In Texas, Lawmakers Throw Tax Funded Lifeline to Fossil Fuels

May 3, 2023

The Hill:

The Texas Senate (in early April) passed a package of bills that would cut support from wind and solar power and force renewable electricity producers to help pay for new fossil fuel power plants. 

The five bills are part of a larger campaign by the Republican-controlled body to redirect growth in the states’ flourishing renewable energy sector — by far the largest in the country — toward oil and gas.

The effort seeks to establish the long-term primacy of “dispatchable” electricity — in practice, gas powered plants — over renewables.

The package acts as a counterpoint to the shifting reality of Texas’ energy landscape. While the state is by far the nation’s largest emitter of fossil fuels, new renewable electricity is cheaper and often more attractive than new gas power plants — particularly with the 30 percent renewable energy tax credits passed by Democrats last September. Plus, wind and solar power has been crucial to keeping Texans’ lights on through bouts of record demand, which have been fueled by both rising populations and record temperatures.

But while blackouts have fallen in conjunction with the rise in renewable generation, Texas Republicans have largely blamed wind and solar energy for the state’s electric woes — and cast “dispatchable” natural gas plants as the solution.

In a statement on Thursday, Lt. Gov. Dan Patrick (R), who presides over the state Senate, cast fossil fuels as the underdog in the contest to ensure electricity to the state’s rapidly-growing cities. 

The new package “levels the playing field between dispatchable and renewable energy sources,” Patrick said.

Opposing the bill was a strange-bedfellows coalition of power utilities, environmental groups and electric coops — groups that generally have little in common. 

“Rarely have I seen so many groups with opposing views hate a piece of legislation,” veteran Texas columnist Chris Tomlinson wrote in the Houston Chronicle.

As demand soared last summer, wind and solar contributed more to the state grid than they had in 2021, ERCOT reported. According to Texas Monthly, as natural gas “underperformed” and hot, still air cut power from West Texas wind farms, rising solar generation and other wind power on Texas’ breezy coast helped stop the gaps.

Some power producers argue that the call for non-renewable “dispatchables” is obsolete. In New England, for example, advances in forecasting, remote measurement and power sharing have allowed the regional grid to dispense renewable energy from wind, solar and hydropower on demand. 

Last December, ERCOT approved nearly 654 megawatts of wind and solar power — and no new gas plants. (As an independent operator, ERCOT does not comment on legislation as a matter of policy.)

State GOP members cast the state’s growth in renewables as a problem — and one that federal subsidies are set to exacerbate. The federal tax credits “distort” Texas’s electricity market by giving “less reliable generators an unfair market advantage over reliable generators,” Senate Republicans wrote in analysis of Senate Bill 7, a linchpin of the package.

That bill would require such “non-dispatchable” sources — in other words, wind and solar — to pay more for state services like building and maintaining the grid. 

It also requires the state utility commission to report yearly to the legislature on how state subsidies can be tweaked to ensure sufficient “dispatchable generation to maintain reliability standards for at least five years.”

A companion bill, Senate Bill 6, would amount to social welfare for gas plants. The bill creates the Texas Energy Insurance Program, which would stand “outside of the competitive market,” according to Patrick’s statement. It would pay for the state to operate 10,000 megawatts “of natural gas or similar sources.” It also offers low-interest loans to keep aging and uneconomic power plants online — a category which in Texas mostly refers to coal and gas.

In 2021, the Texas legislature created a natural gas credit trading program to incentivize the construction of new gas power plants.

This program repurposes the state’s renewable tax credit system as a guaranteed carve-out to fossil fuels. In Senate Bill 2015, members voted to require all utilities and electric cooperatives in the state to purchase at least 50 percent of their power from such sources.

In practice, that electricity will have to come from coal and gas, because Senate Bill 2012 clarifies that battery storage facilities don’t count.

That means that if utilities come up short — or want to run their operations on more than 50 percent renewables — they’ll have to make up the difference by buying up “dispatchable” credits that in practice can only be created by natural gas producers.

In effect, the two bills “require renewable energy companies to subsidize the construction of new fossil fuel plants,” Luke Metzger of the advocacy group Environment Texas wrote in a statement.

Chris Tomlinson in Houston Chronicle:

State Sen. Charles Schwertner knew his proposal to spend $10 billion on a bespoke, white elephant of a backup power system for the Texas grid was going over like a lead balloon before energy executives and experts lined up to testify against it.

The Republican chairman of the Senate Business and Commerce Committee badgered and pleaded with electric industry representatives to support his Texas Energy Insurance Program. He wants to build massive natural gas-fired power plants that would sit idle at least 97 percent of the time.

Twenty-two out of 24 people who took a position on Senate Bill 6 spoke against it. Julia Rathgeber, representing Berkshire Hathaway Energy, was the only industry representative who voiced support. Berkshire first proposed building the backup generators in 2021 and would be a leading candidate to win the $10 billion contract.

Rarely have I seen so many groups with opposing views hate a piece of legislation. The Association of Electric Companies of Texas found common ground with the Sierra Club. Texas Competitive Power Advocates agreed with the South Texas Electric Cooperative. Energy giant NRG joined the consumer advocacy group Public Citizen in declaring SB 6 a lousy idea.

Electric power generators already in Texas adamantly opposed what they consider a heavy-handed solution that will likely lead to less power on the grid managed by the Electric Reliability Council of Texas, not more.

Three years ago, Houston-based Wattbridge began spending $2 billion on the kind of quick-start, natural-gas power plants Texas needs during hot, still days and cold, still nights. But changes imposed by the Legislature and the Public Utility Commission, plus Schwertner’s new bills, have made it impossible to build more.

“The market we invested in over the last 36 months is not the market that exists today,” Mike Alvarado, CEO of Houston-based Wattbridge, testified. “We do not anticipate investing any further in ERCOT, the current market conditions simply do not allow it, and the current legislation considered by the Senate makes it that much more challenging for our business.”

“We believe there are more cost-effective ways of achieving reliability in a way that is more sustainable to the market,” he added.

Texas has a competitive wholesale market where ERCOT only buys electricity when needed. Politicians do not want a competitive market where power generation companies compete to offer the cheapest emergency electricity options.

SB 6 is the kind of overly simplistic solution only an ill-informed politician loves: Force Texans to pay $10 billion for a brand-new backup power system that we will never need if the grid is managed correctly.

Sen. Nathan Johnson, D-Dallas, proposes a more subtle and practical solution with Senate Bill 2112. His plan would “guide the design and development of standard backup power packages using commercially available equipment and standardized installation” and deploy them at critical facilities across the state.

By standardizing the backup power, the state would lower the cost of publicly-owned microgrids at rural police stations, hospitals, senior living centers and other critical facilities. The bill allows private companies to compete for installation contracts.

When they power up, the facilities would reduce demand on the grid and allow electricity to go to residences. By upgrading the grid to accommodate more microgrids, transmission companies could more easily rotate outages when necessary.

Instead of a handful of giant power plants on the outskirts of big cities, small towns across Texas could afford backup power for lifesaving services during a statewide freeze or a local tornado or hurricane. Each microgrid would have at least two days of fuel.


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