Texas is seeing a boom in renewable energy, as more wind and solar projects are under construction to meet the state’s vast thirst for power.

Indeed, 25 percent of all corporate renewable energy contracts in the world in 2019 were made in Texas. That’s due in part to the Lone Star State’s freewheeling energy market as well as federal and state tax incentives for renewable energy operations.

Corporations are using an unusual energy agreement to lock in lower rates. Called power purchasing agreements, they don’t bring renewable energy to the company but, instead, give them credits for buying wind and solar energy while the facilities are being constructed.

It’s not a sure thing, according to a Jan. 28 article in Greentech Media that quoted Bloomberg New Energy Finance sustainability analyst Kyle Harrison.

“But there’s a downside risk for the off-taker if wholesale power prices end up becoming cheaper than expected,” the article stated. “That’s happened with a number of Texas wind deals, Harrison said, as the state’s enormous influx of wind and gas-fired electricity depresses prices at times when contracted wind farms are generating power. That dynamic partially explains the corporate market’s rapid pivot toward solar projects, which tend to generate power at more lucrative, on-peak times in the cutthroat Texas electricity market. Another important factor is, of course, the falling price of solar energy.”

Robert Bradley, CEO and founder of the Institute for Energy Research, said power purchasing agreements often produce more good public relations than energy.

“This is all accounting,” Bradley told Texas Business Daily. “It can be a bit of a subterfuge.”

Companies engage in “greenwashing” by buying credits from those who use renewable energy, he said. In fact, they still rely on fossil fuels.

He said that makes sense, because oil, natural gas and coal are packed with energy after absorbing the sun’s rays for millions of years. Meanwhile, solar power is much more diluted and expensive to use.

Bradley, who has written seven books on energy economics, also is a senior fellow at the Texas Public Policy Foundation, an Energy and Climate Change fellow at the Institute of Economic Affairs in London and an adjunct scholar of the Cato Institute and the Competitive Enterprise Institute in Washington, D.C. 

He said the environmental impact of renewable energy has been overstated along with the economic reality.

“I think it’s bad for the taxpayers and the ratepayers,” he said. “ I don’t think solar farms or wind farms are good for the environment.”

Bradley said consumers must consider the land that is needed as well as the concrete and steel produced to build those operations, as well as the required transmission lines.

That’s why he says traditional energy sources are cheaper than “solar-gas” and “wind-gas,” as he refers to operations that depend on natural gas as backups to produce the power they need.

Bill Peacock, an Austin-based writer and energy policy analyst, said PPAs have their place but they also can be abused.

“Power purchasing agreements are what make the competitive Texas electricity market work,” Peacock told Texas Business Daily. “Unfortunately, renewable energy subsidies like the Production Tax Credit allow wind and solar generators to use PPAs to lock in profits while undermining the competitiveness and reliability of the market.”

Dr. Michael Giberson is an associate professor of practice in the energy, economics and law in the Jerry S. Rawls College of Business Administration and a faculty affiliate with the Free Market Institute at Texas Tech University.

“Texas does attract these deals because of a few natural advantages — land with plenty of sun or wind or both — and public policy commitments that support energy development,” Giberson told Texas Business Daily.

He said it’s important to dig deeper to discover the reality.

“There are some interesting gaps between the promise and the practice of these kinds of programs when the companies are not actually relying on the power from these plants to operate, and that comes from the way that renewable energy gets mixed with fossil-fueled power on the grid,” Giberson said. “Notice cities like Georgetown, Texas, and companies that claim to run on 100 percent renewable energy do not shut down when the wind dies down at night.”

He said although companies proclaim their use of renewable energy, the reality is they need traditional sources of power as well.

“The renewable credit system allows them to more or less paper over the inconvenience of renewable supplies requiring constant backstopping by fossil-fueled plants,” Giberson said.

But he added that there are no absolutes. There are positives to renewable energy and power purchase agreements, but the process could use a tweak or two.

“Sure, it is technically possible for a city or two to switch to 100 percent renewables without the fossil fuel backstop, but it would much more expensive to actually do it,” Giberson said. “The growth of wind and solar power is, all things considered, still good for the environment. The renewable credit system is still a useful tool. It may be time to update the renewable credit system to help ensure that people claiming to be powered by renewables are fully paying the full costs of meeting those claims.”

He said he can hear environmental critics of this last claim responding by saying, “Shouldn’t fossil fuel supporters be paying the full cost of fossil fuels, including climate-related costs?”

Giberson doesn’t deny that.

“To them I would respond: ‘Yes, they should pay their costs, too,’” he said.