When the wind dropped and energy prices spiked on Aug. 31, Michael Giberson wasn’t surprised.

“We're relying more on wind power because it’s a bigger part of the overall energy mix but it's variable, which means that when the wind flows down, it will naturally lead to higher prices,” said Giberson, an associate professor at Texas Tech University’s Rawls College of Business. “Wind power dropped off from about 4,000 megawatts at around 10 a.m. and by 4 p.m., it was 1,500 to 1,600 megawatts, which means other power plants have to fill in the gap.”

What caused the price spike, Giberson told the Lone Star Standard, was a combination of factors, including high demand due to heat and air conditioning.

Associate Professor Michael Giberson | Texas Tech

“The problem is capacity is short and you’ve got to anticipate changes,” said Robert Michaels, an energy economist and former professor at Cal State Fullerton. “There's no easy way to work around a drop, or no cheap ones at least.”

According to an Energy Alliance report, poor reliability of wind energy was the primary factor in the price spike, but what remains unconfirmed by the PUC is the role played by the Operating Reserve Demand Curve (ORDC).

“We have not researched this,” said Andrew Barlow, spokesman for the Public Utility Commission (PUC) of Texas.

When available system reserves fall to a critical level, the ORDC is typically triggered, according to Michaels.

“The point of the ORDC is to get certain generators running, which are economical, but they might not be if you didn't give them the subsidy of the ORDC,” he said.

According to Barlow, the effect was limited.

“Price reactions to market forces had no impact on customers on a fixed contract,” Barlow told the Lone Star Standard.

As for a specific investment response, Barlow said he had no insight into investor’s plans, while Giberson estimates the ORDC raised the average price of power in 2019 by $9 to $10 on average for the year. 

“It does turn into a pretty targeted incentive to be able to build generation that's going to be available exactly when it’s needed,” Giberson said in an interview.

As previously reported in Texas Business Coalition, the ORDC is a response by regulators to the alleged unreliability of renewable energy, which allows for artificial increases to the cost of electricity. For example, the ORDC in 2019 added $3.6 billion to the cost of electricity at the wholesale level, according to Energy Alliance data. 

“There's a pretty obvious link between the subsidized wind power that increased the amount of wind generation built,” said Giberson. “It certainly cuts into the market available to other kinds of generators and reduced the returns to other kinds of generators and therefore, to some degree, the growth in wind power has come at the expense of would have otherwise been an extra few natural gas generators built or maybe coal power plants staying in business for a little bit longer.”

Wind, solar, nuclear and fossil fuels have secured between $13 billion and $37 billion in federal subsidies since 2010, according to a Life Powered study called "The Siren Song that Never Ends: Federal Energy Subsidies and Support from 2010 to 2019,” — and wind power has received 17 times and solar 75 times more subsidies per unit of electricity generated than the average for oil, gas, coal and nuclear.

“Subsidies for renewable energy are substitutes for energy that’s not worth as much as dependable energy and all they do is encourage their use,” Michaels told the Lone Star Standard. “If you subsidize anything, people are going to do more of it.”

Why Texas continues to build more wind generation depends on who is asked.

Barlow says, “It’s a competitive market. The state is not making the choice, individual competitors are.”

Michaels has a different view.

“Wind has a good lobby,” he said.

In either case, experts say one solution is investing in storage capability.

“Some part of the storage has been built at the same location as the wind power plant or the solar power plant,” Giberson said. “There's other energy storage that's being fulfilled separate from any investment in generation technology. Over the coming two to three years, there's quite a bit of storage that's coming on.”

But Giberson adds that storage is an expensive way to manage the problem.

“Combining it with cheaper wind power plants will naturally inject a little bit of variability in the prices and storage is the obvious answer to increasing variability in prices that creates the opportunity for storage to buy when the price is low and sell when the price is high,” he said. “That's what will balance out some of the variability from wind and also the variability that's going to come from solar when more solar comes into the market.”