Texas may ultimately get into the energy business, according to remarks Lt. Gov. Dan Patrick made at a grid summit in Houston on Feb. 6.
The "Texas Power Grid Investment Summit" was jointly hosted in February by Patrick and Larry Fink, the CEO of BlackRock, the world's largest investment firm.
Patrick and Fink called for a "public-private partnership" to address reliability issues and made a pitch to attract $10 billion worth of investments to build "dispatchable generation," mostly from natural gas-fired plants.
“We put forth $10 billion— the voters approved it in the November elections— to an incentive to these companies to build,” Patrick said during a news conference at the summit. “If we can't get an incentive program to attract investors to build, then the state would have to build it ourselves and then subcontract out for someone else to run it."
The event was held just months after Texas formally created a $10 billion energy fund, which some critics say is incompatible with Texas law that requires competitive markets.
Known as the Texas Energy Fund (TEF), the initiative was adopted by the state's legislature and then approved by voters as a constitutional amendment last November. Its aim is to subsidize the building of more power plants in Texas.
Sen. Charles Schwertner, chair of the Senate Business and Commerce Committee and author of the energy fund legislation, promoted the fund as a solution to "strengthen electric generation facilities by modernizing and enhancing their resilience to continue operations, even in the face of extreme weather conditions."
However, market advocates like Bill Peacock, policy director of the Energy Alliance, argue that the TEF is contradictory to Texas law mandating competitive markets.
"The $10 billion Texas Energy Fund is not compatible with the Texas law requiring competitive markets," said Peacock. "Neither is it compatible with capitalism or liberty."
Schwertner did not respond to a request for comment when asked if the TEF complies with existing Texas energy law.
According to Texas's Public Utility Regulatory Act of 2002, the state must have "a competitive retail electric market" determined by "the normal forces of competition."
Peacock argued that the newly developed fund undermines that law.
“It’s socialism and makes even the California electricity market look good,” he said.
In California, electricity prices have increased three times faster than the national average since 2008. However, despite skyrocketing costs, the state's electric grid has experienced increasing reliability problems.
After shutting down numerous natural gas power plants over the past decade, California has become heavily reliant on weather-dependent forms of energy - including wind and solar, as well as electricity imports from neighboring states.
To address the high prices, major utility companies in the state have proposed fixed monthly electricity use charges that would possibly make it more affordable for low-income families to pay their power bills while charging higher-income families more.
Peacock said that by becoming increasingly dependent on unreliable renewable resources in recent years, the Lone Star State is making some of the same mistakes as California.
He pointed to the circumstances that unfolded on September 6, 2023. Even though it was not a particularly hot day in Texas and the period of peak demand passed without incident, issues arose once the sun started to go down.
"Solar generation began to drop, and wind generation did not pick up the slack," Peacock explained. "This was a problem because almost all new generation built recently has been renewables, chasing after the subsidies."
Peacock said there was not enough new natural gas generation to respond to the situation.
The changing climate of Texas' energy market could also further alienate investments that would help to ensure the stability of the state’s grid.
Some major investors have threatened to take their business elsewhere, which could cause the state to become even more reliant on intermittent renewables.
WattBridge, a gas-fired generator, has spent billions to develop power plants in Texas, but company leaders plan to take their business elsewhere after their current construction projects are complete.
"We do not anticipate investing any further" in the Electric Reliability Council of Texas (ERCOT), Mike Alvarado, president of WattBridge told Texas Senators at a hearing last March on the energy fund.
“The [Texas Energy Fund] makes the current market that much more challenging for our business and provides additional conviction to our decision to cease our current investment program in ERCOT and begin to look in other markets,” Alvarado said.
According to Peacock, the subsidies and manipulation of prices taking place in the ERCOT market today are leading to "the collapse of reliability to the grid" because they divert investment away from reliable natural gas or coal generation.
"Renewables fail when the wind does not blow or the sun does not shine, and there is nowhere else for Texans to turn to."
Peacock emphasized that the solution to improving grid reliability in Texas is neither to rely on renewables nor to require taxpayers to subsidize a multi-billion-dollar initiative to build new power plants.
Instead, he argues, the way to solve the problem is to simply let the market work.
"Ending subsidies for all generators, eliminating barriers to competition created by regulations and requiring renewable energy generators to pay for the artificial costs they are imposing on the system will quickly return reliability to the Texas grid."
