Amid the hubbub of the Texas House Democrats’ flight to Washington, D.C. to avoid voting on election protection reforms during the special session, many Texans are wondering why electric reliability didn’t make the special session agenda. After all, isn’t this a critical issue, especially as summer continues to heat up?
But Gov. Greg Abbott’s recent letter urging the Public Utility Commission (PUC) to act on grid reliability, rather than calling for more legislation, is the correct move — and based on a Senate hearing Tuesday with all three PUC commissioners, it is kickstarting the reform Texans desperately need.
Over the last decade, Texas has gained 4 million new residents and 35% GDP growth — but instead of adding more reliable gas, nuclear, and coal generation, we have far less than before. Meanwhile, the combination of Texas’s market structure and federal and state subsidies has caused wind and solar generation capacity to triple — yet we have done nothing to ensure that generation can be counted on to come through when Texans need it. As we learned during the February blackouts, our state cannot continue growing, and our economy cannot continue to flourish, without reliable electricity.
A strong statewide reliability standard, for all generators, is the only way to ensure a prosperous future for our Texas grid. In Gov. Abbott’s words, we must “allocate reliability costs to generation resources that cannot guarantee their own availability, such as wind or solar power.” If generators are not required to bear some of those reliability costs, Texas ratepayers will bear them by either subsidizing backup generation or enduring more blackouts.
If this past session showed us anything, it’s that real grid reform faces an uphill battle. Thanks to well-funded lobbyists and attractive (but false) messaging about the value of “green” energy, most of the blackout conversations in the Capitol revolved around the failures of thermal generators and the natural gas supply system, not around the more fundamental market problems. But just like tossing more money at schools doesn’t necessarily help children learn better, simply throwing money at weatherization and backup generation won’t give us more reliable power. To do that, we must enact substantive market reforms.
For too long, market-distorting policies at the state and federal level have compounded to create a no-lose situation for wind and solar generators. A substantial portion of their capital costs are covered by subsidies and special financing arrangements, they receive massive property tax breaks, and they have no fuel costs. Furthermore, the federal production tax credit pays wind generators to produce electricity whether the grid needs it or not, leading to extended periods of negative prices.
Try competing against that. Our thermal generators can’t, and that’s one of the main reasons these reliable power plants are shutting down.
Gov. Abbott’s letter seems to be the clarion call we need to push through real reform. At the Senate hearing following the letter’s publication, conversations revolved refreshingly around improving baseload generation and solving renewable energy’s reliability problem.
“We need to pay for performance…not just what these producers say they can produce,” Commissioner Will McAdams said. That might seem like common sense — of course the electric market should be based on the actual amount of electricity — but it’s a radical shift for Texas. And it’s a shift the people of Texas deserve.
We’ve written before that Senate Bill 3, the omnibus blackout response bill that passed in the regular session, was just a start. It took decades for the electric market to get in this shape, and it’s going to take time to correct it. Gov. Abbott has taken the appropriate next step of clarifying how the PUC should implement the broad mandates in SB 3, and those reforms should be seen through.
There’s certainly more that can and should be done — such as eliminating the wasteful subsidies that boost variable generation while cutting off more reliable thermal generation at the knees — but Texans deserve a careful, measured approach to the future of our grid. Given the politically fraught nature of this special session, more legislative debate isn’t a prudent step at this juncture.
The path ahead is long, and, as PUC Chairman Peter Lake noted, no market has gone where Texas is trying to go. However, if the PUC is successful, Texans will not see their electricity bills spike as Californians have, and they will no longer have to wonder if the wind is blowing or the sun is shining when they need power.
This commentary originally appeared in The Cannon Online on July 15, 2021.