A new measure proposed in the Texas Senate seeks to resolve problems in the state’s energy market associated with certain federal subsidies.

Senate Bill 714, proposed by State Sen. Kevin Sparks (R-Midland), orders the Public Utility Commission of Texas and the Electric Reliability Council of Texas’ independent system operator to adopt rules “to eliminate or compensate for any distortion in electricity pricing” caused by a specific part of the U.S. Code.

Title 26 Subsection 45 addresses the Renewable Electricity Production Credit, which provides a tax credit for each kilowatt-hour of electricity generated from certain unreliable energy sources, like wind and hydroelectricity.

While federal credits make unreliable energy sources more lucrative for energy producers, the Foundation for Research on Equal Opportunity describes them as essentially paying “producers for their energy, even if no one wants it.”

“During peak sunlight, localities with significant solar plants produce more energy than is demanded. The same holds true in localities with a lot of wind turbines on windy days. This energy often goes to waste because it is not currently cost-effective to store it,” FREOPP Energy Fellow Grant Dever wrote of all federal energy subsidies.

The specific Renewable Energy Production Credit which is the focus of the measure does not address solar energy.

Sparks told Texas Scorecard that federal subsidies like the federal Renewable Electricity Production Credit have “distorted the market and impacted Texas, leading to grid instability, price volatility, and costly infrastructure upgrades.”

“This burden has ultimately fallen on taxpayers, who are left to bear the costs of a less reliable grid,” stated Sparks. “Federal subsidies undermine free enterprise and burden taxpayers; it is time to pave the way for a more sustainable and resilient energy market.”

“SB 714 ensures that those imposing these costs are held accountable and allow the market to function efficiently while providing the necessary transparency on market distortions caused by federal renewable subsidies,” he added.

Texas Policy Research President Jeramy D. Kitchen wrote on X that Sparks’ measure would ensure that “costs incurred from below-market prices are borne by those responsible.”

Kitchen also pointed out that the measure would remove rules allowing the PUC and ERCOT to “adjust electricity prices based on reserve values and probabilities of lost load.”

According to a 2021 paper in the journal Energy Policy, frequent fluctuations in reserve prices can create uncertainty for ratepayers. Market manipulation caused by producers withholding reserve capacity to drive up prices is also a possibility.

Luca Cacciatore

Luca H. Cacciatore is a journalist for Texas Scorecard. He is an American Moment inaugural fellow and former welder.

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