Making Electricity More Expensive

Tuesday’s hearing by the Texas Senate Business and Commerce Committee helped shine some light on the challenges of Texas’ green energy efforts.

While we heard great things about the state’s energy efficiency program, we didn’t hear how much the program costs consumers–so i helped out with some testimony. Since 2002, Texas consumers have paid $591.1 million to support the state’s energy efficiency program, and the program’s estimated cost for 2010 is $114.8 million. A recent increase to the program by the Public Utility Commission of Texas will probably double these costs. And legislative proposals could increase the annual cost to over $500 million.

All of this would be okay, of course, if the state’s energy efficiency program saved consumers money through reduced consumption of electricity. However, there is simply no way to properly determine the efficiency of the state’s energy efficiency program. But an educated guess is that it costs more than it saves.

This same flaw also plagues the state’s subsidies of renewable energy through the renewable portfolio standard, CREZ lines, and tax breaks. Several people testifying today were asking the legislature to give them subsidies for technologies like solar, biomass, and geothermal. But Sen. Chris Harris captured the problem with these subsidies when he asked, “How can I justify going to my constituents and tell them that I voted to give you money?” Sen. Mike Jackson also pointed out that solar projects are much like wind projects in that we give them credits for economic development but after the installation there are very few jobs left. Renewable energy generation simply costs more than generation from conventional sources.

The results of these two green programs stand in stark contrast to the history of energy use. Market-based energy efficiency has for centuries made electricity less expensive to use so that we could use more of it. This makes sense because there is almost a one on one correlation between the increased wealth and health of society and the increased use of energy.

In the last four weeks Texas has set four new records of peak electricity demand, i.e., we’ve used more electricity recently than ever before. But rather than fret about this and create more government programs, we should receive this as good news that clearly shows that the market can handle the increased demand for electricity in the state. It also shows that what Texans want is more, less expensive electricity, not less, more expensive electricity.

If Texas wants to reduce energy costs and save money for Texas consumers, it needs to go back to the drawing board and make significant changes to the energy efficiency program and eliminate the Renewable Portfolio Standard.