The wind industry once again has received a holiday season extension of its multi-billion-dollar tax break, the production tax credit (PTC).
The extension—one of the many times Congress has refused to let the PTC expire over the last 27 years—is included in the $1.4 trillion government spending package approved by Congress last week, despite claims by wind developers that wind is so cheap they don’t need tax breaks anymore.
What this means for Texans is more summers spent questioning if we will have enough electricity—and money—to keep the lights on.
Earlier this month, ERCOT—the grid manager for most of the state—released its forecast of the reserve margin between projected demand and supply in the Texas electricity market. ERCOT estimates a reserve margin of 10.6% for the summer of 2020, up 23 percent from this year as a result of increased capacity from new renewable and small gas-fired generators.
The increased reserve has both good and bad news for Texans. The good news is that, contrary to naysayers, Texas’ competitive electricity market is working by providing incentives for the building of new generation, as it has for almost 20 years now.
The bad news is that much of the new generation coming online is from wind and solar farms. In fact, wind and solar farms provide significantly more electricity than the reserve margin. So, if the weather does not cooperate one hot summer afternoon next August, Texas is going to face some challenges.
Why should Texas—with perhaps the most robust energy market in the world—be so close to the brink of going dark? The answer is that renewable energy subsidies like the PTC enable renewable energy generators to cash in by pushing far more reliable energy sources off the grid.
Since wind and solar power depend on windy and cloudless days to function, this means that the reliability of the Texas electric grid is dependent on the whims of Texas weather. As ERCOT’s calls for conservation this past summer show, sometimes the wind just doesn’t blow enough to ensure sufficient electricity to reliably power the grid.
In these cases, renewable generators simply don’t show up, even if the electricity is needed. But when the conditions favor them, they use the subsidies to engage in predatory pricing that allows them to sell as much electricity as they can generate, whether we need it or not.
Texas policymakers and regulators have refused to make renewable generators pay for the costs they impose on the system because of this anti-competitive behavior. Instead, the Public Utility Commission of Texas (PUC) has decided to force consumers to subsidize all generators through several administrative price adders.
This is just part of the costs consumers and taxpayers are paying—billions of dollars per year—for the privilege of teetering on the edge of reliability. At the national level, Congress’ Joint Committee on Taxation estimates that federal subsidies for renewables (including electric cars) over the next five years (beginning in 2019) will total $45.3 billion. Texan’s share of this, plus our own renewable subsidies, will likely surpass $10 billion during this period.
Most of these costs are hidden from Texans. The decisions to grant these subsidies for the most part take place in Congress, the PUC, and county commissioners courts with almost no public input. And the costs are hidden in our federal income taxes, property taxes, and electricity bills with no way for us to understand how much we are paying in subsidies.
The Texas Legislature must shed light on these hidden dealings and end the subsidies. Texas can keep its lights on while reducing energy costs, but only if Texas policymakers are willing to make renewable generators pay their way on the Texas electricity grid.