By Bill Peacock
“Texas politicians have added at least $38 billion to the cost of electricity through higher bills or higher taxes since 2019…. Retail rates haven’t reached the level of New York ($0.24 per KWh) or California ($0.32), but Texas’s rising $0.15 rate is disconcerting.”
With its grid overwhelmed by renewable energy, Texas is putting natural gas back in the game. The Public Utility Commission of Texas (PUC) has received 125 notices of intent that propose more than 55,000 megawatts of new generation, most of it gas-fired.
Texans should not be surprised at this turn of events. Generators are simply following the money. Taxpayer money, that is.
Background
After Winter Storm Uri, public pressure forced Texas politicians to wake up to—though not confess—the damage they had caused by throwing billions of taxpayer dollars at generation that only works when the weather permits. But rather than restoring grid reliability by ending subsidies for wind and solar farms, they started flinging taxpayer money at natural gas and other dispatchable generation.
It is not going to work. The explosion of renewables continues unabated despite the well-known fact that the reliability value of renewable energy declines as its grid penetration increases. Subsidies for new natural gas generation and batteries may serve as a temporary band aid on ERCOT’s reliability problem, but the only permanent result will be to make electricity more expensive for Texans.
In fact, that is already happening. We are more than five years into an effort to make Texans pay higher rates to improve profits for generators, who have been trying since 2013 to convince policymakers that higher profits for them means more reliability for the grid. They got their first big payout in 2019 when the PUC made changes to a price adder (ORDC) that artificially increased electricity prices by almost $4 billion. Since then, the ORDC has added another $7 billion to electricity rates.
The PUC struck again when its commissioners irrationally, and perhaps illegally, intervened in the market during Uri to raise electricity prices to $9,000 per MWh when prices were about $2,400. This cost consumers at least $10 billion. Either Gov. Greg Abbott or the Texas Legislature could have stopped or reversed this, but both failed to act.
Last year was the most expensive yet for Texans. Another PUC market intervention (ECRS) created artificial shortages that caused prices to jump by $12 billion. Then the Texas Legislature created, and Texas voters approved, the Texas Energy Fund using $5 billion of the budget surplus (another $5 billion may be on the way next year). The Energy Fund is what has generators lined up at the PUC’s doors to get billions through low interest loans, grants, and bonuses.
Cost, Rate Inflation in Texas
Add it all up, and politicians have added at least $38 billion to the cost of electricity through higher bills or higher taxes since 2019.
Electricity prices confirm the cost of these measures to Texas businesses and consumers. In the five years prior to 2019, wholesale electricity prices averaged $31.18 per MWh. Since then, prices averaged $76.14, or $53, removing the effects of the PUC’s actions during Storm Uri.
Retail prices show the same trend. From 2014–2018, the average price for residential customers was 11.3 cents per kWh. For the last five years, prices have averaged 12.72 cents. The latest data show March prices at 14.92 cents, up 27% from 11.71 cents before Uri. Rates haven’t reached the level of New York ($0.24 per KWh) or California ($0.32), but Texas’s rising $0.15 rate is disconcerting.”
The recovery community defines insanity as continuing to do the same thing, while expecting different results. Since 2014, the reliability of the Texas grid has collapsed as federal, state, and local subsidies for renewables averaged $2 billion a year. Over the next five years, subsidies for traditional and renewable subsidies are expected to average at least $6.4 billion.
Policy Reform
The first step toward improving grid reliability is for the Texas Legislature to admit that the grid has become unmanageable, and making Texans pay more for electricity to increase the profits of generators will not fix the problem. From there, the solution is straightforward.
The Legislature must demand that the PUC and ERCOT stop manipulating energy prices. They must end state and local subsidies for all sources of energy. Then they must require renewable energy generators to pay for the costs they are imposing on the grid because of federal subsidies. In other words, they must let competition work in the Texas electricity market.
These measures will restore sanity, reliability, and affordability to the Texas grid. Texans would save billions, and one day would no longer be bothered by alerts to conserve electricity to keep the lights on when the wind stops blowing or the sun stops shining. We just have to take it one step at a time.
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Bill Peacock is the policy director of the Energy Alliance. He has worked in and around the Texas Legislature for more than 30 years.
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The largest problem with the Texas grid is federal subsidies and other rules encouraging wind and solar. As long as the subsidy miners get to ignore dispatchability in their price structure, the situation will persist.
AND Texas politicians are happy to mine those subsidies to employ their citizens and increase their economy.
Doing the RIGHT thing for the rate payers in general is of secondary concern.
The right thing to do would make the speculators in wind and solar pay for the required backup.
…or install sufficient storage to make their wind and solar generation dispatchable (without subsidy).
Please re-read this from the above article:
… batteries may serve as a temporary band aid on ERCOT’s reliability problem, but the only permanent result will be to make electricity more expensive for Texans.
(emphases mine)
Moreover, re: your “sufficient storage” assertion:
current battery tech makes that an impossible (or a nonsensically expensive) goal.
Since there is no way to store meaningful amounts of electricity for meaningful amounts of time, that equals what Tom said.
Amen!
The Feds could subsidize the building of renewables, or even pyramids along the Rio Grande for that matter, but I don’t see how that would affect rates unless the ‘locals’ are somehow complicit in allowing it to happen. You make a better point about Federal rule making, but again that would require the complicity of the locals.
The Feds playing games with mandatory purchase rules for wind are the issue. While Texas does have it’s share of RINOs, like John Cornyn, there are insufficient votes on the Federal level to remove those rules.
Waiting for favorable electoral changes to occur in DC just lets the so-called red-state government of Texas off the hook. If the Texas government was so inclined, they would be well within their rights to declare that the ‘Feds…mandatory purchase rules for wind’ are null, void and of no effect within their borders.
I know a lot of folks here are proponents of a ‘strong’ Federal government for various reasons, but there’s no ‘get back’ from Federal overreach absent action by the sovereign states.
So the problem is that Texas does not act like California, and ignore federal law it does not like? What I think we have here is projection.
‘What I think we have here is projection.’
Relax.
I’m only presuming that States are duty bound to nullify Federal laws / regulations that are not enacted ‘pursuant to the Constitution’. So if the California government decides to ignore, say, Immigration Law, which is quite arguably within the Fed’s ‘wheelhouse’, that IS a problem, but one whose ill effects should only be born by the stupid people who habitually vote for the likes of Schiff, Newsom, Pelosi, etc.
If you don’t think that the sovereign people of the States have any right to nullify un-Constitutional laws enacted when all three (effectively four) branches of the Federal government are in cahoots with the Left, what course of action would you propose?
The minor little problem is that Republicans, by and large, do believe in the rule of law. While often accused of “insurrection” by the likes of Nancy Pelosi, Pelosi is arguably doing what she is accusing the Republicans of.
Voting the yahoos out is more the Republican default reaction.
‘The minor little problem is that Republicans, by and large, do believe in the rule of law.’
It’s not a ‘minor little problem’ if the Republicans routinely acquiesce to unjust Federal laws. That’s exactly how we got into the predicament we’re in today, i.e., broke with a bloated national security state that enforces the Left’s agenda.
As I understand your political system the jurisdiction of the Federal government is bounded by the provisions of your constitution, anything not enumerated in the constitution is left to the individual states. Any Federal law that exceeds that jurisdiction is by definition not of any affect or effect and can be ignored, if you will, by the states affected. Am I mistaken in this understanding.
You are right de jure but not de facto. Under Supreme Court decisions like Wickard v Filburn, the feds claim near universal jurisdiction, and often get away with it.
De facto, the usual method of changing policy is voting out the party advocating for a given policy.
There are three problems with what you said:
#1 The “Necessary and Proper Clause” of the U.S. Constitution, the last paragraph in Section 9 where Congressional powers are enumerated:
“To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”
The government can declare anything “necessary and proper.”
#2 In McCulloch v. Maryland 1819 the U.S. Supreme Court interpreted the necessary and proper clause to mean implied powers are granted. Anything can be said to be implied.
#3 Since the 1920’s the [il]liberals have held the U.S. Constitution is a living document, meaning it means whatever they say it means until they say it means something different. The actual meaning is that it is a dead letter.
Creative interpretations of the Constitution have been common since The Slaughterhouse Cases in the 1870’s. The reactions to Brown v Board of Education, Heller, McDonald, or Bruen are nothing new.
‘Any Federal law that exceeds that jurisdiction is by definition not of any affect or effect and can be ignored, if you will, by the states affected.’
That’s basically how the Constitution was ‘sold’ to the people of each of the individual States during their respective ratification conventions.
Unfortunately, since it’s inception as a constitutional republic, there has been a concerted move towards the concentration of power in the Federal government to the point where there is now a significant gap between the meanings of the Constitution and Constitutional Law.
The former is easily understood by any literate adult, while the latter is often only discernable by legal professionals, whose status and pelf is too often dependent upon their acquiescence to Federal supremacy.
Not true at all .. see my comment in this thread. The Texas power grid is a disaster waiting to happen, with our without wind power. And from time to time, disasters happen.
But much more of a potential disaster with part time weather dependent renewable generation sources foisted upon it
FTM ,
Follow The Money ,
“The first step toward improving grid reliability is for the Texas Legislature to admit that the grid has become unmanageable, and making Texans pay more for electricity to increase the profits of generators will not fix the problem.”
When the pollys stop getting bribed ….
😉
To be fair, Texas used to burn a lot of coal and prices were cheap, energy reliable and power intensive industries such as aluminum smelters could profitably operate, but fools in Dallas, Houston, Austin and San Antonio voted for Leftists who promptly sued Texas’ bitumen burning plants into shutting down early because allegedly the power plant pollution would hypothetically provoke the EPA into fining these aforementioned cities for “unclean air”.
At the same time, the criminals in Babylon DC along with the Austin Leftists made conditions such where multi-billionaires could get the state to ED land for the stated purpose of creating water right-of-ways to where the water is (the West Texas aquifers, which are now depleted) to the major water thirsty metroplex (D/FW). What this was really about was creating electrical grid right-of-ways so that West Texas windmills could bring in electricity to D/FW.
Money was spread around like butter and now Texans have a failed grid, high energy costs and we still have a feckless legislature made up of city Leftists who believe that electricity just magically comes from the wall outlet, and anything that emits CO2 is evil and must be destroyed.
I don’t think that February 2021 (Uri) was a Come To Jesus event, it was just an excuse to throw money at a self-created problem yet another way.
When they outlaw campaign contributions.
This is why I moved out of ERCOT. Like any other organization on Earth, it exists to serve itself.
See Pournelles Iron Law.
I live in a part of Texas without ERCOT. Thank heaven for co-ops.
The chickens are coming home to roost.
Mlesko.
Without enough electricity to roast.
Geoff S
Texas sits on one of the most abundant sources of gas and oil on the planet. To use anything other than gas and oil to provide Texas with abundant, cheap, reliable energy is complete idiocy.
That Texas is suffering the increase in costs and decrease in reliability of energy is a vivid demonstration of the damage that government intervention and spending of taxpayer money at the state and federal level can do to our economy.
Politicians do not fear voters losing jobs. Politicians only fear losing their jobs.
and influence…
‘The Legislature must demand that the PUC and ERCOT stop manipulating energy prices. They must end state and local subsidies for all sources of energy. Then they must require renewable energy generators to pay for the costs they are imposing on the grid because of federal subsidies. In other words, they must let competition work in the Texas electricity market.’
I believe the gist of the problem is that subsidies AND mandates have resulted in the existence of two parallel generation systems, each with its own set of ‘wires’, both of which have to be paid for by rate payers.
The frustrating aspect of this otherwise excellent article is that there is insufficient detail about these subsidies and mandates that could be used to counter the incessant propaganda of the alarmist media and/or allow Texas’ rate payers and concerned citizens to apply pressure to their State officials. For example:
I logged in to give you a joyous golf clap. These are the right questions.
Simon have you found your Russian colluuuusion…what a dolt.
Thanks, man. Hope all is well.
This is a prime example of big government creating big problems so that they can grow bigger to take care of the problems they caused. Rinse and repeat.
I certainly hope the next administration starts saying “you’re fired” to millions of government bureaucrats. It should happen at the state and local levels too.
FJB
I don’t think that’s very likely but we shall see.
Hope springs eternal.
The author is making unsupported implications and claims here if not outright falsehoods. For example he adds the Texas Energy Fund as an example of Texas authorizing renewable energy sources, and blames the Texas legislature for it (the Texas legislature is one of the most conservative red state legislatures in the nation). Except that, the TX legislature only passed enabling legislation that was required by a voter referendum, and oh by the way, it only authorizes funds for development of “dispatchable generation”, not renewables.
Also, the fact that Texas electricity prices have increased (like every other state) is not due to renewables. It is mostly due to
(1) general inflation on everything everywhere including labor and materials of all kinds
(2) Texas is the second fastest growing state in the US, whose population has increased by more than 13% in the last decade, meaning that Texas has had to build a LOT of additional generating and transmission capacity in that timeframe, all constructed at significantly higher cost than a decade ago
3) An unregulated power market that can pay whatever the market bears during major weather related events especially those that happen to coincide with planned plant maintenance shutdowns (as happened in 2021).
Texas does not subsidize utility scale renewable energy projects to drive the increase in production, as some states do. The tax credits that favor renewable energy production in Texas are all Federal programs.
Texas consumer electric rates increased 0.47 cents per kw-hr in the last year to 14.92, or 3.25% increase, identical to the national inflation rate per CPI. Texas still enjoys lower than average retail electrical energy rates.
Whether the Texas power grid has gotten less stable as a result of producing so much wind power, well that seems unclear at all. Texas law insulates Texas utilities from any Federal regulation, and also isolates the Texas grid from the regional grid. Texas law allows the unregulated utilities to buy power on the spot market at grossly inflated rates whenever there is a shortage, such as a prolonged cold spell or hot spell, or during any downtime during plant or pipeline shutdowns – something no other state allows. During the 2021 cold spell Texas’s unregulated utilities purchased spot market power at prices as high as 9 dollars per kw-hr. Some of the unregulated retailers of power in Texas even went bankrupt after paying so godawful much for power during the winter storm.
Texas could, if the legislature chose, agree to cross connect its grid regionally, and that alone would provide a great deal more stability to its grid, and greatly reduce the effect of spot market purchases of power. And lower its retail rates.
Agreeing to regulation by the feds, as long as there is any possibility of the Democrats being in control, is suicidal green spin.
California’s electricity price increases are due to renewable generation inundation.
Prior to renewable generation (2004) 11-13¢/KWh
20 years later (2024) after renewable penetration raises to 39% 36-54¢/KWh
All the electric grids in the United States have been adversely affected by adding unreliable windmills and solar.
All the electrical grids have put out warnings this year about possible brownouts and blackouts and it is attributed to a reduction in conventional electricity generation sources. A 2.3 percent reduction is the number quoted.
So all our grids are being put at risk by windmills and solar and the retirement of conventional electrical generation. Apparently, the grid operators think windmills and solar are a good substitute for conventional electrical generation. As a result, the reliability of the grid is going down, and the cost of electricity is going up.
I doubt that grid operators think that Rube Goldberg machines are a substitute for reliable power generation. It’s mostly state and federal government programs. Grid operators know that wind and solar make the grid less stable. The RTOs (in some states called ISOs) labor under Byzantine rules that almost nobody understands.
1. Your assertion that inflation (which is largely caused by higher petroleum prices, thus, shipping costs are up greatly) is a meaningfully controlling cause of Texas’ energy problem is nonsense.
2. Re: (2) Texas is the second fastest growing state in the US
THAT is going to come to a brakes-screeching-on-the-U-Haul-truck halt if Texas doesn’t get its energy act together mighty quick.
I dunno about that. Recent news is that there is a venture that wants to put in a new stock exchange in the greater NW Dallas area. With that comes massive datacenter demands to handle twitch trading and the myriad of algorithms from traders who locate their computer centers as close to the exchange computers as can be.
I’m thinking that Texas politicians can easily be bought off especially when most of the population is peeved about ERCOT’s gross mismanagement of the grid.
AWG: If you meant to say that Texas will get its energy act together, then, my assertion AGREES with that.
So, why the “dunno?”
From the article: “Add it all up, and politicians have added at least $38 billion to the cost of electricity through higher bills or higher taxes since 2019.”
That has to be a Big hit on the Texas economy.
The school system can piss that away in just one year and have nothing to show for it. Given that the Texas GDP is around $2.6T with a growth rate in 2023 of all years at 7.7%, $38B over five years can be absorbed, but there are far better things to do with the money than blow it on Big Tech tax dodges. (Big Tech and Walmart having substantial wind/solar holdings where the tax rebates and carbon credits help offset their regular profits)
AWG. Suggestion:
Have someone you respect proofread your comments. Some of them are so ambiguously written that they are almost meaningless and what is (apparently) decipherable can only be read as missing the point or simply inaccurate.
Very nice. My understanding is that not just anyone can hook up to the grid. You must be approved and bid for that opportunity. Job one for those approving and accepting bids must be the amount of energy you can supply 24/7 at an affordable rate. Those that can supply large amounts of energy 24/7 or near that have absolute priority for the grid. Those who can’t can apply to supply energy to the grid during heavy loads. But the energy will only be accepted when need. The government can not interfere by offering subsidies, the competition has to be head to head.
Before governments commit to subsidies for alternate energy sources like wind and solar, they need to attach performance clauses to the contracts. These would stipulate that the providers/producers would have to meet specified outputs by certain dates. If they fail to do so, the subsidies would be gradually withdrawn or maybe terminated altogether. Without such deadlines, it’s the consumers and taxpayers that get the shaft in the form of higher prices for a lack of product. Would anyone buy some sort of machine or appliance without some sort of guarantee or warranty that it would do what it’s supposed ty do? Yet the governments that embrace unreliable energies expect the public to do essentially the same and for long periods into the bargain.
If I’m not mistaken, one big contributing factor to that famous power fail in Texas was an Obama reg (or maybe just pressure?) that required the backup gas in case renewables failed had to have it’s compressors powered by the renewable electricity it was backing up rather than the gas it already had in the pipeline?