It often baffles me why so many politicians and CEOs—folks who have fought hard to achieve their positions—exhibit so much fear. The slightest dip in polls or profits seems to drive them into a headlong flight for the safety of big government.
Nowhere is this more evident than in the response to renewable energy subsidies. Policymakers have simply thrown money at the problem which will wind up costing Texans billions if it persists.
Texas has the most competitive electricity market in the world. The price of electricity is largely determined by buyers and sellers, not the government. The result of this has been unparalleled consumer choice coupled with an affordable and reliable supply of electricity.
Still, the Texas power market has been under attack. In 2007, high electricity prices caused nervous legislators to attempt to undermine the market. Only a point of order on a re-regulation bill kept the market alive.
Next up, in 2012-13, the fear of competition led many generators to advocate for replacing Texas’ competitive market with a “capacity” market in which generators receive payments for simply existing.
The Public Utility Commission of Texas (PUC) joined the effort out of a fear of having the lights go out on their watch. That push fizzled out only when members of the Legislature decided they weren’t keen on having a $4 billion electricity tax imposed on their watch.
While the market continues to function, renewable energy generators have taken advantage of it to pocket billions of dollars in subsidies that have pushed the reserve margin for this summer to a new low of 7.4%.
It is easy to understand how renewable subsidies are distorting the market. Subsidies in Texas will total at least $36 billion from 2006-2029. Generators will receive about $2.5 billion this year.
Federal income tax credits for wind and solar generations are likely to cost more than $16 billion before they expire. The state has pitched in through subsidized transmission lines at a cost of $14 billion.
Local governments have also hopped on the renewables bandwagon. Georgetown’s plan to go 100% renewable will cost its residents up to $50 million. Austin’s venture into biomass generation will require taxpayers to pay over $800 million. San Antonio is on the verge of making its ratepayers pay to be “climate-ready.” Meanwhile, property owners across the state are subsidizing wind and solar farms at a cost of more than $2.5 billion through Chapter 312 and 313 property tax abatements.
These subsidies allow renewable generators to engage in predatory pricing to undercut their competitors and still turn a profit. The result is a lack of investment in reliable nuclear, coal, and natural gas-powered generation that keep the lights on.
The fear of rolling blackouts—and as being seen as unfriendly to renewables—has led the PUC and the Texas Legislature to throw money at the problem rather than address renewable subsidies head on. The Legislature declined to reduce or even study the effects of renewable energy subsidies in the recent session. The PUC decided in January, without a public vote, to increase electricity prices by as much as $2.5 billion a year.
Yet both fears are overblown. The effects of rolling blackouts from a lack of generation capacity would be minimal compared to the effects of a single thunderstorm, such as the recent one in Dallas that left as many as 350,000 customers without electricity.
Similarly, while renewable energy may poll high generically, a recent poll conducted by WPA Intelligence on behalf of the Texas Public Policy Foundation, found 77% of Texans agree that “the state legislature should eliminate handouts to big business for renewable energy that drive up electricity bills and reduce the reliability of the electricity grid.”
Texas is teetering on the edge of losing its competitive electricity market and locking Texans into years of paying higher prices for electricity. The only way to avoid that path is to reduce renewable energy subsidies.
Perhaps the only way to make that happen is for Texans to make policymakers fear them more than they fear the renewable energy lobby. We’ll see which way the wind blows.