Intermittent Generation Comes to Texas: The High Cost of Renewable Energy

Summary of Study

Bottom Line: Intermittent renewable power, primarily wind and solar, is a major disruptive influence on operations and investments, and some of its costs are not being borne by those responsible for causing them. The laws and regulations that affect intermittent power (at both federal and state levels) suggest the benefits of wind power are overrated.

For both economic and political reasons, Texas was an early experimenter with wind power and carving out regulatory boundaries, such as renewable portfolio standards. These regulations protected wind generators from the competition by requiring renewable energy producers to comply with renewable quotas when choosing their supply mixes.

Growth continued as wind’s apparent success brought forth environmental legislation that further facilitated access to wind-rich areas by imposing non-bypassable transmission charges. In combination with wind’s scale economies, rate designs further redistributed renewable costs and revenues.

Low average power prices rooted in the growth of wind are economically inefficient if they impose costs on ratepayers and other generators with few countervailing benefits, as is becoming clear from studies of some national grids in Europe.

The presence of substantial “must-take” wind generation alongside the production tax credit can lead to inefficiently low or negative energy prices. Such prices don't align with rationales for competitive markets because they give consumers and producers incorrect signals about today’s resource scarcities and tomorrow’s necessary investments.

A variety of evidence shows that seemingly free wind power can impose substantial costs on competitive generators and their customers without producing commensurate benefits for users. Understanding the paradox requires an explanation of how a “lower-cost” generation technology like wind could degrade reliability in the short run and imperil the benefits of competition for consumers in the long run.

Wind power in Texas, as elsewhere, has risen with developments in technology and federal energy policy, from a minuscule output in 2002 to 14.8 percent of the state total in 2017. Texas is often noted as a state that has made great efforts in advancing wind power, but the fact is not obvious in a comparison of the data. Between 2009 and 2017 Texas wind power production rose by 234 percent, while the nation’s rose by 244 percent. Wind may be growing in a number of other areas, but its scale in Texas is now large enough relative to other states that policy problems have arisen.

Read the full study here

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Texas Energy Production by Source

TPPF

Findings: 

  • Wind power in Texas, as elsewhere, has risen with developments in technology and federal energy policy, from a minuscule output in 2002 to 14.8 percent of the state total in 2017. 
  • Texas is often noted as a state that has made great efforts in advancing wind power, but the fact is not obvious in a comparison of the data. Between 2009 and 2017 Texas wind power production rose by 234 percent, while the nation’s rose by 244 percent. 
  • Wind may be growing in a number of other areas, but its scale in Texas is now large enough relative to other states that policy problems have arisen.
Read the full study here