The majority of new energy projects coming online throughout Texas are renewable sources, according to Electric Reliability Council of Texas (ERCOT) data, and critics say the subsidies that they bring along are breaking the state’s robust electricity market.
“We would not have this situation if the government hadn't stepped in and offered to subsidize renewable energy because renewable energy is unaffordable and unreliable,” said Bill Peacock, policy director at the Energy Alliance, an initiative charged with raising awareness about the harm caused to energy markets by government intervention. “Wall Street, bankers and generators would never invest in renewable energy if it weren't for these subsidies because they'd go broke if they did.”
About 276 megawatts (MW) of mostly solar generation was approved for commercial operation in July, according to ERCOT data, while 435 MW of wind projects neared commercial operation.
Another 180-MW solar project in Ector County in West Texas was approved for commercial operation at the end of July, along with a 96-MW gas-fired plant in Brazoria County south of Houston.
“The only reason we're seeing this massive growth in both wind and solar generation in Texas is because of the subsidies,” Peacock told the Texas Business Coalition. “It's simple government intervention because some people decided that renewable energy would save the world, but it's not saving the world. It's just transferring wealth from the average Texan to companies with multibillion-dollar market caps.”
Wind, solar, nuclear and fossil fuels have secured between $13 billion and $37 billion in federal subsidies since 2010. Wind power has received 17 times and solar 75 times more subsidies per unit of electricity generated than the average for oil, gas, coal and nuclear, according to a Life Powered study called "The Siren Song that Never Ends: Federal Energy Subsidies and Support from 2010 to 2019."
“No market in the entire world is as competitive and successful as Texas has been,” Peacock said. “It's been working great up until the last four or five years where the subsidies have finally gotten to the point where people are concerned that the market can't function anymore with all this wind and solar coming in.”
The Operating Reserve Demand Curve (ORDC), according to Peacock, is a response from regulators to the unreliability of renewable energy, which allows for artificial increases to the cost of electricity.
“Renewable energy generators are not very concerned about the price of their electricity because some of their subsidies depend on being able to sell the electricity,” Peacock said. “Some they get up front, but others they don't get the subsidy unless they sell the electricity. So they're a lot more concerned about selling electricity than the price they get for it.”
They have been known to sell low when the wind blows or when the sun shines, according to Peacock, or they sell at whatever price they need in order to get into the market, which has driven market prices down.
“It's being manipulated by the subsidies and when the market prices drop, that's where the generators are saying they can't earn enough money off the prices they are getting for electricity to justify new investment into the ERCOT market,” Peacock said.
For example, the data shows the ORDC added $3.6 billion to the cost of electricity at the wholesale level in 2019, meaning the retail electric providers had to pay $3.6 billion more money.
“They do everything they can to pass that additional cost on to Texas consumers so the ORDC is essentially a $3.6 billion electricity tax on consumers, except the money doesn't go to the government," Peacock said. "It goes directly to the generator.”