Texas Politicians Aim to Penalize Wind and Solar in Response to Outages. Are Renewables Now Strong Enough to Defend Themselves?

Texas lawmakers are pushing legislation aimed at what they see as the culprit in the massive power outages and more than 100 deaths during February’s winter storm: wind and solar power.

The bills would make wind and solar power plant owners pay for replacement power that would be ready if their plants underperformed, along with services that maintain balance on the grid. The proposals would saddle the plant owners with potentially huge costs that other types of power plants don’t need to cover.

Hostility to wind and solar power is not new in a state at the epicenter of the U.S. oil and gas industry, but Texas is also the nation’s leading producer of wind energy and one of the fastest-growing markets for solar. Renewable energy companies, and their close allies among tech and financial giants, are now powerful enough to fight back, but so far they have been unable to derail the legislation.

For many people closely watching the debate, the storm’s aftermath is shaping up as an extension of the disaster, because of a failure to address many of the things that went wrong.

“The politicians are motivated by who gets them elected, and if you look at who gets them elected, it’s oil and gas,” said Peter Cramton, an economics professor at the University of Maryland and the University of Cologne.

Until two months ago, Cramton also was a member of the board of directors of the Electric Reliability Council of Texas, or ERCOT, the nonprofit company that runs the state’s grid. He was one of five board members who resigned under pressure from state officials following the power crisis, amid criticism that some members were not Texas residents.

Since leaving the board, he wrote a paper about what he sees as the causes of the crisis and the potential solutions. Among the causes: The natural gas supply fell short of demand as a result of frozen equipment; conventional power plants failed because they couldn’t get fuel or were not adequately winterized to operate in extreme cold; and homes and businesses didn’t have enough insulation.

So he is perplexed why legislators would want to increase costs paid by renewable energy operators.

“They would have to be complete idiots if they think what they’re doing is solving the problem,” he said. He doesn’t actually think elected officials are idiots, he added, but he does think they are acting out of political convenience. 

Lawmakers say they are working to address the causes of the power failures, but with little acknowledgment that extreme weather disasters are becoming more frequent and almost no mention of climate change. Instead, officials are talking about things like changing the design and oversight of the electricity market.

“We do need to plan for these extreme weather events that are happening more often,” said Caitlin Smith, vice president of an Austin consulting firm that works with energy companies. “We lost about 50 percent of our generation fleet,” she said, referring to power plants. “There’s not a market design anywhere that accounts for 50 percent reserves.”

Renewables Providing More Electricity and Gaining Power

While natural gas remains firmly entrenched as Texas’ main source of electricity, with 52 percent of the state’s power generation last year, wind and solar are rapidly increasing. Wind farms generated about 20 percent of the state’s electricity last year, up from 6 percent in 2010.

Solar power was only a small part of the mix, with 1.7 percent, but Texas ranked No. 1 in the country in projected five-year growth, according to the Solar Energy Industries Association. 

Renewable energy industries are now big enough that they can hire top lobbyists.

“The lobby for renewable energy industries is certainly a lot larger than it was,” said Doug Lewin, a clean energy advocate and president of an Austin-based consulting firm, who has been closely monitoring the wind and solar legislation. “It’s larger this session than it was last session. It was larger last session than it was the session before.”

And those lobbyists have the help of some corporate giants that share interests in clean energy.

One of the groups taking a stand is the Partnership for Renewable Energy Finance, which includes tech companies that are major consumers of renewable energy, like Amazon and Google, and financial companies that are heavily involved in renewable energy projects, like Goldman Sachs and and BlackRock. The group sent a letter this month to Texas Gov. Greg Abbott and the Republicans who are in charge in the state House and Senate.

“Our companies have invested tens of billions of dollars in the state partly because of our confidence in Texas’ historically friendly business environment,” the group said in the April 6 letter, signed by Gregory Wetstone, president and CEO of the American Council on Renewable Energy, the lead organizer of the energy finance group.

In an interview, Wetstone said the approach the legislature is taking is “not going to improve grid reliability, and in fact it’s simply going to increase costs for all and reduce investment in Texas.”

In a separate letter sent to Texas leaders this week, three of the country’s largest electricity utilities also urged Texas leaders not to pass the legislation. Duke Energy, NextEra Energy and Southern Company have renewable energy developments in Texas that add up to about $15 billion in spending.

“These bills would unfairly and unjustifiably shift significant costs onto wind and solar facilities in the State of Texas, penalizing assets and discouraging future investment,” the letter said.

Lewin said the legislation has progressed despite the growing support that renewable energy industries have from Democrats and Republicans in Texas.

“This is not a purely partisan thing,” he said. “Wind and solar have been transformative for a lot of West Texas communities.”

But the dynamics are different inside the Statehouse, where an antipathy to renewable energy remains strong.

Problems Identified a Decade Ago

The winter storm rolled into Texas on Sunday, Feb. 14, with frigid temperatures that led consumers to turn up their electric heating systems, resulting in a spike in electricity demand. Demand surged at the same time that power plants and parts of the gas supply network were going offline because of frozen controls and other weather-related problems.

Shortly after 1 a.m. on Feb. 15, ERCOT ordered local utilities to begin controlled power outages to keep electricity demand low enough to match the diminishing supply.

About 30 gigawatts of thermal power plants—which include gas, coal and nuclear—were offline. For perspective, ERCOT’s peak winter demand was 66 gigawatts, so the scale of the loss was devastating.

Wind energy was responsible for 3.6 to 4.5 gigawatts of outages, about 13 percent of the total outages, according to ERCOT.

The outages went on for four days, and some water systems also went offline because of the cold and lack of electricity.

Some of the problems were familiar, since Texas had endured another winter weather crisis and power outages in 2011, leading to reports, including one by the Federal Energy Regulatory Commission, that identified many of the same issues that are still present.

Only this time the severity of the weather and the resulting power outages were worse.

Making Renewables Pay

Even before the lights had fully returned, Texas political leaders were pointing to wind and solar power as the cause of the power outages.

Abbott, a Republican, said on Sean Hannity’s Fox News show that failures in wind and solar “thrust Texas into a situation where it was lacking power in a statewide basis.”

Texas lawmakers soon introduced a variety of bills tied to the February crisis.

This week, the Texas Senate passed Senate Bill 1278, which shifts costs to wind and solar operators, in a 22-9 vote. Similar language also is part of Senate Bill 3, a broader proposal that addresses several aspects of the energy crisis, which passed the Senate unanimously on March 29. Senate Bill 3 also requires winterization of power systems, which is something even critics of the legislative response say is much needed.

The bills would shift who pays the costs of “ancillary services,” a catch-all term that includes the various ways that grid operators make real-time adjustments to the supply of electricity to make sure that supply is in line with demand. The costs of ancillary services vary a lot depending on the level of instability on the grid. Last year, ERCOT charged its customers $275 million for those services, but the costs spiked during the February crisis, with a bill just for that month of $7.1 billion, according to ERCOT records.

The legislation would require wind and solar operators to pay for their share of these services. Other types of power plants wouldn’t have to pay, even though all power plants have variations in their output that require the use of ancillary services.

The bills are now in the Texas House of Representatives, which has been working on its own versions of measures responding to the storm.

State Sen. Kelly Hancock, a Republican, the lead sponsor of Senate Bill 1278, has said he is responding to concerns brought on by the rapid growth of wind and solar.

“Texas Republicans and conservatives still love wind, we still love solar, but we also love reliability,” he said this week on the Senate floor.

Yet his concerns go beyond reliability. He said in written testimony that wind and solar are “destroying price incentives for thermal generation and curtailing investment in dispatchable resources,” by which he means that the growing presence of renewable energy is pushing down electricity prices, which is harming the market for coal, natural gas and nuclear power plants.

Lewin, the Austin clean energy advocate, said the bills are not really a response to the February crisis, even though they’re being talked about that way.

“The bigger part of it is ideologues, many of whom are from the oil and gas industry, that have had it in for the renewable industry from the beginning and are trying to use the storm as a reason to attack renewables anew,” he said.

But the interest groups that support the bills go beyond the oil and gas industry to include the Texas Association of Manufacturers and other large businesses. The bills would shift some costs that are now paid by electricity customers to owners of wind and solar power plants, which would help the industrial businesses that have the highest electricity bills. Also, some of those large businesses operate their own power plants, which may benefit from the legislation.

Another supporter of the bill is the Texas Public Policy Foundation, a conservative think tank with ties to fossil fuel industries, which is a longtime critic of renewable energy. Jason Isaac, a staff member of the group and former member of the Texas House, wrote this week that wind and solar generation are “wildly variable, dependent on the weather, and often pitifully low.”

It is not clear how the costs would be allocated to wind and solar plants or how the total costs would be determined. The Public Utility Commission of Texas would need to figure those things out.

“It could cost a few million dollars, it could cost billions of dollars,” Lewin said. “It just depends on what the PUC decides to do with it, and that’s obviously problematic.”

He views the vigorous lobbying efforts against the bill as a sign that the politics of energy in Texas are changing, but he fears that they haven’t yet changed enough.