In a year of record-high prices for fossil fuels, as lawmakers consider new policies that can help fight inflation, renewable energy is already helping to shield Americans from steep jumps in their electricity bills.
For example, in Texas, even as some observers have incorrectly blamed renewables for the state’s strained power grid, more than a third of electricity in the first half of 2022 came from wind and solar projects. Wind and solar have both set records already this year.
High production from renewables and high fossil fuel prices together mean wind and solar are having an outsized impact on lowering energy costs. Based on benchmark natural gas prices, RMI estimates that, on average, wind and solar projects in Texas have avoided $20 million per day in fuel that otherwise would have been needed for fossil fuel-based power plants to meet electricity demand.
Average fuel cost savings delivered by wind and solar power in Texas started the year at about $10 million per day in January. As gas prices began rising steeply in the spring, wind and solar production also rose, providing about 40 percent of Texas electricity in March, April, and May even as gas prices peaked. In May, renewables saved Texans $30 million each day in avoided fossil fuel costs.
These savings estimates do not include the cost of power purchase agreements used to finance wind and solar projects; however, the average savings from avoiding natural gas-based generation in 2022 — more than $50 per MWh of renewable generation — exceed the typical costs of wind and solar projects. For example, the vast majority of wind projects in Texas have been contracted below $40/MWh, and more recently below $20/MWh, while the average contracted price of solar in Texas similarly falls below $40/MWh, and more recently even lower.
In the first half of the year, renewable energy in Texas is estimated to have avoided more than $3 billion in fuel costs. As policymakers across the country consider opportunities to further limit the impacts of high fuel prices and inflation on American households, the evidence on display in Texas suggests that investing in more renewable energy is a no-regrets choice.
Source / methodology notes:
Electricity generation data sourced from US Energy Information Administration (EIA) Grid Monitor. Henry Hub natural gas daily spot prices from EIA. To estimate daily cost savings, we assume that wind and solar avoid natural gas burned in a gas turbine with an average 8 MBtu/MWh heat rate.