Doug Sheridan Opines About Texas Energy Inequality
The WSJ Editorial Board writes, renewable subsidies have distorted and destabilized Texas's grid, which resulted in a week-long power outage during 2021.
The WSJ Editorial Board writes, renewable subsidies have distorted and destabilized Texas's grid, which resulted in a week-long power outage during 2021. To prevent more blackouts, politicians in the state now plan to subsidize gas power plants.
The Texas Senate passed putative energy reforms to “level the playing field,” as Lt. Gov Patrick put it. Texans will now spend tens of billions to bolster natural-gas plants that provide reliable power but can’t make money because of competition from subsidized renewables.
Federal tax credits have encouraged an oversupply of wind power, which Texas politicians assisted last decade by charging rate payers $7B to build thousands of miles of transmission lines from West Texas and the Panhandle to big cities.
Today, solar and wind supply about 30% of Texas power on average. Wind generators pocket a tax credit for every Kwh they produce no matter if the grid needs it. A surfeit of wind is increasingly driving wholesale power prices negative. Renewables can still make money because of the tax credits, but fossil-fuel plants that provide baseload power can’t.
Baseload plants were developed on the assumption that they’d run 85% to 90% of the time, but many aren’t because they are being squeezed by tax-advantaged renewables. Coal plants are closing, and gas plants are at risk. Too few new gas plants are being built to support a growing population and economy.
Austin's answer is to create a Texas Energy Insurance Program to support gas generators to backstop renewables. The state would commission gas plants with as much as 10 GW to run only during grid emergencies.
The Senate Finance Committee set aside $10 billion to fund part of the cost for these emergency plants, but the legislation also proposes charging consumers. An insurance program would finance zero-interest rate loans to existing gas generators to maintain their equipment, which they are struggling to do.
Another bill would create financial incentives for “peaker” gas plants that could ramp up on demand. Yet building peaker gas plants that run only 10% of the time costs about three times more than a baseload gas plant that operates 85% to 90% of the time.
Texas politicians are trying to fix enormous inefficiencies caused by renewables subsidies with more subsidies that cause more inefficiencies. California couldn’t have done it better.
Our Take 1: Make no mistake, Texas politicians have been used, abused and bamboozled by the renewables industry, rich land owners, and energy industry consultants. It's a pathetic showing from a state that could once claim to be a bastion of uncommon wisdom and market-based principles. No longer.
Our Take 2: Texans shouldn't expect any mea culpas from politicians in Austin—including Lt Gov Patrick and Gov Abbott. But they should expect to have their wallets lightened—so far to the tune of $63B—as lawmakers throw taxpayer money and higher rates at a problem they created.