The demand for electricity throughout Texas surged to its highest point ever two days ago (Tuesday, June 27) when rising temps and massive heat dome covered the state. A heat wave continues to bake Texas for two weeks now reaching 100+ temps.
Electricity Demand in Texas is Scorching
ERCOT (Electric Reliability Council of Texas), which operates the grid serving most of the state, reports that electricity demand rose to 80,828 megawatts between 5 p.m. and 6 p.m. Tuesday. That’s the amount of energy needed to power more than than 16.1 million homes while blasting air conditioners. The new record for electricity demand also breaks the all-time peak demand record on the ERCOT power grid. The number tops the previous record of 80,148 megawatts set just last year in July 2022 (76,681 megawatts). That menas this new records happened three weeks earlier in the season. Scary!
Despite triple-digit temperatures and soaring power use, ERCOT issued only 1 request for residents to reduce energy use last week on Tuesday, June 20th. Even so, air conditioners whir around the clock while residents do their best to cool down. The grid operator has issued another weather watch through the end of this week because of the continued weather pattern.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
In its seasonal summer report released in May, ERCOT forecast that summer demand would hit 82,739 megawatts. The report expects there to be enough electricity supply through the summer, barring the unlikely occurrence of intense heat, widespread outages of natural gas and coal power plants, and a shortage of renewable energy.
Approximately 45% of the electricity on the grid Tuesday evening came from natural gas fired power plants and about 20% came from coal and nuclear plants. About 23% of power came from wind energy, and another 12% came from the state’s rapidly growing fleet of utility-scale solar farms.
Earlier this spring, the Public Utility Commission of Texas (PUCT) warned that there is likely to be a shortage of power supply/production that can be brought online with short notice during extreme summer conditions. Eerily, current data show that peak demand for electricity this summer will exceed the amount we can generate from on-demand dispatchable power.
The state of the Texas electricity grid continues to be a point of anxiety for residents and business owners. It is a complex and evolving issue in Texas politics. In recent years, the grid has come under scrutiny due to a number of factors, including the 2021 winter storm, rising natural gas prices, and the increasing penetration of renewable energy.
Impact on electricity prices for consumers in Texas
The 2021 winter storm was a major test for the Texas electricity grid. The storm caused widespread power outages and left millions of Texans without power for days. The outages were caused by a number of factors, including frozen wind turbines, natural gas production outages, and transmission line failures. The storm highlighted the vulnerabilities of the Texas electricity grid and electricity prices, which led to calls for reforms.
Elevated natural gas prices had a significant impact on electricity prices in Texas and elsewhere, but they have come down of late. As natural gas is the primary fuel used to generate electricity in Texas, the recent volatility has made electricity prices in Texas volatile as well.
The increasing penetration of renewable energy has also influenced electricity prices in Texas. Renewable energy (wind and solar) is intermittent and does not always generate electricity when it is needed. This intermittency can lead to spikes in electricity prices when the demand for electricity is high and the supply of renewable energy is low.
The combination of these factors has led to higher electricity prices for consumers in Texas. In 2022, the average residential electricity price in Texas was 13.93 cents per kilowatt-hour. This is higher than the national average of 12.93 cents per kilowatt-hour. Prices went up everywhere, not just Texas. Even so, the higher electricity prices in Texas have put a strain on household budgets and have made it difficult for businesses to operate.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
The solution is simple but the process to affect positive change in Texas is complex. The factors that have contributed to higher electricity prices are likely to continue to impact the grid in the years to come. It is important for consumers and businesses to be aware of the challenges facing the Texas electricity grid and to take steps to manage their energy costs.
There are a number of things that consumers can do to manage their energy costs. One is to sign up for a fixed-rate electricity plan. This will protect you from rising electricity prices. Another is to make sure that your home is properly insulated. This will help to keep your home cooler in the summer and warmer in the winter, which will reduce your energy consumption. These changes can save you money on your electricity bills in the long run.
Businesses can also take steps to manage their energy costs. One is to invest in energy efficiency measures, such as installing LED lighting and upgrading to more efficient HVAC systems. Another is to sign up for a demand response program.
This is a program where businesses agree to reduce their electricity usage during peak demand hours in exchange for financial incentives. Demand response programs can help to reduce the strain on the electricity grid and can save businesses money on their electricity bills.
The U.S. Energy Information Administration says in the December Short-Term Energy Outlook that U.S. wholesale electricity prices will be higher and more volatile this winter – from 31% higher than last winter in Texas.
Highlights from the December Short-Term Energy Outlook:
In 2023, U.S. natural gas production is expected to rise to an average of more than 100 billion cubic feet per day for the first time. Pipeline constraints have limited production growth in the Permian Basin of Texas and New Mexico, but the constraints are expected to be resolved more quickly than previously projected.
Crude oil production in Venezuela is expected to rise slightly in the second half of 2023 after the United States ruled that Chevron can resume production there. DeCarolis noted uncertainty in the production forecast for Venezuela but expected production to rise “somewhat next year.”
Electricity generation from wind and solar power in Texas is expected to grow in 2023. Wind power is expected to account for 29% of the state’s electricity generation in 2023, up from 25% in 2022. The share of electricity generation from solar is projected to rise to 8% in 2023, from 5% in 2022. “Renewable sources will play a key role in meeting electricity demand in Texas during peak daytime hours,” DeCarolis said.
It is expected that electricity customers in Texas will pay more for electricity, but retail electricity prices are not expected to increase as much as wholesale prices this winter. The reason is that regulatory and contractual factors vary widely across the United States. During the core winter months – December through February – EIA is forecastes residential electricity prices to average $.145/kWh, which is 6% higher than last winter.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
The natural gas price at Henry Hub in 2021 averaged $3.91 per million British thermal units, with the 2022 price expected to average $6.48 per million Btu and $5.43 in 2023. In November Henry Hub averaged about $5.50 per million Btu; EIA said it is forecasting a spot price of more than $6 in the first quarter of 2023, with natural gas prices expected to increase from November levels due to higher winter natural gas demand and increasing LNG exports.
The National Oceanic and Atmospheric Administration is forecasting colder weather than last winter from October through March, with 7% more heating degree days than last winter and 2% more than the 10-year average.
EIA said it expects natural gas prices to begin to decline after January as storage levels move closer to a 5-year average but mostly a result of rising U.S. natural gas production.
The agency has raised its forecast for U.S. natural gas production by almost 1% for next year compared to its November forecast. EIA said it has expected natural gas production from the Permian basin to be limited early next year by lack of pipeline capacity but now expects those constraints to be resolved earlier than previously thought.
U.S. natural gas production is forecast to average 98.1 billion cubic feet per day this year, and in November EIA forecast an average of 99.7 bcf per day for next year, a forecast it has now raised to 100.4 bcf per day.
Production of more than 100 bcf per day in October and November exceeded pre-pandemic monthly records from 2019, EIA said, with growth in natural gas production driven by increased drilling activity in the Haynesville region in Louisiana and East Texas and in the Permian region in West Texas and Southeast New Mexico. “Recent pipeline infrastructure expansions in both these regions facilitated the increases in production,” EIA said.
The agency said forecast production in the first half of 2023 is limited by pipeline constraints and declining prices, with more pipeline infrastructure expansion projects scheduled to come online in the second half of the year, contributing to increases in dry natural gas production. “The pace at which these projects are completed is a notable uncertainty in our forecast, and delays could result in lower production than we expect,” EIA said.
LNG TRADE
U.S. natural gas exports are forecast to increase in 2023, “driven largely by growth in LNG exports,” EIA said. Those exports peaked in the first half of 2022 with facilities operating close to maximum capacity and the Calcasieu Pass facility coming online.
A June fire at Freeport LNG, however, removed some 2 billion cubic feet per day of U.S. LNG export capacity. Freeport has announced it plans to come back online in December and increase output to some 2 bcf per day in January.
Once Freeport is back online, EIA said it is forecasting that LNG exports will set a new record, close to 12.5 bcf per day, in March, with U.S. LNG exports expected to reach 12.7 bcf per day by the end of 2023.
No new U.S. LNG facilities are scheduled to come online in 2023, EIA said, and it is forecasting LNG exports in 2023 to average 12.3 bcf per day as facilities continue to operate close to maximum capacity to meet high demand for natural gas in Europe and Asia.
The U.S. also exports natural gas by pipeline to Canada and Mexico and those exports reached almost 9 bcf per day in November, EIA said, near a previous record. During the coming winter months pipeline exports are expected to be between 9 bcf and 10 bcf a day, reaching new record highs.
CRIUDE OIL PRICES IMPACT
EIA said Brent averaged $91 per barrel in November, up from an average of $70.89 per barrel in 2021. The agency is forecasting a 2022 average of $101.48 per barrel and $92.36 per barrel in 2023.
In November Brent reach almost $100 per barrel on Nov. 7, dropping by the end of the month to $86 per barrel. “The price declines were largely the result of market concerns about global economic growth, as well as COVID-related lockdowns in China that have reduced China’s oil demand,” EIA said, adding that despite the recent drop in prices, it expects Brent to be pushed back above $90 per barrel by the beginning of the second quarter on falling global inventories.
EIA said because global petroleum inventories are relatively low and it takes time to rebuild those inventories, the market has limited slack during the forecast period, and any unplanned supply disruption has the potential to increase oil prices quickly and significantly.
Wizard Energy puts the electricity market in context with real-time information
In Texas, Electricity rates don’t doesn’t exist in a vacuum outside of the whole energy market. To find the right electricity plan for your business (current and future needs), you need to know what is going on in the energy market now and how it will likely trend in the future.
Electricity Rates & energy Update September 2022
Winter weather is more weighted than normal this year because demand is outpacing growth in supply of natural gas and that is affecting power prices.
HISTORICALNEAR-TERM FORECAST
Natural gas production is up about 3.784% from 2021, but most of it was consumed by LNG (export) and electricity generation demand. Meanwhile, natural gas consumption is likely to be at its highest level on record and exceed 2019 levels, per the EIA. Consumption is projected to be up 4.337% from 2021 levels. As is often the case, the biggest factor affecting power energy and electricity prices will be winter weather.
U.S. natural gas consumption likely to increase in all sectors
We expect U.S. natural gas consumption in 2022 to increase by 3.6 billion cubic feet per day (Bcf/d) from 2021 levels to average 86.6 Bcf/d for the year, the highest annual natural gas consumption on record. It looks like U.S. natural gas consumption will increase in all sectors, led by the electric power sector and the residential and commercial sectors.
In the electric power sector, which consumes the most natural gas, annual consumption has increased by 1.2 Bcf/d in 2022 to average 32.1 Bcf/d, which is 0.3 Bcf/d greater than the previous annual record high of 31.8 Bcf/d set in 2020.
When we get our electric bills, we all know this sector is sensitive to changes in natural gas prices relative to coal prices. Many power providers typically offset their use of natural gas with coal for electricity generation when natural gas prices are relatively high.
Impact on Electricity Prices
Despite a large increase in natural gas prices this year, U.S. consumption of natural gas in the electric power sector increased in the first eight months of 2022, averaging 33.2 Bcf/d, which is 2.0 Bcf/d higher than the same time in 2021 and 0.4 Bcf/d higher than in 2020. Over the same eight-month period, the natural gas price at the U.S. benchmark Henry Hub in Louisiana averaged $6.56 per million British thermal units (MMBtu) in 2022, compared with $3.43/MMBtu in 2021 and $1.86/MMBtu in 2020.
U.S. consumption of natural gas in the electric power sector has increased in 2022 due to limitations at coal-fired power plants and weather-driven demand. Coal-fired power plants have been limited in their ability to increase power generation due to historically low on-site inventories, constraints in fuel delivery to coal plants, and continued coal capacity retirements. During both a cold January and a hot summer, natural gas was key to meeting electricity demand peaks throughout the country. We expect natural gas consumption in the electric power sector to decline in the fourth quarter of 2022 and in 2023, in part, due to more renewable electricity generation capacity coming online.
Residential Consumption of Gas / Electricity
We forecast annual U.S. consumption of natural gas in 2022 to have increase by 0.9 Bcf/d in the residential sector and by 0.7 Bcf/d in the commercial sector, driven by high consumption in January. January 2022 was particularly cold, resulting in 9% more heating degree days (HDD) compared with the previous 10-year (2012–2021) average. Natural gas consumption in these two sectors averaged 8% higher than the five-year (2017–2021) average in January, averaging 31.0 Bcf/d in the residential sector and 17.8 Bcf/d in the commercial sector. We expect natural gas consumption in the residential and commercial sectors in 2023 to be similar to 2022 levels.
In Texas, Solar & Wind Energy Kept the AC on This Summer
How about this fall and winter?
Texas lawmakers say changes should provide protection for our Power Grid this winter, but other critical changes will be harder to execute.
A hearing this week in the State House Energy and State Affairs committees began with an optimistic report that the reliability reforms that were passed in Texas and implemented at the PUC & ERCOT are working. The state continues to switch from the old extra-electricity-when-needed (crisis-based) structure to a reliability-based model that focuses on keeping the lights, heat, and AC running.
Unfortunately, the changes to Texas Electrical Grid is going to hit everyone’s pocketbook.
Rules are in place to fine energy producers for non-compliance is up to $1,000,000 per day.
Nonetheless, the costs for winterization, inflation, and higher energy prices thanks to Russia are driving up delivery charges by some 50%. That doesn’t include the upcharges coming from REPs (Retail Electricity Providers) either!
It will be a burden on both commercial and residential electricity customers throughout Texas.
There is concern about additional changes to restructure how energy producers are compensated.
It could become a turf battle to determine if more power plants are built. But if the state doesn’t get companies to build new power plants, it doesn’t matter what is done in the legislature.
If additional generation capacity is not added to the grid, we’re going to be in great trouble.
This summer got too hot too early, which has forced farmers to harvest a month early, slashing yields to 80 bushels per acre from their typical production of 130 to 150 bushels. But many farmers in Texas these days, don’t fret about the weather as much as he used to. Many have 30-year leases with renewable energy companies that have erected large turbines on their land in exchange for a set fee plus a share of the electricity revenue they generate. In a typical year, the extra cash helps farmers pay down land and equipment loans and get a head start on the next crop. This year, lease payments and royalties will cover many of their drought-related losses.
One of the most active players in communities like this is Engie, a French energy company. It has a wind farm northeast of Waco that began producing electricity in December 2020 with 100 turbines across 30,000 acres and a substation connecting it to Texas’ grid. It has a production capacity of 300 megawatts per day, enough to power 150,000 homes. Engie has two more power projects under construction… another 300 megawatt project called Limestone Wind and a 250-megawatt Sun Valley Solar project. The company also plans to add 100 megawatts of battery storage at Sun Valley to allow it to hold on to electricity that can be released when needed. These will give Engie seven wind and four solar projects in Texas with a combined capacity to produce more than 2.2 gigawatts of electricity. The 200-ton towers are as tall as a football field and are increasingly common in Central Texas. The turbines surprise many who thought they were only in West Texas.
Inflation Reduction Act
The legislation provides billions of dollars in tax breaks and incentives to increase renewable energy and affiliated manufacturing designed to drive down carbon emissions. Surprisingly, Texas is already one of the leader in the country for renewables. Only eight states produce more total electricity than Texas does solely from renewable sources. And the industry within the state is growing rapidly too. Wind generation in May increased 32 percent from a year earlier and was 63 percent higher than in May 2018. Solar generation, while still a small part of Texas’ total energy production, was up 545% over 2018.
Kickbacks to Rural Republican Landowners
There’s a lot of money involved in these projects. Building new wind and solar projects on the prairie east of where Texas’ Wind industry bloomed puts Engie closer to established transmission lines that can supply metro areas like Houston and San Antonio. Engie spent $300 million to get Prairie Hill Wind up and running, and the Limestone plant is expected to cost about the same. That requires abundant available land and property owners. A land owner who owns 735 acres, is one of 78 who signed leases with Engie. Though many say they were “on the fence” about how the turbines fit into an agricultural environment (noise, aesthetics, damage to roads and infrastructure), they have been more than happy to receive their payouts.
Projects like these highlight the extent to which investment capital for renewable energy is flowing primarily into blue, Republican strongholds despite the political rhetoric from many on the right. Records show 41 of the 50 (82%) of U.S. congressional districts with the most money going toward renewable-energy projects are represented by Republicans. Even so, Republicans in Congress voted unanimously against the Inflation Reduction Act, even though their districts are poised to reap the expected benefits of increased spending on renewable-energy initiatives. In Texas, Republicans lead 8 of the 10 that are home to the lion’s share of wind and solar projects. Meanwhile, Democratic-leaning metropolitan areas that want to decarbonize their energy sources, have to payout to conservative strongholds and lobbyists that funnel money to blue counties.
Economic Benefits for Rural Communities & Schools
Funny enough all that puffery and bluster about the windmills ruining the view and adversely affecting their livestock is gone. Those blue, conservative communities are raking it in. Local schools in rural communities are getting more than their share of tax revenue while urban schools are dealing with overcrowded schools and budget shortfalls. And of course those communities are going to say that renewable power can’t sustain itself without government subsidies… that money is too easy.
Texas was once a promised land for bitcoin miners, a business-friendly state with stable regulations and a seemingly endless energy supply. But the tide has turned.
Texas has slowed issuance of new permits for crypto miners to connect to the grid. The state is trying to balance its demand and supply of electricity. There’s virtually no place in Texas where you can just plug into the electrical grid. There are a large number of miners waiting to plug into the grid, and because the amount of available electricity has been low lately bitcoin miners have had to build out their own generators and power lines to power up their computers to mine crypto. That will take a while.
Furthering the pain, Crypto miners have been struggling as the price of bitcoin has slumped and will likely collpase, reducing the miners’ profits and forcing some to sell their mined tokens to cover operating costs.
Lower Electric Rates From Broken Promises
While many companies were successful in building out large-scale operations in Texas, some companies did not get as much power as they initially expected. A slowdown in permitting has felt like a broken promise. There continues to be fire sales of transformers, PDUs (power distribution units) and other equipment that the mining farms can’t use due to power constraints.
A Chinese mining company was planning a 600 MW site in West Texas, and the first phase of the site with a power capacity of 100 MW has been energized. This means electricity is flowing to the mining machines, but the rest is on hold. Is this extra capacaity being added to the grid that is not being used to easy prices? The company had to lay off part of its staff in Texas and a few others left the company in June and July. Other miners with big plans in Texas are Riot Blockchain, Core Scientific, U.S. Bitcoin Corp., and Genesis Mining… will that stick to their development plans in Texas?
In March, ERCOT, which manages large loads on the grid including those for crypto miners, announced an interim process for large energy consumers to connect to the grid. The state needs to figure out how to manage these flexible loads. Right now the state requires large consumers of energy to register and get approval from authorities before they can connect to the grid, which will slow down the build out process for all. Fewer projects have been able to energize per month since the process was established. Although the approval process is a measure to ensure grid stability until ERCOT completes its work, the delay could cripple crypto miners as prices continue to fall.
GET THE BEST ELECTRIC RATE
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down! Plus we confront all those sneaky practices of hidden fees or deceptive terms.
How big a drop in demand and the electric rate might we see?
Despite the new, slower procedures, Texas is trying to remain friendly to crypto miners. The state hasn’t overtly said they are no longer looking to attract more mining to the state. ERCOT estimates that 33 gigawatts (GW) worth of bitcoin mining projects planned are waiting for permits, up from 27 GW in mid-July. That volume can be added back to the grid to lower rates. The state expects about 80 GW of peak demand for upcoming summers, compared with 93 GW of energy production based on current and planned resources.
Lower Demand, Lower Electricity Rates
As bitcoin miners and crypto miners continue to melt, will the reduction in demand lower Texas’ electric rates?
Lobbyists for deceptive energy companies and inept bureaucrats have made this way more complicated than it needs to be. Wizard Energy is committed to helping our commercial clints navigate these charges in the bids, contracts, and billing of retail electricity providers to make sure our clients get the best possible electric rate and save tons of money.
The “real” or “actual” electric rate you pay is the amount you pay each month divided by the amount of kWh (kilowatt hours) of electricity you used.
What Makes Up The Charges on Your Electric Bill in Texas?
1) TDU Delivery Charges (Regulated State Fees)
2) Rate Charged by Retail Electricity Provider
3) Fees Added by Retail Electricity Provider
Let’s go through each of those…
1) TDU Delivery Charges
This is what you pay the state to deliver electricity to your business (i.e. service and maintenance of the poles and wires) and the meters that measure it. TDU delivery charges are regulated by the Public Utility Commission of Texas (PUCT). They are impacted significantly by your Peak Demand.
Peak Demand
In Texas “demand charges” are based on the highest usage recorded over a 15-minute period for the previous year. Peak demand is measured so power generators know how much electricity is needed to service everyone on the grid.
If your peak demand is less than 10kW, you pay a base fee plus a rate per kWh:
If your peak demand is greater than 10kW, you pay a base fee plus a rate per kWh AND a Demand Charge:
2) Retail Electricity Provider (REP) Rate
REPs will offer customers a rate based on the amount of electricity they and their Load Factor, which is a measure of how predictable your electricity usage is on average.
If you use power consistently (few or low spikes when you need a large amount of electricity), then the potential for your business to adversely affect the grid is low. In this case, you would be considered a “low demand, high load” customer and tend to pay a lower rate.
Alternatively, if your business has inconsistent, big spikes in demand for a lot of electricity, then your business can potentially have a negative impact on the grid. In this case, you would be considered a “high demand, low load” customer and tend to pay a higher rate.
Calculate Load Factor
(Total Electricity Used (KWh) in Billing Cycle)
divided by
(Peak Demand X Hours in Billing Cycle)
As an example, let’s say your business used 14,000 kWh during the month and your previously established Peak Demand is 25 kW.
(14,000) / (25 X 720) = .77 or 77%
This would be considered a high load factor.
Low: 0-40 Medium: 41-75 High: 76+
Consequently, you are likely to get a better rate offer from an Retail Electricity Provider, like $.03/kWh instead of $.06/kWh. Remember that this rate is in addition to the state-regulated TDU charges for delivering the electricity to your house. Unfortunately, the electricity rate quoted by your REP is not always the sole fee charged to customers. Let’s look at those…
3) Retail Electricity Provider (REP) Fees
There should be only 2 fees in your contract/bill: Electricity Rate ($/kWh) & State Taxes/Fees
Again, unfortunately REPs bury other fees like monthly base fees, minimum usage fees, customer service fees (even for phone calls), etc. These all add up to significantly increase your actual electric rate.
It doesn’t end there. The worst culprits are not hidden fees but deceptive plans that quote potential customers a rate based on a “Market Rate”. These Market Rates are variable rates based on market conditions that are out of your control like weather events, seasonality, global events, or just odd spikes in demand. These risky plans are called:
Instead of your electric bill being a simple sum of (1) TDU Fees + (2) REP Rate + (3) REP Fees + (4) Taxes, you get charged (1) TDU Fees + (2) Market Rate (3) REP Rate + (4) REP Fees + (5) Taxes.
Let’s go back to our example where your business uses 14,000 kWh/month with a Peak Demand of 25 kW. And let’s say your energy company baited you and quoted an “Indexed Plan” with a rate of $.03/kWh.
Here’s the reality of what you are going to be charged:
(1) TDU Fees: $10.41 + (14000 X $.00314) + (25 X $7.749513) = $248.11
(2) Market Rate: $.12 X 14000 = $1680.00
(3) REP Rate: $.03 X 14000 = $420.00
(4) REP Fees: $50.00/month (assumes no other sneaky fees)
(5) Taxes: $2398.11 X .0625 = $149.88
TOTAL: $2547.99
REAL RATE: $2547.99 / 14000 = $.18/kWh
THAT WOULD BE INFURIATING… The Energy company can quote $.03/kWh and you end up getting charged $.18/kWh… 6X more than you might have been expecting or budgeting for.
Wizard Energy would never steer clients to indexed or variable rates
Plus we know how to review multiple bids, decipher the terms and weed out the sneaky fees or deceptive add-ons.
GET THE BEST ELECTRIC RATE
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down. Plus we confront all those sneaky practices of hidden fees or deceptive terms.
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.
GET THE BEST ELECTRICTY FOR YOUR BUSINESS
We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!
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.
