Midland has become the epicenter of oil and gas production in the world.
Texas is on the verge of passing Iran and Iraq in oil production and is pushing the U.S. toward surpassing Saudi Arabia as the world’s No. 2 producer. Much of this is driven by new production in the Permian Basin, with Midland sitting smack dab in the middle of it all.
It’s odd, then, that in the midst of was of the largest boosts to energy production in human history that Texas is spending billions of dollars of taxpayer and ratepayer money to subsidize the expensive and inefficient generation of electricity using renewable energy.
The subsidies come in many flavors. One of the most expensive has been the building of the “CREZ” transmission lines that crisscross West and Central Texas, including Midland County. These were built at a cost of more than $7 billion for the sole purpose of providing transmission for wind and solar generation.
One of the major challenges with renewable energy is that the best places for generating it are the places relatively few people live. Wind and solar generation is generally best suited for West Texas and the Texas Panhandle. Those areas are where the winds blows and the sun shines the most.
Another reason, often not mentioned, is because both wind and solar generation require tremendous amounts of land. For instance, if all the electricity used in Texas was generated by wind, turbines would have to cover about 200 of Texas 254 counties.
However, generating electricity in West Texas and the Panhandle doesn’t make a lot of sense for the simple reason that only about 15 percent of the Texas population lives there. Yet Texas policymakers decided it would be worth more than $7 billion, which Texas consumers have to pay off as part of their monthly electricity bill, for Texas to become the leading producer of wind energy in the United States.
Another big subsidy for renewable energy comes in the form of local tax abatements. These abatements, offered under Chapters 312 and 313 of the Texas Tax Code, allow local governments, including school districts (using Chapter 313), to reduce the property tax bills for favored businesses. Often these include wind and solar farms.
The total costs of these programs are difficult to calculate because 312 agreements are usually available only from local governments. However, the Texas Comptroller of Public Accounts keeps track of 313 agreements. Through 2016, the lifetime cost of that program to the state was $7.1 billion, of which about $1.6 billion was allocated to wind projects.
But wait. There is more.
The federal government offers tax credits for the generation of wind and solar generation. The Texas Public Policy Foundation has estimated that the cost of these credits for wind generation alone will cost $65 billion through 2029.
While estimates vary, Texans pay in the neighborhood of 17 percent of all federal income taxes. That means our share of the federal wind energy tax credits is about $11 billion.
And the price tag keeps going up. The more subsidies are offered, the more renewable energy generation is built. It is an upward spiral that has no end in sight.
Yet while we can’t foresee how much renewable energy is built in Texas, it is much easier to understand the end result of these policies. We’ve already seen some of the effects.
Texas once again reached record usage of electricity this summer. With temperatures pushing 110 degrees, Texas hit its all-time peak hourly usage rate of 72,192 megawatts on July 18 between 4 p.m. and 5 p.m.
Even with this record usage, Texas generators managed to produce enough electricity to keep the lights on. No thanks to renewables, however.
The subsidies for renewables helped push more than 4,000 megawatts of coal-fired generation off the grid this past year as these plants struggled to remain profitable while competing against subsidized competitors. Even investment in low-cost generation from natural gas may be affected as well.
Remember, all of this is taking place in the midst of an increase in oil and gas production perhaps unparalleled in history. In other words, at a time when efficient, inexpensive energy is flooding the market, Texas and the U.S. are paying billions of dollars in subsidies for energy production from technologies that became outdated back in the 19th Century.
The Texas Legislature has an opportunity in 2019 to reverse the harm being done by renewable subsidies to Texas taxpayers and its economy, as well as Midland’s. By ending state and local tax abatements and forcing renewables to the costs they impose on Texas’ electric grid, Texas’ energy and economic expansion will continue to bless Texans—and Americans—for years to come.