ultracheap and efficient. is this ultimately the costs of the other 10 years, this once in a decade thing, is this essentially the inevitable price that texans pay for for what usually works well? is there an argument that the dial needs to change such that people need to pay more during the good times to reduce the sort of freak events that are rare but happen? >> there definitely is an argument there of how much extra are you willing to pay to avoid rare reliability events? in this case you do have somewhere around one third of the texan capacity off-line for

weather-related reasons and it's hard to imagine any system that would be able to absorb that blow would just by having extra capacity. so, i kind of suspect that regardless of how the system had been set up, we would have had big problems and other parts of the country had problems, to, though not to the extent that we had in texas. so, i kind of think that while that is an important argument, i don't think that is ultimately responsible for what happened. it's just it got really cold. alix: somewhere in between to be met. thanks for joining us, we appreciate your time. coming up, a broader policy perspective on the deep-freeze. this is bloomberg. ♪

alix: let's dive we are joined now by the founding director of the sector on global energy policy at columbia university. he previously held policies on the council on environmental quality. you are the guy that people want to talk to about this and i'm curious, when the dust settles and we point fingers, how will this affect the green energy plan? >> there's a lot of finger-pointing going on, the fault of fossil fuels, wind, we need to have a postmortem to

understand what went on and it is fair to say that temperatures this extreme in a system not billed to work in this kind of cold weather, everything is failing. we have massive problems with coal, gas, wind. wind output is down relative to this time of year and where it should be but electricity generation outages have come from gas, coal, pipelines are freezing. we also know that this kind of extreme weather, hurricanes, deep freezes and other things, we will see more of, not less of, with climate change, so it's important to continue with an agenda that moves towards a low carbon energy system and think about what it means to reduce what's in the electrical system. alix: specifically it feels like storage for things like wind, solar, natural gas, things like

recertifying the infrastructure, those are key things. do you think those things can get done through federal policy? >> it's certainly the case that federal policy with the right financial incentives and investments in technology to make sure that batteries last not only a few hours but a longer duration when you have extreme weather or the wind doesn't blow, that's part of a federal policy. also state policy. the texas grid is not overseen by for an has a role to play as your prior panel was talking about, the standards we want to set and how much we will pay for it to achieve different levels of reliability. we know that technology regulation makes it happen and it could be dial down in terms of consumer usage. texas getting cut off from the druids around it, maybe more

generators could help. the question is how much extra capacity do you want to build and that's a stent -- joe: should nuclear be part of the answer? >> some of them have been affected as well and when you take a look at what it takes to get a net zero carbon, we need all tools at our disposal. we certainly don't want nuclear power to retire. it is struggling sometimes in the face of cheap renewable. it's expensive to build, but when you look at it in the u.s. and on a global basis, nuclear power will be part of the solution in a net zero system. romaine: with more states moving to a more diversified energy distribution model, i'm curious as to what they can do in

preparation for their grid having an extreme event like we saw in texas this week. >> a lot of it comes down to how the grid is regulated and what you are planning. the electricity system in texas is designed for peaks in the summer, not the winter. it's a highly decentralized system. the regulator there makes a choice to pay for energy, not capacity. this lowers system costs and it means there is a smaller margin held in reserve and as i said, the texas grid is isolated from neighbors and you can draw more connections between grids. we need to think about all the risks we are going to say about the rise of electrification. challenges over wildfires, hurricanes, even cybersecurity that's another one. all of these are going to become

more important for regulators and policymakers. electricity use grows with the growth of the energy system. alix: jason, it was great to catch up with you. thank you so much for joining us. guy's, what are you looking for over the next 24 hours? i'm looking for anymore force majors we are seeing, oil companies. that will affect that short term. joe: we, and it's amazing that we have this data, how many people are able to get power and it doesn't seem they've made a lot of progress on restoring it. alix: 2 million, 3 million, still out. -- might still come out. joe: we have seen -- romaine: we have seen several companies

delay reports because they won't be able to get anything accurate in the short-term. alix: guys, thanks for joining me, thanks for letting me crash the show. always a pleasure to be unset with you. that wraps it up for "commodities edge, america's energy crisis." for more, tune in every thursday at 1 p.m.

♪♪ ♪♪ >> i'm in san francisco and this is bloomberg technology. coming up this hour, a deadly combination of cold and snow plunges millions across texas into darkness as rolling blackouts surge to contain an