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Texas has long pitched itself as a business utopia with no corporate income tax, a skilled workforce, and a low-cost of living compared to the coasts. But after an intense winter storm this week left millions without power and water, Texas has taken a blow straight to its business-friendly face.
“It’s a black eye for Texas,” said Tom Fullerton, professor of economics and finance at the University of Texas at El Paso. “Businesses could legitimately look at this and raise it as an issue.”
The problem for Texas began on Monday when record freezing temperatures along with snow and ice battered most of the state. The demand on the energy grid, which is separate from the rest of the country’s power supply, soared. Meanwhile, the blizzard-like conditions froze natural gas pipes—responsible for a big portion of the state’s energy—and, to a much lesser extent, wind turbines. By Tuesday, 45 gigawatts of power was offline, according to the Electric Reliability Council of Texas, and nearly 3 million Texans were left in the dark and without heat on Wednesday.
The ensuing chaos—people complaining about subfreezing temperatures in their living rooms, a lack of clean water, and food shortages—isn’t the image that Texas typically projects to the world. Over the past decade, the state has patted itself on the back for adding nearly 2 million jobs, according to the U.S. Bureau of Labor Statistics.
In recent years, Texas has attracted a number of large California companies seeking a cheaper, less-regulated place to do business. During the coronavirus pandemic alone, San Francisco-areas companies like Oracle, Charles Schwab, and HPE moved their headquarters to the state.
Even Tesla CEO Elon Musk made the jump after his company chose Austin as the site of a new factory. Apple and Google are also expanding in Austin.
Mike Rosa, senior vice president of economic development at the Dallas Regional Chamber, said his organization is in talks with 93 different companies that are considering relocating to the area, nearly double the number it was working on in 2019. “There’s been a real increase in intensity of interest in Texas,” Rosa said. “There’s a good bang for their buck here.”
But Texas’ energy crisis will likely create a new challenge for the state, as companies evaluate whether the energy grid failure was an isolated incident. The state has already seen massive increases in population in the past several years, and the unexpected effects of climate change aren’t expected to slow any time soon.
“If I’m a company thinking about moving there, I don’t care just about the conditions now but five to 10 years from now,” said Mark Duggan, director of the Stanford Institute for Economic Policy Research. “If Texas is already straining, think about all the strain on the horizon.”
Houston and Dallas-Fort Worth officials responsible for luring companies to their cities admit the power outage creates a new challenge for them, but they don’t expect it to have a major impact. And they suspect that the state will work to ensure this power failure is a one-time event only.
“I don’t doubt there will be questions,” said Andy Icken, chief development officer for the city of Houston. “But I think it’s like all other challenges. We just have to find a solution to the problem.”
This week, the Dallas Regional Chamber had conversations with three companies that are close to signing relocation deal and Texas’ power outage never came up, Rosa said. “It was business as usual.”
Fullerton pointed to the city of El Paso as an example of how Texas could rebound from the crisis. In 2011, a freeze caused similar water and power problems for the city, after which El Paso Electric spent $4.5 million to winterize its power plants. It also built two more power sources following the outages. “If El Paso can do it, there’s no reason other parts of the state can’t,” he said.