Houston entrepreneur Thomas McAndrew on the Texas power grid, the future of energy, and how his company keeps businesses up and running even through disasters
Nearly a year and a half since it happened, Winter Storm Uri—which caused days of power outages and an estimated 246 deaths in February 2021—is still vivid in the minds of Texans. In the days and weeks after the calamitous freeze, many of the state’s utility operators and politicians came under harsh scrutiny for their lack of preparation and haphazard response.
But over in Houston, one energy company did live up to the challenge: Enchanted Rock, which since 2006 has provided Texas institutions with reliable power from natural gas microgrids. As power plants across the state were knocked offline that February, causing millions to lose power, Enchanted Rock’s microgrids supplied continuous power to its 143 customer sites, including grocery stores, water districts, and healthcare and manufacturing facilities. Enchanted Rock was even able to supply additional capacity aid to the main power grid.
We wanted to know how this company passed the Uri test, and whether its success points toward reliable solutions in an increasingly uncertain energy future—so we talked to Enchanted Rock’s founder, president, and CEO, Thomas McAndrew.
McAndrew began his career in the US Navy, operating and maintaining nuclear plants aboard two different aircraft carriers. McAndrew was born in New York but largely raised in Houston, where he graduated from Klein High School before moving on to A&M. After leaving the Navy (and getting an MBA from Harvard), he grew his expertise in the energy industry until he eventually created an energy solution that offered reliable, clean, and affordable power to businesses and infrastructure.
We asked McAndrew to share a postmortem on why the 2021 disaster happened as well as his insider perspective on the future of energy in Texas and the United States. Will nuclear be a thing? Is it really so bad that Texas’ energy grid is independent from the rest of the country? And how much is climate change affecting power grids? He wasn’t shy about giving his perspective.
Can you tell us about your background?
I graduated with a mechanical engineering degree from Texas A&M. I was in the Corps at A&M and was then commissioned into the Navy. I went through nuclear power training and got to my first ship—a Nimitz-class aircraft carrier, the USS Eisenhower, where I did all my chief engineer qualifications. From there I went to another nuke ship, the USS South Carolina. I had just under six years in the Navy, and it was fantastic. Every day was exciting and challenging. I learned a lot about how to put together teams to tackle a challenge.
Today at Enchanted Rock, we’ve integrated a lot of the culture of the Navy, especially the nuke Navy, into our own culture. That includes the way we design and operate high-reliability energy systems. We hire quite a few veterans too. We’ve established a reputation as a place for talented folks to go once they leave service.
What made you decide to found Enchanted Rock?
The first go-around was a company called Progressive Power Solutions in 2000, which we formed out in California. At the time, commercial, industrial, and tech companies had to go out and buy their own backup generation in case of power outages. Then they had to pay someone to install and operate it. Our model was to outsource that service and reduce the customer’s cost by letting them participate in different types of electricity grid programs.
We made good progress, but we were way too early in 2000. A lot of the control technologies we needed weren’t available or were too expensive. The electricity markets were still pretty immature as far as their ability to pay for the type of service we could sell back to the broader electricity grid. So we sold that business to [Houston-based electricity generation company] Calpine, but we knew that at some point it would make sense.
In 2002, I started a consulting business because it was clear to me that there was an opportunity to help electricity consumers reduce cost, increase reliability, and decrease carbon footprint. That all sounds pretty obvious today, but back then it wasn’t yet.
I formed Enchanted Rock in 2006. It was just me, and I didn’t have any idea how to make money with the business yet, so I still did a lot of consulting. Then Hurricane Ike hit Houston [in 2008] and there was a very high failure rate—about 50 percent—of backup generators. There were power outages of two to three weeks in many cases. In some cases they lacked good fuel contracts, in others they had no maintenance plan for generators, and in others the generators were sized way too small for the facility.
At that point, I’d added a chief technology officer, Clark Thompson, to Enchanted Rock. We said, “Okay, it’s time to resurrect that old Progressive Power Solutions business plan.” It was no longer too early. We now had last-mile connectivity, amazing control systems, and different types of software and hardware to install for our microgrids. And specifically in Texas, the marketplace would pay for that type of emergency response.
So we launched the reliability-as-a-service business within Enchanted Rock. Today our biggest customer is H-E-B. Like most institutions, they don’t want to be in the backup generation business—they just want the store to stay operational when power isn’t available. We can give them that affordably by selling back to the electric grid. And we do it all with the very high standards of the nuke Navy.
How did you decide on the name Enchanted Rock?
While I was developing the business plan, I spent a lot of time in the Fredericksburg area hiking Enchanted Rock. I thought, “I want to steal that name.” I checked with the lawyers, who said, “Yep, you can.”
You’re a Texas-based company, but I assume you have customers outside of Texas, right?
We do. Just yesterday we commissioned our first microgrid outside of the state, at a Marine base at Quantico in Virginia. Walmart is our second-biggest customer, and we’re working on sites in Louisiana, Mississippi, and Illinois. We’re expecting to see a considerable US expansion in the next two to three years, but our home base still is Texas.
How did Enchanted Rock perform during the big winter storm of 2021?
The 2021 storm was a great test for us, and we passed it. Our company came together and literally worked 24/7 to support our customers. Our microgrids, which are powered by natural gas and renewable natural gas, are designed to be reliable, so we had 97 percent availability. That’s better than almost anybody in the industry. Most people were at 40 to 50 percent. We had a couple of stores that had issues, but we worked through those in real time.
Do you have any thoughts on why outages were so widespread during and after that storm?
The first thing is that in Texas, solar and wind have ramped up, causing overall energy prices to go down. A lot of traditional power plant owners didn’t have the cash flow to support weatherization and other preparations for this kind of storm. Many of them only had one or two years out of the last 10 that were profitable.
The second is that there’s been a lot of electrification of heating, especially in North Texas. When we got to a certain temperature, the very efficient heat pumps couldn’t operate and they turned on what’s called resistive heating, which is just like a toaster. Once all those toasters switched on, that doubled or tripled the normal electricity consumption, causing this big spike we don’t normally see. Most folks were assuming a linear increase in demand with temperature, but that’s not how it worked.
Of course, the wind and solar levels were very low during that period as well. So it was a combination of factors that, in my opinion, led to the situation. I was recently appointed to the Texas Energy Reliability Council, and we’ve been reviewing a lot of these reports and working with the Railroad Commission, the Public Utility Commission, and the state government to make sure that we have a plan going forward.
Are we ready for future winters?
It depends. We’re one of the few companies adding dependable capacity right now. There’s been a lot of solar added, but solar just doesn’t do much at five or six in the morning in February when there’s cloud cover for days. Given that there hasn’t been that much incremental investment, if we have another bad winter storm, it’s not clear to me that we’ll be ready.
What do you think about President Biden’s energy plans?
Let me back up and say that we’re focused on keeping local emissions as absolutely low as possible. We have the cleanest natural gas backup generator on the market. But we think you also have to be smart about decarbonization. The 2021 Texas storm is an example of not being smart about it, as well as things we’re seeing in California, China, the UK, where the energy transition is starting to hit the wall. Across the globe, you have a general lack of dependable capacity.
Going on to Biden’s plan, I think the decarbonization objectives are noble, but I’m concerned about whether there’s enough focus on reliability. At the bottom of Maslow’s hierarchy of needs is life and safety. People die when they lose electricity in these events. If we electrify everything—heaters and cars and more—but the grid isn’t reliable, that’s a recipe for disaster. So we’re excited about accelerating decarbonization, as long as we’re smart about it.
To a lot of people, nuclear energy is the future. Do you agree?
I came from the nuke world and I still love that industry. I left it in 1992 because I just didn’t see a future. I was 28 years old and they were talking about retiring nukes. But there’s so much potential in nuke power. It has two things that renewables don’t: One is dispatch ability, meaning it’s totally independent of the weather, and the other is amazing power density. It doesn’t cover fields and fields. If you’re going to electrify everything, you have to use nuke power at some point.
But I doubt we’re going to roll out any new nukes in the next eight to 10 years—maybe we’ll get something just inside of 10 years. Over the next 10 to 15 years we do need solar and wind, and some battery storage and a lot of dependable capacity like what we bring to the market. Then I can see a phase-in of new types of nukes early to mid-2030s.
I would love to see nuclear plants come down to a smaller level instead of these huge power plants we have in South Texas and Comanche Peak. Something small and available for local communities. Our biggest institutional investor, Energy Impact Partners, has launched a fund to focus on 10- to 15-year-out technologies and they’re specifically looking at nuclear fusion. I think it has to happen eventually. Just turning on a lot of wind and solar and four-hour batteries won’t provide for the basic needs of society.
How is climate change affecting power grids? Do you think it’s getting worse?
I live on Clear Lake and just anecdotally, I’ve had to evacuate a number of times over the last several years due to hurricanes. Whether it’s that or these huge pop-up thunderstorms, wildfires out west, the extreme temperatures on both ends—it’s all tremendously stressful for the physical infrastructure and load of our grid. And I think it’s trending worse. At Enchanted Rock, our microgrids rely on underground natural gas infrastructure, so we typically don’t have any pipes or wires above ground. That gives us more resiliency.
Again, one reason nuclear is getting a strong look is that the fuel supply, whether fission or fusion, isn’t dependent on weather. There were some issues in the winter storm at South Texas Project [Electric Generating Station] on the cooling side, but there are designs in the future for nuclear that can operate independently of any weather event.
Isn’t France moving toward all nuclear energy?
France’s trajectory has been interesting. They’re somewhere around 70 percent nuke. Over the last several years there was a movement to reduce that, because it became unpopular. But now they’re going to reinvest in nukes because they’re watching what’s happening elsewhere with reliability problems. France doesn’t have any issues right now with their energy supply.
What should leaders in the private sector know about the Texas power grid?
The nice thing about the Texas power grid is that it’s isolated from the rest of the country. I know folks think it should be interconnected, but I have a slightly different opinion. I think that actually can make things worse. Because our grid is independent, we have a lot more control over our destiny than other grids in the country. We have one Public Utility Commission, one independent system operator, and one state legislature, all over one grid.
I believe that that situation will allow Texas to be the leader in showing that you can have a reliable grid and decarbonize at the same time. In other parts of the country, it’s so complicated—you have an independent system operator over eight or 10 states, with eight or 10 Public Utility Commissions, however many state legislatures, and all these other stakeholders. That makes progress difficult. But in Texas, we can identify our problems and say we’re going to solve them in a business-friendly way, with the right incentives for private industry, not through government mandates. I think we’ve learned a lot since the winter storm, and we will get it right.
Does your personal leadership style draw on your military background?
I’m not a hands-on manager, because I have a super-strong management team. I do really make it my business to understand what’s going on in all areas of the business though, and I try to lead by example. Because we’ve been growing, it’s a challenge to maintain the culture we started with, but we’re working hard on it. We’re starting to get recognized as a great place to work, which is exciting. I really love what I do every day and feel blessed to be around great folks. We have a business where we actually are changing the world, and it’s not a cliché. Helping customers in challenging times like the winter storm gives us a sense of purpose and mission. I keep hearing about how everybody’s quitting, but we just don’t see that on our team.