Is the Texas Power Grid Fixed Yet?

What happened in the waning days of the Texas Legislature’s 88th Session and what it means
MAY 30

Late Sunday — after the Texas Legislature, at the 11th hour, passed monumental electricity grid bills that stitched together a range of energy proposals that many had assumed to be dead — a friend asked on Twitter, “Does this mean the grid is fixed?”

No. Not even close.

Over the past 20 weeks, state leaders have, with frightening consistency, focused on the wrong energy-related issues. They wasted time and energy attacking Texas’ nation-leading clean energy sector — something most states and countries pine for — while ignoring consumer-centric solutionsthat would reduce bills and increase reliability.

The only good news as the 88th legislative session came to a close was the surprising lack of bad news.

Bad bills that died (or got better)

A remarkable coalition of environmentalists, industry organizations and business groups — including more than 50 chambers of commerce, manufacturers, generators, oil & gas advocates, and others — stopped very real efforts to shut down the renewable energy industry in Texas.

As attack after attack rolled out of the Texas Senate, the state House of Representatives consistently raised red flags about the effects of such legislation on consumers. House State Affairs Committee Chairman Todd Hunter — a pro-business, anti-nonsense Republican from Corpus Christi — often led the questioning on behalf of consumers. And most anti-renewable bills could not stand up to that scrutiny.

The worst of the proposals would have unleashed the “exercise of the police power of the state” (actual words in the bill) on renewable energy developers by creating an unprecedented, incredibly restrictive permitting system. The measure would have set the foundation for a building’s worth of bureaucrats deciding what Texans could and couldn’t do on their land. Despite the false conservationist veneer that advocates invoked, the bill was pushed by NIMBY billionaires, such as Houston automobile and travel magnate Dan Friedkin, who don’t want to see wind turbines near their exclusive private ranches.

Other anti-clean energy, anti-property rights, big-government proposals included a cost allocation scheme concocted by the Texas Public Policy Foundation to add $4 billion in costs to the ERCOT market for no reliability benefit. The Senate passed it despite the cost; the House, again protecting consumers, whittled it down to allow only a study that will be completed by 2026.

TPPF also pushed for measures that would force renewable energy developers to secure very expensive backup capacity that would go unused and unneeded for most of the year — but would nevertheless add billions of dollars to Texans’ power bills. Only a couple of companies, Valero and South Texas Electric Co-op specifically, supported this “firming” measure to soak consumers in their war on renewables. Most manufacturers, retail electric providers, and even oil and gas companies, don’t want to see power prices rise at that clip, and they opposed (or at least didn’t support) the firming proposal.

Asked about the firming requirement in the Senate, the Independent Market Monitor, one of the foremost experts on electric markets in Texas, said she “couldn’t get her head around” the language in the bill. Here again, the House stood up for consumers: greatly improving the Senate’s incomprehensible language, tying it to generation portfolios rather than specific units (still not great, but not nearly as costly), and setting an implementation date of 2027.

What about Market Design?

One week after the session began in January, the Public Utility Commission tentatively recommended the Performance Credit Mechanism, a capacity market proposal introduced after the demise of a different expensive capacity market construct. The PCM would reward existing gas and coal plants for simply being available, paying them $6 billion or more of Texans’ money per year.

Overcoming a multimillion-dollar wave of lobbying from generators who’d profit from the PCM, the Legislature capped the proposal at a net cost $1 billion — a major win for consumers. At one point, a coalition as diverse as the Sierra Club and the Texas Oil and Gas Association, as well as AARP and the Texas Chemical Council, endorsed a low cap. The Legislature obliged.

The future for the Performance Credit Mechanism is uncertain at best. If it can operate, it will need to do so with meaningful consumer protections, not the blank check generators wanted. The Senate and House both deserve credit for protecting consumers from billions of dollars in increased power bills.

Fixing the Wrong Problem

The legislature did nothing to directly address the root causes of the Winter Storm Uri outages in 2021. Instead, it doubled down on the infrastructure that triggered the blackouts.

Lawmakers passed Senate Bill 2627, which will provide $5 billion–$10 billion in taxpayer money for low-interest loans and completion bonuses for new gas plants. Voters will have the opportunity to weigh in via the constitutional amendment embedded in Senate Joint Resolution 93this November. But it’s unlikley new gas plants will do much of anything to actually solve the problems with the Texas grid.

Remember, it was gas supply and gas plants that failed most spectacularlyduring Uri: comprehensive reports from FERC/NERC and the UT Energy Institute show that natural gas production fell by 85%, and natural gas generation fell by more than 50%, during the worst of the storm. The capacity was there, it didn’t work.

Texas’ gas supply remains vulnerable to extreme weather — just last December, during Winter Storm Elliott, gas output fell 32% and more than25,000 megawatts — one-third — of thermal power plants were offline at some point during the three days of Elliott, even though there was no snow and ice.

NERC has warned that continuing to rely on gas plants could increase the risk of blackouts. As the landmark Never Again report showed, “The blackouts in February [2021] were not due to the lack of generation capacity within ERCOT, but rather to the failure of many generators to prepare their hardware and fuel supplies adequately for the Arctic weather.”

New gas plants won’t fix that.

But despite all of its flaws, SB 2627 was the thing Lt. Governor Dan Patrick insisted on above all else — the phrase “steel in the ground” was his energy policy, even it solved the wrong problem. As if to prove the point, in his statement after SB 2627 finally passed, Patrick repeated a demonstrable lie by faulting renewables for the Uri blackouts.

Instead of facing the truth, Patrick’s bill doubled down on the source of our problems.

No, the grid is not fixed.

Supply and …

Perhaps worst of all, the legislature again failed to meaningfully address the runaway demand that helps drive electricity shortages in Texas. That’s two sessions now with nothing to show on the demand side.

During Uri, demand outstripped supply by 20 gigawatts. Even if the state can attract 10 gigawatts of gas plants, as SB 2627 aspires to do by 2029, we would still need to reduce demand by another 10 gigawatts, not counting the population growth that’s coming. The state’s paltry energy efficiency programs are projected to achieve less than 20% of that by the end of the decade. What’s more, the additional 10 gigawatts, if they get built, will likely crowd out older, dirtier, less reliable power plants, leaving an even larger need to optimize energy use and reduce demand.

Legislators could have increased the state’s energy efficiency goals, which would save consumers money and strengthen the grid. The Senate even passed a bill to significantly increase energy goals, and another to set a residential demand response goal, but the House didn’t pass either — putting Texans at risk.

No, the grid is not fixed.

What It Means

I’ll have more to say in coming weeks about other legislative actions this year to:

Create a distributed backup power program of small generators as part of SB 2627;
Establish a Dispatchable Reliability Reserve Service (DRRS), an important (and potentially expensive) new ancillary service product; and
Strengthen the foundation for geothermal energy, hydrogen, and offshore wind power.
But the best news out of the past 20 weeks is that, despite some lawmakers’ intentions, the legislature did not mortally wound the state’s clean energy industry.

The continued rapid growth of renewables is good for consumers and good for the grid. As CPS Energy CEO Rudy Garza told me, “We need every megawatt we can get. … It would be crazy to punish renewables.”

Most power generators, manufacturers, consumer advocates, and even oil and gas companies feel the same way. Unfortunately, powerful dissenters — principally ideologically driven billionaires and a “think” tank they control — remain on a right-wing crusade against renewables, consumers, and, apparently, free-market capitalism itself.

Right wingers against markets. Strange days.

Texans do not have to choose between a grid that’s reliable, affordable, and clean; we can have all three. Anyone that presents these as mutually exclusive is setting up a false choice.

But achieving that balance takes collaboration, vision, and a laser focus on the right things. During this last session, the legislature failed on all three counts.

No, the grid is not fixed. Not even close. For that, policymakers need to focus on increasing resilience to extreme weather for gas supply and power plants, and homes and buildings.

Fortunately, the damage from the session is minimal, and entrepreneurs and innovative companies can continue to bring solutions and power to the still dynamic Texas electric market, despite the misguided attempts of some policymakers and special interests to keep them out.

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