Despite Gov. Greg Abbott signing legislation in response to the February blackouts, concerns have emerged about Texas’ power grid this summer. Texas Scorecard spoke with three of the state’s energy experts about the possibility of future blackouts, what the Texas Legislature should have done during the regular session, what they actually did, and what, if anything, Abbott should have them do in a special session.
Last week, Abbott signed legislation created in response to deadly blackouts during February’s severe winter weather. “Everything that needed to be done was done to fix the power grid in Texas,” Abbot stated.
This week, as Texas summer temperatures began arriving, ERCOT—the Electric Reliability Council of Texas that manages Texas’ power grid—announced power outages due to mechanical failures.
Texas Scorecard interviewed former State Rep. Jason Isaac and Brent Bennett of Life:Powered, and Bill Peacock, policy director at the Energy Alliance about Texas’ electricity issues. Both firms study Texas’ electrical grid and political policies that affect it and consumers. Bennett had pointed out ERCOT, before this, claimed there was a less than one percent chance of rolling outages this summer. After ERCOT’s alert, we asked about the possibility of blackouts this year.
“Our reliance on renewables has put us in a situation where relatively minor fluctuations in the weather or mechanical problems can put us at risk,” Peacock said. “We are at a higher risk of blackouts than we’ve ever been. But we don’t know what will happen until it does.”
“My opinion is that we’ll continue to have Conservation Alerts and will likely see rolling outages in August,” Isaac replied. “I’m seeing a trend that ERCOT is continuing to blame ‘planned outages’ rather than admitting we have a lack of reliable thermal generation because we’ve put too much emphasis on unreliable variable sources.”
Isaac was asked to define thermal dispatchable energy. “It is our natural gas, our clean coal, and our nuclear electricity that is really on demand,” he said. “It’s just readily available. It can be increased and decreased within minutes’ notice.”
“We’ve seen that good thermal dispatchable generation drop significantly over the last 10 years. It’s now only 66 percent of our grid,” Isaac explained. “Thirty-three percent is variable, it’s wind and solar, and then you’ve got about 1 percent that’s hydro.”
“Yesterday’s call for conservation is just a reminder of how precarious our situation has become because of our reliance on renewables,” Peacock added.
What the Legislature Should Have Done
Isaac and Peacock agree that during the regular session this year, the legislature should have ended subsidies for unreliable green energy.
“There’s a variety of reasons [wind and solar build in Texas]. Federal renewable energy subsidies drive investment all over the country, and they also build here because they have free transmission from West Texas,” Peacock said. “Another reason is because local property tax abatements.”
“They get production tax credit, investment tax credit, they get chapter 312 and 313 property tax exemptions here from the state of Texas,” Isaac explained. “They can lose money, and still break even at a negative price.”
“Chapter 312 abatements come from counties, and then chapter 313 come from school districts, because school taxes are higher than county taxes,” Peacock continued. “The generators get more benefit from the 313 than the 312 abatements.”
“Stop with the subsidies, and really cut those back because that’s how we’ve gotten to where we are today,” Isaac said.
What the Legislature Did
In so far as what the legislature actually did on energy subsidies, Peacock and Isaac had differing perspectives .
“The legislature did absolutely nothing to address renewable energy subsidies,” Peacock said. “What they did actually was they made electricity more expensive.”
He pointed to when the Public Utility Commission—the board appointed by the governor that oversees ERCOT—raised power prices during the blackouts to $9,000 per kilowatt hour. “The estimates run from about $16 billion to $32 billion in excess cost that the PUC imposed on Texans and businesses,” Peacock said. “The Senate tried to reverse all that. The House wouldn’t have anything to do with that.”
How did the legislature address the massive energy bills?
“They came in with all these loan programs and bond programs, where these companies that are in financial trouble could securitize these debts they have, and then take them and add them to the cost of electricity,” he explained. “The legislature basically said, we’re going to take care of our big corporate cron[y] pals over here, but we’re going to do that by making Texans pay more for their electricity. That’s essentially what they did this session.”
Isaac, meanwhile, noted what he calls a “huge victory” in that the Chapter 313 Tax Abatement wasn’t extended this session.
Chapter 313 of the Texas Tax Code allows school districts to offer large tax breaks for 10 years to renewable energy and other businesses. The tax breaks come at no loss to the school districts. Instead, the state supplements the lost revenue to the districts from sales taxes and other state-collected taxes.
“Chapter 313 will now sunset at the end of 2022 because no bill was passed to extend it,” he said. “A huge, huge victory for property taxpayers in the state of Texas. It means that more industrial users and more businesses will be at the table fighting to reform and reduce the burden of property taxes in the state of Texas.”
Peacock has a caution about this, however. “313 is scheduled to expire … but that doesn’t mean it is gone,” he said. He points out how Abbott is expected to call at least one special session this year. “It’s quite possible that he would put that on the call, but even if he doesn’t, the legislature can come back in January of 2023 and take another shot at it because the program doesn’t expire until December 2022.”
Bennett brought up Senate Bill 3, which he said was a positive response to the February blackouts. He mentioned two sections in particular: Sections 14 and 18.
He said Section 14 addresses reform and growth of the ancillary service market, which he defines as backup power and contracts with industrial businesses to stop producing to save power. “We were hoping for stronger language in terms of directing the PUC to reform both the size of that market and also the cost structure,” Brent continued. “What kind of came out was more just a directive to the PUC to study the issue and go fix it.”
“We have to expand that market. We need more backup power.”
“Section 18 basically says the PUC needs to establish reliability standards and ensure that we have enough dispatchable energy,” he said. “It’s not like it’s a clear directive, but at least opens the door for kind of a change in philosophy going forward, which is needed.”
On SB 3, Peacock says an opportunity was missed when State Sen. Kelly Hancock (R–North Richland Hills) added language requiring wind and solar energy companies to pay when they didn’t produce enough energy. He said the legislature took it out and replaced it with language not targeting renewable energy companies. Peacock adds this isn’t how other energy companies are treated, such as natural gas plants. “They have a breakdown, they don’t show up, they still got to go get the electricity that they promised the market to provide,” he said. “Wind and solar don’t have to do that.”
With Abbott indicating he’ll be calling multiple special sessions, what should citizens ask the governor to put on legislators’ to-do list to secure Texas’ power grid?
“They should be asking him to get rid of renewable energy subsidies,” Peacock said. “And get rid of corporate cronyism.”
“While we believe more must be done to ensure reliable generation is the top priority, the PUC should be given the opportunity to craft a strong reliability standard as outlined in SB 3 before any more changes are made,” Isaac replied.