Saturday, March 27, 2021

Repurposing River Oaks Theater, grid resilience, Dallas insanity, reinventing inferior jets, Houston's diversity advantage, TX migration, NYC losing half its commuters, and more

Our first lead item this week is an in-depth follow-up from Jim Crump on targeted solutions to improve the electric grid in Texas. Highly recommended if you're interested in the nuances of improving grid reliability without extraordinary costs.  Speaking of which, it's been verified that we don't necessarily need to spend billions on winterization, we just need to treat gas pumps like critical infrastructure during blackouts! "This simple paperwork blunder left Texans cold during the deadly freeze

One more lead item so the blog lives up to its name this week ;-) Assuming the River Oaks Theater won't be taken over by a live theater group (really the best option), my suggested best realistic option in a streaming world: since Weingarten wants another high-rise there, preserve and repurpose it as a cool public lobby and coffee bar, marquee and all. Sure it's sad to lose the actual movie theater, but does that have any chance when you can stream pretty much any independent film at home any time?

Moving on to lots of backlogged items to catch up on this week:

  • Dallas insanity: $1.7 billion for 2.4 miles of mostly subway. That's $708 million per mile! Glad Houston METRO is being a lot more pragmatic and prudent with their resources than this. Hat tip to Oscar.
  • Several think tanks published their Metropolitan Blueprint for Texas.
  • Antiplanner on Reinventing the Jetliner (i.e. high speed rail) with some compelling opening paragraphs:

"Suppose I told you that I have reinvented the jet airliners that carried Americans more than 750 billion passenger miles–about 10 percent of all passenger travel–in 2019. My reinvented jet will go less than half as fast as existing jets. It will cost six times as much to operate, per passenger mile, as existing jets. Unlike existing jets, which can go anywhere there is air, the reinvented jet will only be able to go on a limited number of fixed routes. 
This wondrous invention will become a reality if the federal government spends a mere one, two, or possibly three or four trillion dollars. Does that sound like a good deal? No? Yet that is exactly what high-speed rail advocates are proposing. Some proposals, such as the Green New Deal, even call for almost completely replacing low-cost, fast jet airliners with high-cost, relatively slow trains."
Now on an opportunity cost basis, just imagine if those trillions went directly into carbon reduction instead of white elephant high-speed rail lines??
"Less than 50 percent of people who worked in Manhattan offices in 2019 will be working from those offices in the coming years, according to a recent survey by the Partnership for New York City."
"One thing I always admired about Houston is how confidently immigrants claim public space for themselves—how working families picnic in Hermann Park or elated quinceañeras roam the Galleria with their brightly attired entourages and pose for portraits before the Waterwall."
"Cities do not thrive by having more cutting-edge coffee shops, trendy restaurants and edgy boutiques; they need safe streets, decent schools and jobs for middle and working-class families." 
Finally, I'd like to end with a well-done in-depth video by CNBC on why so many businesses and billionaires are moving to Texas. Worth the watch. "Embrace the freedom!" 

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Sunday, March 21, 2021

The future of remote work and what it means for Houston

This week I want to focus on a single CSM story, because it's the most insightful I've seen on what post-pandemic work might look like: Remote work is here to stay – and it’s changing our lives. There are so many great nuggets, insights, and excerpts in it, which I'll follow with what I think it all means for Houston:

An IBM poll found that 54% wanted to keep working from home post-pandemic, and 75% wanted the option of working from home occasionally. 

“What the pandemic made blazingly obvious,” says a Manhattan entertainment lawyer, “is that there is no need for a physical office.” Only a complete lack of imagination, he says, kept the realization from dawning sooner. “Before the pandemic, we wouldn’t have taken the question [of going virtual] seriously. It wouldn’t have seemed possible.” ... 

It’s hard to find a management expert who doesn’t judge the work-from-home experiment a resounding – and somewhat unexpected – success. A survey by the recruiting firm Robert Walters found that 77% of professionals believe they’ve been equally or more effective when remote, and that 86% of employers plan to continue remote work “in some form” after the pandemic ends. A January survey by the consulting firm PwC revealed that employer satisfaction had risen even as the year dragged on, with 83% now assessing remote work successful for their company, up from 73% last June. 

Wrote one top manager in an email posted by economist Tyler Cowen: “Speaking from personal experience as a white-collar Exec, the productivity gains for our highest value workers has been immense. The typical time-sucks and distractions of in-office work have been eliminated.... Mental focus on productive efforts is near constant. Perhaps most importantly, work travel is not happening.” ... 

Among venture capitalists and venture-backed entrepreneurs, 74% now expect their companies to be majority or fully remote. ... 

“Even before the pandemic,” he says, “big cities like New York, Los Angeles, and Chicago were losing population to suburbs, lower-cost metro areas, and less expensive states in what Zillow called ‘a great reshuffling.’” 

The trend has accelerated, Mr. Kotkin says. “In just the past six months, New York City lost almost as many residents as it gained since 1950.” He notes that a recent report by Upwork, a freelancing platform, suggests that 14 million to 23 million Americans are seeking to move to a less expensive and less crowded place. Welcome to the “Zoom towns.” ... 

The market research firm Forrester predicts a 60-30-10 split among organizations: post-pandemic, 60% will be hybrid, 30% will be all-in-the-office, and 10% will be all-remote. ... 

Experts can point to only one other work style “experiment” like the one caused by COVID-19, though its sample size in comparison was minuscule. When a 2011 earthquake demolished Christchurch, New Zealand, the entire community turned immediately to telework. Then the city rebuilt, renewing its stock of office space. Yet years later a study revealed that Christchurch’s workers continued to operate remotely, away from their freshly available workplaces. “When [the crisis] was over,” said a researcher, “they didn’t go back.” 

If the expert consensus proves right, Americans won’t go back, either. 

“As remote working has boomed during COVID-19,” summarizes a study by the University of Utah, “the rise in the number of people working from home has prompted many to reconsider where they wish to live.” Which means, as the survey data already indicate, that as many as 40% of office workers could scatter outward from the name-brand cities to places more spacious and affordable. ... 

“As life at work [when remote] will be less social, people will have to get more of their socializing from elsewhere. So people will choose where they live more based on family, friends, leisure activities, and non-work social connections. Churches, clubs, and shared interest socializing will increase in importance. People will also pick where to live more based on climate, price, and views. Beach towns will boom, and the largest cities will lose.” 

So workers will be more dispersed, and more of their working hours will be spent where they live instead of elsewhere in an office. The question is: Could all this lead to a “reset” of the locus of community in America? 

Might the center of gravity shift at least somewhat from the office to the neighborhood – back, in a sense, to something closer to a pre-industrial model? What might it mean for our culture if the human contact that offices used to provide is replaced by closer-to-home human connections? And how might that affect the health of local communities and even levels of societal trust? ... 

Here Mr. Kotkin quotes Lenin: “There are decades when nothing happens; and there are weeks when decades happen.” 

So what does it mean for Houston?...

Working against us:

  • Not a classic lifestyle-destination city (think Austin, Denver, Miami) - no mountains or beaches
  • Big city problems, including traffic and crime
  • Climate: flooding, hurricanes, heat and humidity
Working in our favor:
  • Lots of Houston ex-pats that can come home to be closer to friends and family
  • Industries that are less amenable to remote work: manufacturing, refineries, port, health care, NASA, even energy to a significant extent
  • The most affordable global city in America - big-city amenities at an affordable price
  • Strong community culture for such a large, diverse city
  • High pull among immigrant networks
Overall I'd say we're likely to come out fairly well - not as good as the popular lifestyle cities, but much better than the unaffordable superstar cities like SF and NYC. Would love to hear your own thoughts in the comments...

UPDATE: Houston Innovationmap picked this up!

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Sunday, March 14, 2021

Texas Startup Manifesto 2.0, new top rankings, Houston housing elasticity, remote work reshaping America, and more

 Real backlog of smaller items this week...

"Houston—whose median home values are only 76% of the national average—stands out. Since 2010, it has had America’s 2nd-highest net population growth but is #1 in permits issued. This has made it an affordable city even in core locations; 1-bedroom, 1-bath downtown condo units can be found for under $200,000. 
How does Houston remain so elastic? Less regulation. The city famously lacks a zoning code, and many of its suburbs are also very pro-growth. This means it has fewer legal barriers to more housing than inelastic coastal metros, where proposed zoning changes can trigger lengthy and contentious review processes."

"Similar proposals show that the basic idea of hyperlocal zoning has precedent. Houston has been able to remain a city without zoning laws in part because residents had options in the form of deed restrictions, where neighbors could choose their own rules at the hyperlocal level. In 1998, policymakers were able to reduce the city’s minimum lot sizes by allowing residents on individual streets and blocks to opt out of that change, a move which helped overcome local resistance because residents felt they had control over the risks. The result? Some 25,000 more housing units, including denser townhomes, built close to job centers and transit, many of which Houstonians would not have seen built otherwise."
  • WSJ: How Remote Work Is Reshaping America’s Urban Geography (archive link) - Smaller cities and communities are turning into ‘Zoom towns’ and competing with coastal hubs as workers move to find more space and lower costs.  Basically, Richard Florida articulates Creative Class 2.0, which is the same as 1.0 but for remote workers outside superstar cities. Key excerpts:
Eye-opening stat: "remote workers are often more efficient than their in-office counterparts. They don’t waste hours on mind-numbing commutes, and they aren’t distracted by unnecessary meetings and water-cooler chitchat. The productivity boost to the U.S. economy from remote work could be as high as 2.5%, according to research by Stanford University economist Nick Bloom and colleagues." 
Conclusion: "The remote-work revolution promises to change the way that Americans work and live. It will allow smaller cities, suburbs and rural areas to compete with the superstar cities on the basis of price and amenities. It will shift the main thrust of economic development from paying incentives to big employers to investing and building up a community’s quality of life. As communities attract more remote workers, their tax bases will grow, allowing them to improve schools and public services, benefiting everyone. Eventually, companies will come too. That holds out the possibility of a better, more virtuous circle of economic development."
Finally, a couple items on Houston as a startup hub. First, we rank #4 on this list for annual startup formations and jobs created by startups (#10 for formation rate), behind DFW but - surprisingly - ahead of Austin! Second, the excellent Texas Startup Manifesto 2.0 is out (highly recommended), arguing for treating the Texas Triangle as one giant startup ecosystem (absolutely), with this excerpt on Houston: 
"Houston (East and Gulf Coast) is the fourth largest, and the seventh most diverse city in the US. It’s the energy capital of the world and is home to the Texas Medical Center (TMC), the world’s largest concentration of healthcare delivery and research institutions; to the NASA Johnson Space Center, a hub for cutting-edge human space flight research and astronaut training; to the number one seaport in the nation for waterborne tonnage, for foreign waterborne tonnage, and for vessel transits. Houston is an international city — a seaport, a spaceport, a “health-port”, and an “energy-port.” As a result, Houston has a diverse, high-tech industry ecosystem, and is increasingly an industry destination, serving as the home to 22 Fortune 500 company headquarters (with Hewlett-Packard Enterprise becoming the latest addition)."

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Sunday, March 07, 2021

Regulation of Electric Power in Texas

This week we have an excellent guest post by Jim Crump on the hot topic of the moment: fixing Texas' electric grid so the winter storm failures don't happen again.

Regulation of Electric Power in Texas

Politicians, pundits, and the public at large have voiced deep concern that electricity was tragically unavailable to many Texans during the recent period of extreme cold.  Claims that lax ERCOT planning caused the problem are exaggerated.  “Grid independence” from federal regulation is manageable.  The problem lies in the supervisory structure that regulates the Electricity Reliability Council of Texas (ERCOT) - Texas’ Public Utility Commission (PUC), a three-member panel appointed by the state legislature, and our elected officials, ultimate guardians of the public interest.  

To start, claims that ERCOT’s planning process is undisciplined are misleading.  Published documents (December 2020, January 2021) evidence well-structured scenario planning of capacity, demand, and reserve margin, including grid requirements and fuel types.  True, evolving events brought conditions not premised in these studies but laxness is an unwarranted criticism.  

The next layer of electric power management:  Oversight of ERCOT by the PUC.  Here, critical commentary by knowledgeable observers is valid.  To begin with, independent management of Texas’ power grid – that is, independent of the Federal Energy Regulatory Commission (FERC) – rests on reasonable logic, not merely the fabled secessionist tendencies of Texans.  

Two conditions in combination make Texas electrically unique.  First, the ERCOT grid embraces abundant energy resources as well as large urban demand centers, thus the energy system within ERCOT’s reach can self-supply.  (“Supply” goes beyond fossil sources.  The barren mesa region of west Texas is reliably windy.)  Next, the grid’s regional limits follow state lines to a high degree;  the political boundaries of Texas align with grid infrastructure, El Paso and portions of the panhandle and east Texas excepted.  The first condition (grid independence) allows supply without power purchase from other states, hence authority to operate free from regulation by the Federal Energy Regulatory Commission (FERC); the second facilitates rule-making and goal-setting, from the state legislature to PUC to ERCOT.  

Results of FERC-independent behavior are subject to debate; certainly positive outcomes can be offered.  ERCOT’s market-based model coupled with strong transmission infrastructure linking generation to consumers have enabled rapid growth of competitively-priced electricity sourcing, most recently wind generation and prospectively, solar.  ERCOT’s fuel mix report states that wind plus solar accounted for more than 20% of generated electricity in 2020.  

However, specific policies of a perhaps lenient regulatory framework appear unwise and call for revision.  A large proportion of winter electricity supply anticipated by ERCOT was disabled by frigid weather because established standards for deep-cold winterization had not been implemented.  In televised appearances Bill Magness (ERCOT CEO) and Dan Woodfin (Director, System Operations) explained that such standards are provided to generators on an advisory basis, not mandated.  

Also, ERCOT manages generation adequacy by pricing methodology, which failed in this severe case.  Reserve capacity, like winterization, may require measures beyond market-based methods (a mandate).   Of course, bulking up reserve capacity alone would be inadequate in the absence of stricter winterization.  Backup generators incapable of startup would have been of no help to Texans in the cold light of dawn on February 15.  

Clearer, more aggressive communication to the public might have saved untold damage and pain.  Meaningful public advisories that could have helped Texans to safeguard property (and life) were late and limited.  Future communication protocols must require updates on rotating or extended blackouts, health and safety information, and practical advice to prevent freezing of water systems.  

So, a call to our governor, legislators and PUTC commissioners:  Draw yourselves up to full stature, recognize that Texans’ lives are at stake, and formulate firm guidelines (yes, non-market guidelines where necessary) on winterization, reserve capacity, communication, and other requirements that will flow from the public hearings that Dan Phelan, speaker of the Texas House, has so sternly announced.  You must put right the executive functions linking our legislature to the PUC and to ERCOT. 

Texans suffered due to physical climate conditions, here a word on the political climate.  Both major parties must acknowledge shared responsibility for past power decisions.  Democrats:  Recognize that efforts to decouple Texas from FERC originated when democrats controlling Texas politics acted to shield Texas companies from federal regulators.  

Republicans:  Abandon the failed narrative that renewables caused the shortage – this is nonsense.  Abandon also the impulse to label renewables as menacingly “liberal”, therefore unworthy of service to the lone star state.  For one thing, such pronouncements violate the market basis for electricity sourcing that you claim to champion.  Recall also that Senator Chuck Grassley of Iowa, a Republican, is justly regarded by many as the father of wind energy – at least, father of legislative enactment of the wind operating tax credit, a spur to the growth of wind generation.   

Our leaders must tame their rhetoric, mandate best operating practices, and modify market-defined guidelines where required to protect Texans.  

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