While wind and solar generators in Texas are running on warm breezes and plentiful sunshine, the state's taxpayers are being left out in the cold.

That’s the take on the administrative price adder known as the operating reserve demand curve (ORDC) by Bill Peacock, an Austin-based energy analyst and policy director for the Energy Alliance, a Texas Business Coalition project designed to raise awareness of three major energy market issues — reliability, affordability and efficiency. Peacock says that while the Public Utilities Commission (PUC) of Texas has provided $19.4 billion in subsidies to wind and solar power, it has imposed what amounts to essentially an electricity tax on state residents.

It’s a whopper of a bill, too, at $3.6 billion.

Energy Alliance Policy Director Bill Peacock | File photo

“The ORDC is an administrative price adder put into the electricity market by the Public Utility Commission of Texas,” Peacock told the Lone Star Standard. “The PUC commissioners implemented the ORDC so they could artificially increase the wholesale price of electricity in Texas. Electric generators have been claiming for years that they cannot make enough money operating in Texas' competitive market. The PUC commissioners feared that generators would not build enough new reliable natural gas generation to keep the lights off so they implemented the ORDC in 2014, expanded it in 2019 and again in 2020, in order to increase the generators' profits. Last year, the ORDC increased wholesale electricity prices by about $3.6 billion.” 

Peacock rejects the PUC's argument, however.

“If the generators aren't making enough money in Texas, it is not because of the market,” he said. “It may be that they are not very good competitors, though. It is certainly because renewable energy subsidies have distorted the market. Renewable generators are making billions of dollars per year off of taxpayers. To make up for that, the PUC commissioners decided that taxpayers would also have to pay billions more for electricity as consumers.”

Subsidies for renewable energy sources have been under the spotlight of late in the Lone Star State. Peacock examined the issue in a July 2019 piece for the Texas Public Policy Foundation (TPPF).

“Texas has the most competitive electricity market in the world,” he wrote. “The price of electricity is largely determined by buyers and sellers, not the government. The result of this has been unparalleled consumer choice coupled with an affordable and reliable supply of electricity.”

But, Peacock says, legislators have interfered with the market and the PUC joined in as well.

“While the market continues to function, renewable energy generators have taken advantage of it to pocket billions of dollars in subsidies that have pushed the reserve margin for this summer to a new low of 7.4%,” he wrote last July. “It is easy to understand how renewable subsidies are distorting the market. Subsidies in Texas will total at least $36 billion from 2006-2029. Generators will receive about $2.5 billion this year.”

Add to that more than $16 billion in federal income tax credits, $14 billion from the state for subsidized transmission lines, and hundreds of millions in local costs, including an $800 million price tag on Austin’s “venture into biomass generation,” as well as $50 million for Georgetown’s plan to go 100% renewable.

“Meanwhile, property owners across the state are subsidizing wind and solar farms at a cost of more than $2.5 billion through Chapter 312 and 313 property tax abatements,” Peacock wrote. “These subsidies allow renewable generators to engage in predatory pricing to undercut their competitors and still turn a profit. The result is a lack of investment in reliable nuclear, coal and natural gas-powered generation that keep the lights on.”

In his report conclusion on the $3.6 billion “electricity tax,” Peacock offers a way forward.

“Renewable energy subsidies are at the heart of Texas’ reliability problem,” he said. “Rather than adding more subsidies for renewable generators, Texas policymakers should address the subsidies directly. They can do so in two ways. First, they can eliminate renewable energy subsidies in Texas. Through 2029, state and local subsidies are expected to total more than $8 billion. These can be eliminated by the Texas Legislature.

“Second, federal subsidies for renewables will total more than $7 billion through 2029. While Texas cannot eliminate these, Texas legislators and the PUC commissioners can make changes to state law and policy that mitigate the harm caused by the subsidies,” he continued. “This can be done by forcing renewable generators, rather than consumers, to pay for the harm, including reliability problems they are imposing on the grid. On top of this, Texas should eliminate the ORDC and the $3.6 billion electricity tax. Combining these policies will result in a more reliable and affordable supply of electricity for Texans.”

Meanwhile, the public is kept in the dark and stuck with the bill, Peacock says.

“Most Texans are not talking about this because a lot of people in the government, industry and media are doing everything they can to hide what is happening,” he told the Lone Star Standard. “Perhaps they think that if people knew that the government, in league with the renewable energy industry, was forcing them to pay close to $6 billion a year to support renewable energy in Texas, the people might be upset.”