Texas had the highest wholesale electricity prices in the U.S. over the last three years, according to a new report released by the Energy Alliance.
From 2021 through 2023, the wholesale price of electricity in ERCOT, which covers about 90% of Texas’ electric grid, averaged $117 per megawatt-hour. The next closest region was New England, where prices averaged $81, followed by California at $80.
The costs were calculated for the seven regions of the U.S. where electricity is managed through independent or regional service organizations. These areas cover about 70% of the total electricity consumed in the U.S., which corresponds to a similar percentage of the U.S. population served.
In 2023, California had the highest wholesale prices at $72 per megawatt-hour, followed by Texas at $70. New England and New York followed next, with prices at $55 and $54, respectively.
Retail prices were also up nationally and in Texas over the last three years. The report found that for 2024, U.S. residential electricity prices averaged 16.34 cents per kilowatt-hour, an increase of 3.19 cents, or 24%, from 2020, the last year of the Trump administration. During the same period, Texas residential prices jumped from 11.96 cents to 14.57 cents, marking an 18% increase.
“The Biden administration’s policies had a definite impact on Texas’ electricity prices,” said Bill Peacock, author of the report and policy director of the Energy Alliance. “However, the decision by Texas politicians to provide subsidies for both renewable and thermal generation has had an even larger impact on prices.”
The study found that from 2019 through 2023, federal and Texas subsidies for wind and solar generators totaled $16.3 billion. For the same period, Texas subsidies for thermal generation—primarily natural gas, coal, and nuclear—totaled $53.4 billion.
“The thermal subsidies give us some idea of the costs renewable subsidies are imposing on the grid,” said Peacock. “But by far the better, less expensive way of dealing with the problems caused by renewables would have been to end all Texas subsidies, for both renewable and thermal generation, then require renewable generators to pay for the harm they are causing because of federal subsidies.”
In addition to the cost, the main problem caused by renewable generation on the grid is a rapid decline in reliability. Numerous studies, including one conducted by ERCOT, have found that the reliability value of renewable energy decreases as its grid penetration increases.
The reason for this, according to the ERCOT study, is the intermittency of wind and solar generation, which only produces electricity when weather conditions are favorable. This necessitates backing up wind or solar generation with batteries. However, the cost of batteries is prohibitively expensive on a grid-wide level.“Storing a kilowatt-hour of electricity in a chemical battery costs an order of magnitude more than just generating it in a nuclear power plant,” wrote Quico Toro and Guido Núñez-Mujica in their article, The Problem with Solar. “Which is why a 100% solar grid would be insanely expensive ...”
Despite attempts by the Texas Legislature to address reliability problems, these issues are likely to worsen as renewable generation continues to dominate the grid.
ERCOT forecasts that renewable generation will increase by 58,654 megawatts through 2029—comprising wind at 3,628 megawatts, solar at 36,868 megawatts, and batteries, which also receive billions in subsidies, at 18,158 megawatts. In contrast, thermal resources are expected to increase by only 1,074 megawatts. Renewables are projected to account for 98.2% of new generation on the Texas grid over the next five years.
The percentage of new renewable generation might change because of the newly created Texas Energy Fund. However, what won't change is the rapid growth of renewables on the Texas grid.
