Several energy experts recently questioned whether Texas’ massive increase in subsidies for generators will be effective in addressing the rapidly growing reliability problems caused by renewable energy.
Doug Sheridan, the Managing Director & Founder of Energy Point Research, wrote on LinkedIn, “The subsidized fund for gas-fired generation seems far from a solution to the grid’s large and growing problems. More likely, it's a political fig-leaf to cover up poor grid management by state leaders—that is, a way to say, ‘Don't blame us, we tried to fix it’ should the system suffer catastrophic failure due to the non-performance of renewables.”
Sheridan’s post was in response to a recent announcement that the Public Utility Commission of Texas received 125 applications to the state’s new Texas Energy Fund. The Fund, which was created by the Texas Legislature and approved by voters last year, appropriated $5 billion of taxpayer money for grants and low-interest loans to support the construction of new natural gas generation plants.
The Fund was created in reaction to the virtual takeover of the Texas grid by renewable energy. Over the next five years, new generation coming online in Texas is projected to be more than 59,000 megawatts. More than 58,000 megawatts of that is expected to be solar, wind, or batteries.
Sheridan’s perspective is supported by research published on the energy blog Master Resource by Bill Peacock, policy director of the Energy Alliance. According to Peacock, the subsidies are “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.”
Peacock suggests that while the Fund might serve as a temporary Band-Aid, the primary result of the fund and other subsidies will be to make electricity more expensive. His research shows that subsidies for electricity generators in Texas, both renewable and traditional, have increased the cost of electricity by $38 billion in the last five years. These costs show up in many ways, through increased taxes and higher, particularly in the price of electricity.
“In the five years prior to 2019, wholesale electricity prices averaged $31.18 per MWh,” wrote Peacock. “Since then, prices averaged $76.14, or $53, removing the effects of the PUC’s actions during Storm Uri.”
According to Peacock, this trend is showing up in retail prices as well.
“From 2014–2018, the average price for residential customers was 11.3 cents per kWh,” he wrote. “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.”
Yet, according to the experts, the higher costs have not improved the reliability of the Texas grid. Robert Bradley, Jr., who founded the Institute for Energy Research, noted, “The wind/solar/battery experiment in Texas has wounded a once reliable grid by replacing consumer-driven, taxpayer-neutral, economic, reliable energies with inferiors.”
Sheridan suggests the primary reason behind this is the politicization of the Texas electric grid.
“We suspect analysis of political contributions from renewable energy interests to Texas politicians would show there’s too much in the way of donations flowing to the political class to expect they’d ever disallow more damaging renewables on the system,” he wrote.
Neither is Sheridan sure that this will change in time to stop more grid failures.
“The lack of public understanding of what’s going on as it relates to the Texas grid is also a concern. That’s because it limits the public’s ability to act as a governor in real time to politicians... and their policy makers and moneyed interests. Unable to punish politicians at the polls in advance of breaking our grid, it leaves only the regrettable option of punishing them after the fact.”
Peacock notes that it is insane to keep pouring more subsidies into the broken system and expecting a different outcome. He suggests that the only way to “restore sanity, reliability, and affordability to the Texas grid” is to “end state and local subsidies for all sources of energy.” As well as “requir[ing] renewable energy generators to pay for the costs they are imposing on the grid because of federal subsidies.”
