Austin News

Legislation that would be have major implications for Texas' energy grid's reliability, which passed the state Senate last week, will force renewable energy sources into the stability of traditional suppliers, according to an Austin-based research and educational institution policy director.

Senate Bill 1278 isn't a total fix, said Brent Bennett, a public policy director at Texas Public Policy Foundation, which has thrown its support behind the legislation. The measure aims to ensure that renewable energy companies pay when they fail to meet expected energy level outputs.

"This bill will not completely counteract the distorting effects of subsidies for wind and solar, but it will require those resources to pay to bring their reliability closer to that of thermal resources," Bennett told Austin News. "This step will help remove some of the implicit subsidies that these resources have received by making generators pay instead of socializing those costs among customers as is done right now."

A worker unloading supplies for Texan's suffering in the wake of Winter Storm Uri in February | twitter.com/fema/

How much of the bill will help balance the state's energy market will "depend on whether it can be sized properly" and dovetail into a "proper" cost allocation, Bennett said.

"The current language is too vague to determine how far it will go toward fixing these problems, and the change from the original language that makes the bill not applicable to existing projects is a big step backward," he said.

Bennett testified in late March before the Senate Committee on Business and Commerce. He told committee members there is "one clear takeaway from the postmortem" of Winter Storm Uri in February and widespread power outages that the Electric Reliability Council of Texas (ERCOT) could not keep ahead of.

"Even if every generator that was online the night of Feb. 14 had continued operating throughout the event, we still would have had widespread and lasting outages," Bennett said during his testimony. "Based on ERCOT's demand forecast, the outages would have still lasted more than 24 hours and reached up to 10 gigawatts in this optimal operating scenario. We should not expect to weather an event of this magnitude without any outages, but we must do better than this."

Bill Peacock, policy director at the Energy Alliance, has elaborated on the unreliable nature of intermittent generators. Peacock told the Lone Star Standard that “the more wind and solar you get onto the grid, the more problems you're going to have with reliability. He says the storm not only contributed to increased demand, but it also created weather conditions that made renewable energy generators unable to operate at even their already diminished expected levels.

The bill's primary sponsor, Sen. Kelly Hancock (R-North Richland Hills), chairs the Senate committee.

On April 7, SB 1278 passed favorably out of committee with a vote of 7-2, almost along party lines. Democrats Sen. José Menéndez (San Antonio) and Sen. John Whitemire (Houston) voted against the measure while Sen. Nathan Johnson (Dallas) was the only Democrat on the committee to join Republicans to support the bill.

A week later SB 1278 passed the Senate 22-9. Voting no were Sens. César Blanco (D-El Paso), Sarah Eckhardt (D-Austin), Roland Gutierrez (D-San Antonio), Eddie Lucio (D-Brownsville), Borris Miles (D-Houston), Charles Perry (R-Lubbock), Kel Seliger (R-Amarillo), Royce West (D-Dallas), and Whitmire (D-Houston).

SB 1278 was received into the state House the following day and on April 19, was referred to the House State Affairs Committee where it remains.

Texas Public Policy Foundation supports SB 1278 because ERCOT's market structures don't "properly" account for reduced reliability and increased volatility of wind and solar resources compared to traditional gas, coal and nuclear resources, Bennett said during his Austin News interview.

"Our existing structures and scarcity pricing are designed to handle daily and seasonal variations in demand along with small variations in supply, up to 10%," he said. "These structures are not adequate to handle the large supply variations brought on by wind and solar, which can easily produce 50% less than their expected value during peak demand periods. Additional market mechanisms, in the form of ancillary services and replacement power, are needed to manage these variations."

Wind alone receives at least $15 million in federal subsidies while solar receives about 30% of its total capital costs from federal subsidies, Bennett said.

"To say these resources rely on subsidies to turn a profit is an understatement," he said. "That's not to say that wind and solar generation would not exist at all without subsidies, but their market share would be vastly smaller. They would only exist on the margins where they were not competing with each other and with existing thermal resources to drive down wholesale prices."

Robert Michaels, a retired Cal State University, Fullerton economics professor, has stated that wind and solar generators need subsidies and other financial breaks in order to survive. Michaels says that regular “capital expenditures and operating expenditures" are given to renewables to keep them afloat financially and to deal with their unreliable nature, Lone Star Standard reports.

If Texans are going to include wind and solar in its energy market, those renewable sources must meet a reliability standard "preferably through their own investments" to maintain its part in a balanced market, Bennett said.

"The absence of such a standard means that our market is chronically underinvesting in reliability and at risk of supply shortages," he said. "Since we cannot remove the federal subsidies and lack the political will to create a tax that counteracts the subsidies, we must at least ensure we manage the reliability and volatility issues that come with using those resources and make the generators - not consumers - pay those costs."

A January panel discussion on energy reliability hosted by the Texas Public Policy Foundation reached unanimous agreement that the renewable-heavy "California model" is a dangerous model for Texas to emulate. A heavy share of energy generation being shouldered on renewables leads to serious issues of reliability. Panelist DeAnn Walker asserted that an electricity system run solely on wind and solar is impossible.