A recent analysis from Energy Alliance details how federal, state, and local policies subsidizing “renewable” energy sources such as wind and solar have added nearly $20 billion in costs to ratepayers in the Electric Reliability Council of Texas (ERCOT).
This amounts to more than 42 percent of the total cost of electricity to ERCOT ratepayers, and represents a significant jump from a decade ago, when government-imposed costs on electricity were approximately $2 billion, or 6.7 percent of the total cost of electricity, in 2014. Over that time, renewable subsidies increased from $1.275 billion to $4.035 billion, while additional government costs rose from $850 million to $15.928 billion.
“How did it happen that more than 40% of Texans’ electricity costs are imposed on them by government?,” the report asks. “The answer is simple: Texas policymakers supported ever increasing subsidies for renewable energy even as renewables were degrading the reliability of the Texas grid. When the reliability problem caused by renewable subsidies became so apparent to the public that it could no longer be ignored—think Winter Storm Uri, policymakers decided to throw more taxpayer dollars at all generation sources rather than end renewable subsidies. Apparently, it is safer politically to take money from constituents than to challenge the renewable energy lobby.”
The distortion to the generation marketplace through these subsidies has been significant. In 2014, ERCOT only generated 13.8 percent of its electricity from renewable sources, with 13.3 percent coming from wind and just 0.5 percent coming from solar, biomass, and battery storage combined. Reliable, traditional sources made up 85.6 percent of generation, with 56.6 percent coming from natural gas, 23 percent from coal, and 6 percent from nuclear sources. In 2023, 25.2 percent of ERCOT’s generating capacity came from wind, and 13.2 percent from solar, while natural gas had fallen to 44.3 percent, coal to 9.8 percent, and nuclear to 3.5 percent.
As the report notes, this dramatic shift from “dispatchable” to “non-dispatchable” power sources also negatively impacts grid reliability. Dispatchable power sources are those that can adjust to the electric grid on demand, such as a natural gas turbine, a coal plant, a hydroelectric dam, or a nuclear plant. Non-dispatchable power sources, such as solar and wind, cannot be turned on or off in order to meet demand and are highly intermittent, meaning they are not continually available 24 hours a day because of factors that cannot be controlled (like cloud cover, daylight, wind speed, air density, etc.) and are therefore unreliable.
While replacing a megawatt of electricity generation from, say, a coal plant with a megawatt of generation from a wind or solar source may appear to be an apple-to-apple swap, that is not the case. This is due to capacity factor, the measure of how often a power plant runs for a specific period of time, expressed as a percentage and calculated by dividing the actual unit of electricity output by the maximum possible output.
According to the U.S. Energy Information Administration, solar had a capacity factor of just 22 percent in 2023, while wind’s capacity factor was just 33 percent. Comparatively, the capacity factor for nuclear was 93 percent in 2023, while natural gas had a capacity factor of 58 percent, and coal 42 percent. So, a megawatt-to-megawatt swap from a dispatchable power source to these non-dispatchable sources results in a decrease in overall capacity.
As more dispatchable sources of the grid are swapped for non-dispatchable sources, the less reliable the grid becomes. Therefore, it is no surprise then that ERCOT’s grid has become increasingly unreliable.
“The only solution to the current insanity of increasing energy subsidies in an attempt to address the harm being done by renewable energy subsidies is to eliminate all of the subsidies,” the report concludes. “The Texas Legislature and the [Public Utility Commission of Texas (PUC)] could end all state energy subsidies by 2026. These subsidies are the [ERCOT Contingency Reserve Service], the Texas Energy Fund, the [Operating Reserve Demand Curve], the Reliability Adder, most Ancillary Services, and [the] Chapters 312 and 313 tax abatements. Additionally, the PUC and the Legislature could require all energy companies to start paying for the costs they create on the grid that are currently socialized (paid by consumers): transmission lines (including [Competitive Renewable Energy Zone transmission] lines), interconnection costs, renewable congestion costs, and the cost of building new generation and storage to address the reliability problems caused by the intermittency of wind and solar generation.”
Another way Texas legislators can protect their constituents from the threat of an unreliable and intermittent electric grid by passing the Electricity Trajectory Management Act (ETMA), which would require the halting of any planned decommissioning of an existing dispatchable power facility if the purpose of decommissioning that facility is to replace it with a non-dispatchable power source.
Heartland Impact can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Cameron Sholty, at csholty@heartlandimpact.org or 312/377-4000.
