Texas Electricity Prices Continue to Climb

Texas’ Decision to Subsidize Natural Gas Generation Has Hiked Electricity Costs

Texas had the highest wholesale electricity prices in the U.S. over the last three years, according to a new report released by the Energy Alliance.

From 2021 through 2023, the wholesale price of electricity in ERCOT, which covers about 90% of Texas’ electric grid, averaged $117 per megawatt hour. The next closest region was New England, where prices averaged $81. California came next, with the average price at $80.

The costs were calculated for the seven regions of the U.S. where electricity is managed though independent or regional service organizations. These areas cover about 70% of the total electricity consumed in the U.S., which corresponds to a similar amount of the U.S. population served.

In 2023, California had the highest wholesale prices at $72 per megawatt hour, followed by Texas at $70. New England and New York were next, at $55 and $54 respectively.

Retail prices were also up nationally and in Texas over the last three years.

The report found that for 2024, U.S. “residential electricity prices averaged 16.34 cents per kilowatt hour. This an increase of 3.19 cents, or 24%, from 2020, the last year of the Trump administration.” During the same period, Texas residential prices jumped from 11.96 cents to 14.57 cents, an 18% increase.

“The Biden Administration’s policies had a definite impact on Texas’ electricity prices,” said Bill Peacock, the author of the report and policy director of the Energy Alliance. “However, the decision by Texas politicians to provide subsidies for both renewable and thermal generation has had an even larger impact on the prices.”

The study found that from 2019 through 2023 federal and Texas subsidies for wind and solar generators totaled $16.3 billion. For the same period, however, Texas subsidies for thermal generation, largely natural gas, coal, and nuclear, totaled $53.4 billion.

“The thermal subsidies give us some idea of the costs renewable subsidies are imposing on the grid,” said Peacock. “But by far the better, less expensive way of dealing with the problems caused by renewables would have been to end all Texas subsidies, for both renewable and thermal generation, then require renewable generators to pay for the harm they are causing because of federal subsidies.”

In addition to the cost, the main problem caused by renewable generation on the grid is a rapidly decline in reliability. Numerous studies, including one done by ERCOT, have found that the reliability value of renewable energy declines as its grid penetration increases.  

The reason for this, according to the ERCOT study, is the intermittency of wind and solar generation. They only produce electricity when the weather cooperates. This necessitates backing up wind or solar generation with batteries. However, the cost of batteries is prohibitively expensive on a grid-wide level.

“Storing a kilowatt-hour of electricity in a chemical battery costs an order of magnitude more than just generating it in a nuclear power plant,” wrote Quico Toro and Guido Núñez-Mujica, in their article, The Problem with Solar. “Which is why a 100% solar grid would be insanely expensive …”

Despite the attempts by the Texas Legislature to deal with the reliability problems, they are likely to get worse than better as renewable generation continues to dominate the grid.

ERCOT forecasts renewable generation will increase by 58,654 megawatts through 2029 (wind by 3,628 megawatts, solar by 36,868 megawatts, and batteries, which also receive billions in subsidies, by 18,158 megawatts). Thermal resources, however, will only increase by 1,074 megawatts. Renewables are projected to make up 98.2% of new generation on the Texas grid over the next five years.

The percent of new renewable generation might change because of the newly created Texas Energy Fund. However, what won’t change is the rapid growth of renewables on the Texas grid.

This story was originally published on the Lone Star Standard.