April 20, 2023 Josiah Neeley & Matt Welch
The Texas energy grid may need a few precise improvements, but errant and unfounded advice isn’t going to help conservatives beat the top-down command and control left. The Wall Street Journal, for instance, recently published an editorial entitled “A Texas-Sized Energy Fiasco” which seeks to blame Texas’ energy issues on renewable energy, particularly wind. But the facts just don’t support that conclusion.
>>>READ: Texas Senate Energy Bill to Overhaul Power Grid Will Increase Costs for Ratepayers Across the State
Blaming renewable energy for the infamous Texas blackout of 2021 is a favorite talking point of some in the oil and gas industry. Their argument has been debunked over and over again with empirical, scientific research. Every single credible after-action report, including the official University of Texas response commissioned by the Public Utility Commission of Texas and the Federal Energy Regulatory Commission’s Staff Report concluded that the freezing of mostly thermal power plants and the natural gas system were to blame for the vast majority of the power failures.
In fact, an analysis of how each major type of power plant performed found that both natural gas and coal performed below their worst-case scenario for the entire time that the lights were out in Texas. Renewables weren’t perfect during the freeze either, but they did mostly provide output at levels between their worst-case and expected levels.
Similar alternative histories of the 2021 blackout contained in the WSJ piece blame the lack of natural gas flows to the power being shut off to parts of the natural gas system. While that did happen, it was because the natural gas system operators couldn’t be bothered to fill out the two-page form to tell the power company that their loads were critical. Some even went further and voluntarily signed up for programs that automatically shut off their power when the grid was tight. Willful ignorance is not a valid defense.
The WSJ piece also claims that “Republicans assisted [wind power in the] last decade by charging ratepayers $7 billion to build thousands of miles of transmission lines from West Texas and the Panhandle to big cities.” This version of history commits a sin of omission.
The Texas Legislature established the (Competitive Renewable Energy Zone) CREZ in 2005 to move Texas’ abundant wind resources from the western part of the state where it is windy to the center and eastern part where most electricity is consumed. Texas legislators did not do this out of some green or woke energy agenda, they did this because high natural gas prices were driving up the cost of our electricity.
The 2005 Annual Energy Outlook from the US Department of Energy’s Energy Information Administration was forecasting that from 2010 to 2020, the price of natural gas was going to average about $7.57/MMBTU (adjusted to today’s dollars). Every other major forecaster saw similar trends. Building the transmission lines was seen as the most prudent path forward to create a hedge against the high price of natural gas. Such was the expectation of high natural gas prices that companies spent billions of dollars to build liquified natural gas (LNG) import terminals, many along the Texas Gulf Coast.
In actuality, the hydraulic fracturing revolution drove down the price of natural gas, which from 2010-2020 averaged close to half of the 2005 projections. Even though the original projections of natural gas prices didn’t pan out, the CREZ lines still saved Texans roughly $1 billion per year, paying themselves off in less than a decade making the decision a very worthwhile investment.
>>>READ: Texas Grid Proposal Should Bolster Reliability, Protect Consumers
Beyond that, recent research has shown that, since 2010, renewables have saved over $31 billion in the ERCOT market and over the last five years have saved the average residential consumer about $1,000 on their electricity bills. Renewables have also been huge economic engines for rural Texas as they are often the only development that comes to the region. Other research has shown that existing and planned wind, solar, and energy storage projects will pay between $12.5 billion and $15.9 billion in total taxes and between $11.8 and $21.7 billion directly to Texas landowners over their lifetimes. Over 60% of these revenue streams flow to rural Texas economies.
Media coverage often reveals a basic ignorance of how modern energy systems work by espousing the merits of the outdated assumption of the baseload power plant. Modern grids do need sources of firm power, but the idea of needing large amounts of power plants that run 85%+ of the time is antiquated. Case in point, there are over 14,000 MW of batteries expected to be online in ERCOT by 2025.
The WSJ editorial describes a proposed legislative “fix”, the Texas Energy Insurance Program laid out in Texas Senate Bill 6; a government program that would forever change how power plants get built in Texas. While the legislature set aside $10 billion to allow the state government to buy power plants, recent analysis by one of the companies that would build them indicated that it would cost closer to $18 billion. All that money to buy power plants that would, by law, operate less than 4% of the year. To boot, the owners of these power plants would get paid handsomely for doing nothing most of the time.
While this might seem to some in the Texas Legislature to be the fastest way to build more power plants, doing it this way puts Texas on a slippery slope to more government intervention and regulation. Other regions, including California, Ontario, and more recently some New England States have shown us that once the state starts doing direct procurements, free market investment in power plants declines, which is the exact opposite of what conservatives want in Texas.
Matt Welch is the State Director of Conservative Texans for Energy Innovation, an organization working to advance clean energy with free market solutions that bring job creation, technology advancement, innovation, and a cleaner environment.
Josiah Neeley is the Texas director of the R Street Institute, a nonprofit think tank focused on free markets and limited government