At the end of October, several electricity generators and wind industry representatives teamed up to ask the Public Utility Commission of Texas to impose an electricity “tax” on Texas consumers of up to $4 billion a year in order to increase their revenues.
Their reason for asking for this new tax? They don’t think they make enough money.
Rather than pushing the PUC and the Texas Legislature to eliminate one of the main reasons that some of them are taking a revenue hit, renewable energy subsidies, they decided to ask for subsidies themselves.
To understand why this is happening, let’s back up a bit.
In our new paper, The Economic Fall & Political Rise of Renewable Energy, Robert Bradley, Jr. points out that from the beginning of history, renewable energy held a market share of about 100 percent. But over the last 300 years, that market share dropped to nearly zero in the developed world, except where water was abundant.
This happened because renewables like wind and solar are unreliable, inefficient, and expensive sources of energy. And when something better came along, i.e., fossil and nuclear fuels, the market all but eliminated them from the fuel mix.
This began to change in the 1970s when politicians and energy experts became (wrongly) convinced that we were running out of oil and gas. So, they started to pour billions of tax dollars into synthetic fuels, electric cars and renewables.
Yet, as Bradley writes, “despite a four-decade effort, wind power, solar power, and ethanol are still not competitive against conventional carbon-based energy. Electric vehicles are also uneconomic on a stand-alone basis compared to the internal combustion engine.”
Renewables will never catch up to modern, efficient sources of energy. But this hasn’t stopped federal, state and local governments from continuing to force consumers and taxpayers to subsidize renewable energy companies, making energy in American less affordable and reliable in the process.
Unfortunately, Texas is a national leader in this effort.
Texas built $7 billion worth of “CREZ” transmission lines to benefit wind and solar farms located far from population centers; Texas electricity customers pay down this debt every month, with interest, on their electric bills. Mandates to purchase renewable energy have added another $500 million. We’ve also paid close to $1 billion more to connect renewable generators to the grid.
Local tax abatements (Tax Code Chapters 312 and 313) have reduced property tax revenue by more than $500 million. And the cost of federal subsidies (stimulus payments and the Production Tax Credit) to renewable generation in Texas have topped $6 billion.
Add it all up and renewable energy generators in Texas have reaped close to $18 billion since 2006, all of it coming out of the pockets of taxpayers and consumers.
It is impossible to track which businesses benefit from all these subsidies. But we can track which companies benefit from the tax credits offered through PTC.
NextEra Energy leads the list, being eligible for $5.7 billion of tax credits since 2008. Also, on the list are NRG Energy ($1.1 billion), BP ($913 million), and Exelon ($528) million. These companies have a combined market cap of $278 billion.
Despite all the money we’ve been forced to pay these and other companies, it still is not enough, as witnessed by the energy generators operating in Texas — most generators have both conventional and renewable assets — going to the PUC to ask for another $4 billion per year.
They claim that if Texas doesn’t force consumers to pay them higher prices for electricity, the lights will go out. But they made the same claim back in 2012.
These companies seem to hope that a sympathetic PUC may force this electricity tax on consumers. But this should not be the PUC’s decision to make.
If Texas is going to abandon its world-class competitive electricity market and force consumers to pay generators another $4 billion a year, that decision should be made by the Texas Legislature and the governor.
But it need not come to that; the way to improve our tight — though sufficient — electricity reserves is through the market with less subsidies, not more.
The PUC should end operating procedures that favor renewable generation, such as subsidizing their transmission and allowing them to fail to dispatch electricity when needed without penalty. The Texas Legislature should end local 312 and 313 tax abatements for renewable generation and mandates for purchasing electricity from renewable sources. And it should tell the PUC to eliminate the distortions caused by the PTC.
Markets have already declared renewable energy outdated. It is time for policy makers to do the same.