Only a decade ago, Texas had the most competitive electricity market in the world, a market that produced reliable, affordable electricity. Today, the Texas electric grid has been taken over by Texas government. This has produced predictable results: reliability has plummeted while costs have skyrocketed.
A new study by the Energy Alliance explains how high the costs have gone. In 2023, the U.S. government, Texas’ state government, and Texas local governments increased the cost of electricity in the Texas by $19.9 billion, most of it by providing subsidies and other benefits to generators and utilities. This represented 42.7% of the total cost of electricity to Texans in the area served by the Electric Reliability Council of Texas (ERCOT).
How did it come to pass that more than 40% of Texans’ electricity costs are imposed on them by government? The answer is simple: Texas policymakers supported ever increasing subsidies for renewable energy even as renewables were degrading the reliability of the Texas grid. And when the reliability problem caused by renewable subsidies became so apparent to the public that it could no longer be ignored—think Winter Storm Uri, policymakers decided to throw more taxpayer dollars at all generation sources rather than end renewable subsidies.
Over the last 10 years, this approach has added $84.3 billion. Of that amount, Texas state and local governments are responsible for 85.7% of the total. And the amount keeps growing.
On July 1, Texas Gov. Greg Abbott and Lt. Gov. Dan Patrick announced that they “will seek to expand the [Texas Energy Fund] to $10 billion to build more new [natural gas generation] plants as soon as possible.” The Texas Legislature, with voter approval, created the Fund last year with initial funding of $5 billion.
These subsidies for natural gas, coal, and nuclear (thermal) generation mark a significant change in Texas’ energy policy. Until recently, renewable energy subsidies had always been the largest government-imposed cost. That is no longer the case. Starting in 2019, thermal generation subsidies began to increase rapidly. The result is that last year renewable subsidies totaled $4 billion, but thermal subsidies of $15.9 billion were almost four times that of renewables.
Electricity prices confirm that these costs are being passed along to consumers and businesses. The lates data show April electricity residential prices at 14.57 cents per kilowatt hour, up 23% over the last three years.
Wholesale prices are up even more. In the five years prior to 2019, wholesale prices averaged $31.18 per megawatt hour. Since then, prices averaged $76.14. These costs translate into higher energy prices, higher general prices, higher taxes, lower wages, and lower profits for Texans. Except for wages and profits in the energy industry.
The only solution to the current insanity of increasing energy subsidies in an attempt to address the harm being done by renewable energy subsidies is to eliminate all of the subsidies. Doing so will once again bring to Texas an affordable, reliable supply of electricity.
Bill Peacock is the policy director of the Energy Alliance, a project of the Texas Business Coalition.
