The High Cost of Renewable Energy

Executive Summary

Federal, state, and local subsidies for renewable energy are undermining the reliability of the Texas electricity market. And Texans are paying a high price for the privilege of a less reliable market. Since 2006, wind and solar generators in Texas have received about $19.4 billion from taxpayers and consumers. It is estimated they will receive another $15.9 billion over the next decade. Texas policymakers should eliminate subsidies for renewable energy in order to ensure an energy abundant future for Texas.

Introduction

In his new book, A Question of Power, Robert Bryce explains the tremendous power and benefits we can access when the natural resources of this world are efficiently converted into electricity:

Electricity has conferred on us a bit of the creative power that God showed in Genesis. With the flip of a switch, we can kill the anti-God and banish darkness. With a touch of our mobile phones we can ensure safe passage through a strange hotel or garage at night. With quadrillions of electrons at our beck and call, we can create as much light as we want.

America has been blessed to be a leading producer and user of energy in the world. Our increased energy use has brought greater prosperity to America and the world. Though it has not always been like this.

For thousands of years, most humans struggled to have enough energy to keep themselves warm and fed. Energy was largely provided by humans, animals, and from inefficient renewable sources, i.e., water, wind, solar, and wood. Only the wealthiest could afford to harness enough energy to consistently protect themselves from the constant assaults of nature in the form of heat, cold, floods, famine, etc.

Figure 1: England Led the Industrial Revolution by Turning Coal into Prosperity

Then, by about 1800, parts of Western Europe, America and other areas developed the necessary protections for private property and amassed enough capital to allow the building of the extensive and expensive infrastructure—which we take for granted today—necessary to take advantage of fossil fuels by converting them to mechanical energy. Almost overnight, it seemed, a new energy abundance made it possible for the middle class and even the poor to experience a standard of living previously reserved for the wealthy. As Kathleen Hartnett White explains,

fossil fuels, as a necessary condition of the Industrial Revolution, made modern living standards possible and vastly improved living conditions across the world. Humanity’s use of fossil fuels has released whole populations from abject poverty.

As a result of the rapid growth in the use of coal, oil, and natural gas, renewable sources of energy basically disappeared from use for close to 200 years in the developed world. Over the last 30 years or so, however, there has been concerted and expensive effort to eliminate the use of fossil fuels and replace them with renewable energy, the inefficient energy sources they had displaced. This effort has come at a high cost to Texans.

Renewable Energy Subsidies in Texas

A commonly noted factoid is that as a stand-alone country, Texas would be the 10th largest economy in the world. Perhaps less well known is the fact that it would rank fifth in the world for wind power capacity. The growth of wind generation in Texas seemingly came out of nowhere. But the explanation is quite simple.

Figure 2: Top Wind Producers 2018

In 1999, Texas policymakers started a process that within a few years would give Texas the most competitive energy market in the world.  Prices, not government mandates, were the main determinant for whether generators would profit from building new generation. With a few speed bumps along the way, the market flourished, providing Texans with an affordable and reliable supply of electricity.

The foundation for wind’s rapid growth was established about the same time. In 1999, the Texas Legislature adopted a renewable portfolio standard that forced retail electric provided to purchase renewable energy or pay for renewable energy credits (RECs). Renewable energy generation also was eligible for local property tax abatements in chapters 312 (counties, cities, and special districts) and 313 (school districts) of the Texas Tax Code. The biggest factor in promoting renewables, however, came in 1992 from the federal government in the form of tax credits for wind and solar generation. With these subsidies, renewable generators have taken advantage of Texas’ competitive market to undercut their competitors on price and force their way into the market, sometimes selling far below their costs or actually paying people to take electricity off their hands to earn the tax credits. In most cases, this would be called predatory pricing and be investigated for antitrust violations. But this practice has been ignored when it comes to renewable energy.

Renewable energy started to take off in Texas around 2006, especially in the form of wind energy. Solar energy took longer but is now rapidly growing in Texas. Since 2006, subsidies for wind and solar power generators have totaled about $19.4 billion. These subsidies are paid for by taxpayers and consumers—mainly from Texas, on top of the $36 billion Texans already pay for electricity each year.

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