The economic cost of no power

Economic losses to Texas start at $4.7B

The economic loss to Texas due to the power outages caused by Hurricane Beryl starts at $4.7 billion for just the first two weeks. This number is neither complete nor accurate; however, it provides some perspective on power's importance to the economy. With a Texas electrical grid averaging above 90% capacity in some weeks and forecast future increases in severe weather events across the U.S., the potential for economic loss should also be expected to increase.

Household Outage Trends from Beryl

The average number of households without power for the first work week when Beryl struck was 1.3 million. If we fit an exponential trend to the data from the first week, the second week is expected to average 200,000 households without power.

Simple Estimate of Economic Impact

Potential Income or Value of Output Lost = average no. of households without power in a week x assumed 1.5 working adults per household x average hourly earnings in Texas(2) x 40 hours x velocity of money(3).

Loss week 1 = 1,101,605 x 1.5 x $32.73 x 40 x 1.551 = $4.1 billion

Loss week 2 = 200,000 x 1.5 x $32.73 x 40 x 1.551 = $610 million

Total loss first 2 weeks = $4.7 billion

Final Thoughts

Don’t expect utilities or the government to address the problem in a meaningful way. One solution that actually could work and mitigate risk in the short run… make home generator purchases and installations fully tax deductible.

Footnote:

Estimated from Houston Public Media posts and CenterPoint Outage Tracker.
US Bureau of Labor Statistics [SMU48000000500000003]
The number of times one dollar is spent to buy goods and services per unit of time. Federal Reserve Bank of St. Louis [M1V]