Wholesale and residential energy prices in Texas have been on the rise despite record-low oil and gas prices, and some believe subsidies for renewable energy sources are to blame.
The COVID-19 pandemic caused oil to plummet to historic lows with oil prices falling into negative territory in April. Oil and gas companies currently are expecting $40 per barrel through the rest of the year, Houston Public Media reported.
Despite such low oil prices, energy prices continue rising in Texas and the the Energy Alliance released a research report indicating that subsidies for renewable energy are to blame. Bill Peacock, policy director for the Energy Alliance, wrote that Texas wholesale electricity prices jumped 13% in 2019, compared to drops from 15% to 30% in other markets.
Energy Alliance Policy Director Bill Peacock
| File photo
Retail U.S. electric prices also rose by 1.3%, but Texas consumers saw their prices rise by 6.8%.
Lower natural gas prices in 2019 led to much of the decline in wholesale electricity prices for most of the nation, except in Texas, where a decrease in fuel prices did not result in a decrease for consumers.
"Why did Texans pay more for electricity in 2019 despite reduced natural gas prices and lower wholesale prices in other parts of the country?" Peacock wrote. "The answer starts with renewable energy. Since 2006, wind- and solar-power generators in Texas have received about $19.4 billion in subsidies from federal, state and local governments. In 2019, renewable subsidies totaled almost $2.4 billion. The subsidies have caused massive distortions in Texas' wholesale electricity market."
Texas consumers have had to pay for the billions in subsidies for renewable energy and also have to foot the bill for the energy itself that has been generated, Peacock argues.
"Renewable-energy subsidies significantly increase the cost of electricity," he said. "For instance, not only did consumers have to pay $3.1 billion for the electricity generated from renewable sources last year, as taxpayers they had to cover the cost of $2.4 billion in renewable energy subsidies. That is about a 77% cost increase for the 81.1 million MWhs (megawatt hours) generated by wind and solar generators last year. Rather than the $38 per MWh average wholesale cost of electricity in Texas last year, the all-in cost of wind and solar generation in Texas was $67.9 per MWh."
