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.
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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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.
