Though the two Republican senators from Texas aren’t fans of the Inflation Reduction Act, few states stand to gain as much. Sure Texas is an oil state but is really is an “energy” state. It is the biggest producer of oil (and gas) in the country, as well as the top refiner. It is also in the top 10 states for coal mining. And Texas produces more electricity from coal than any other state. Even so, Texas is also the biggest state for wind power generation and the Corpus Christi port is a critical entry point for turbine imports. In utility-scale solar power, Texas ranks number two and is catching up to California fast.
Republican politicians’ vocal antipathy toward renewable energy is at odds with the fact that the vast majority of it is sited in red locales. Texas is a prime example.
Of the top 10 congressional districts in the country for operating and planned wind, solar and battery capacity, 4 are in Texas, more than in any other state. All are represented by Republicans, and despite their verbal opposition, the state will benefit from existing trends and opportunities.
But Will It Lower Current Electricity Rates?
Federal investment and production tax credits have been crucial to the expansion of wind and solar power across the US. The new tax credits are more generous and flexible. The maximum $26 per megawatt-hour credit is huge compared with current Texas electricity futures prices for 2024 of about $48 per megawatt-hour.
Furthermore, renewables were already growing exponentially in Texas due to the state’s deregulated power market, open land, growing electricity demand, high wind speeds and abundance of sunshine. Wind generation overtook coal-fired power generation a couple of years ago. Solar energy, which was slower to get going, pairs well with wind by stepping in during listless lunchtimes on hot days, which have contributed to strains on the grid.
As of July, ERCOT (the Electric Reliability Council of Texas) counted planned solar and wind projects equivalent to 3X the installed base. Most of that won’t end up getting built, but analysts suggest that even if 30% is realized, wind and solar would supply 1/2 of the state’s projected peak demand by 2025, up from just 23% last summer.
Let’s add in batteries… There are 69 gigawatts of battery capacity in the project queue versus an installed base of less than 2 gigawatts. In extending a 30% tax credit to battery projects, the IRA will ensure that more of the projects get built. It will also encourage large commercial power customers to install their own batteries as insurance against blackouts. Taken altogether, massive increases in renewables and storage will force further closures of coal-fired plants and reduce reliance on gas-fired plants.
To realize this continued transition, Texas will need to build more transmission lines to connect remote renewables projects with demand centers and link its own grid with surrounding networks. Wholesale power prices in sparsely populated West Texas have averaged 14% less than in Houston over the past five years. This is an arbitrage that new transmission would close.
Incentives That Will Eventually Reduce Electric Rates
The IRA’s transmission incentives are relatively small ranging from $3 – $15.5 billion. Given the strong existing economic case for new transmission wires, any help could mean the difference between an opportunity being realized or lost. In addition, last year’s bipartisan Infrastructure Investment and Jobs Act provided funds for the grid.
The permitting legislation would identify 25 strategic energy projects aimed at reducing energy costs, improving energy reliability, decarbonization potential, and promoting energy trade with allies. Transmission hooking up a wind and solar boom in Texas to its own cities and perhaps other states easily meets the first three of these criteria. Given the potential to displace domestic gas demand that could be redirected to exports, the fourth might also apply.
In addition to addressing energy supply, reducing electric bills in Texas means tackling demand. The state scores poorly on energy efficiency. Cutting load on the grid by 10% would be the equivalent of adding three nuclear reactors’ worth of spare capacity, and it wouldn’t cost nearly as much. The IRA’s $9 billion in funding to cover rebates for efficient appliances isn’t much. Nevertheless, the case for more energy/electricity efficiency in Texas where we have the sixth-highest monthly bills is clear.
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Clean Energy Displaces Fossil Fuels
Everyone would benefit from a grid featuring more renewables, batteries and transmission because it would boost resilience and reduce costs. Even in a decarbonizing economy , Texas’ concentration of low-cost resources and export capacity means its oil and gas production will endure longer than other states.
Above all, Texas would be a magnet for investment in not just greener energy infrastructure but also the manufacturing encouraged by the IRA’s domestic-content measures. Expanded rebates on electric vehicles, for example, will boost the emerging EV and battery hub around Austin.
