From Master Resource
By Bill Peacock
“The predictable but inevitable intermittency of renewable energy had created a grid emergency that would not exist on a grid that operated without renewables…. natural gas peaker plants would have handled the load at peak demand, the riskiest time for a normally functioning grid.”
“, Governor Greg Abbot should declare an energy emergency and call the Texas Legislature into special session and keep them there until they eliminate all Texas subsidies for renewable energy and force renewable generators to pay for the costs they have imposed on Texas consumers.”
As many renewable advocates like to point out, solar often provides good performance during periods of high temperature. Leaving aside for the moment the performance of solar compared to installed capacity, at 5 p.m. solar came close to its expected output of 12,636 MW. At 6 o’clock, solar dropped off to 77.6 percent of expected summer output. It also contributed 12.2 percent of generation at the time of peak load about 5:55. Wind was operating at 54 percent of expected summer capacity (10,427 MW) and contributing 7 percent at the same time. Batteries added only 0.3 percent.
All told, renewables contributed 19.5 percent at peak load. Thermal energy, meanwhile, contributed 80.2 percent: natural gas, 59.9 percent; coal, 14.2 percent; nuclear, 6.1 percent.
The trouble with wind and solar became readily apparent as 7 o’clock and 8 o’clock come around. At the critical time of 7:25 p.m.—when ERCOT issued its Energy Emergency Alert 2, solar generation had plummeted to 11.6 percent of expected summer capacity—down from 86.9 percent just over two hours before. Wind also had dropped, as it usually does about that time of day. To make things worse, wind generation had already been operating far below expected summer capacity throughout most of the day. Thus, wind could not pick up the load for solar as the sun was going down.
In evaluating what happened on September 6 it is important to remember the load had dropped significantly by 7:25 when the grid emergency occurred. At that point, demand was 77,670 MW, down by almost 6 percent from the 82,350 MW demand at 5:55 and continuing its decline. Yet renewables could not keep up even with falling demand. The predictable but inevitable intermittency of renewable energy had created a grid emergency that would not exist on a grid that operated without renewables.
A Texas Grid Without Renewables
To fully understand the situation ERCOT is in today, we can contrast the events surrounding Energy Emergency Alert 2 to what the Texas grid would be like absent the takeover of the grid by renewables.
A grid operating without renewable energy would have handled peak load very differently than what occurred on September 6. As temperatures and demand soared, natural gas peaker plants would have come online to handle the increased load. These plants are built exactly for this type of situation. Often, peaker plants run less than 1,000 hours a year. Of course, in order to be profitable, they need to receive high prices for their electricity when they do run. That was the genius of Texas’ competitive electricity market. As demand increased faster than baseline generation could ramp up, prices would increase. That would be the signal for peaker plants to come online.
Such was the nature of the Texas power market from the late-1990s through 2015 or so. Investors flocked to Texas from all over the world seeking to earn profits by building new natural gas “peaker” plants. From 1996 when Texas began its move toward competitive markets, almost 35,000 MW of natural gas generation was built through 2009. This constituted about 45 percent of all generation in ERCOT in 2009 and was why Texas was able to make it through the summer of 2011, the warmest on record at the time, without any outages due to generation shortages.
The situation was beneficial for everyone. Peaker plants received high prices in the relatively few hours they operated when generation became scarce. Texans paid higher prices for a few hours a year, but the power they received kept the lights on.
Allowing this scenario to play out on September 6, it would have been the peaker plants—in response to higher prices, not solar, that would have come online to handle the peak load at 5:55 p.m. Then, as the load decreased as businesses shut down and temperatures dropped, some peakers would have gone offline or reduced output. But some of them still would have been online at 7:25 to handle the reduced load at that time. There would not have been the sudden drop off in generation that the grid experienced on September 6 due to changes in the weather or the setting of the sun.
In other words, natural gas would have handled the load at peak demand, the riskiest time for a normally functioning grid. Perhaps there might have been calls for conservation at that time, but more than likely there would not have been; such calls occurred much less often before renewables arrived. And unlike on September 6, there would have no discussion about how to handle the decreasing load between 7 p.m. and 8 p.m. For the straightforward reason that the necessary generation assets, peaker plants, would have already been online and committed to carrying the load. They would not have suddenly disappeared from the grid, unable to generate the needed electricity, like many wind and solar farms did that day.
Woody Rickerson, the ERCOT official, discussed the difference that solar has made during times of peak demand. “What’s changed in the last three years has been this huge influx of solar. Solar has taken [most of] the risk out of 4 p.m. and 5 p.m,’ he said. But Rickerson gets this aspect of the risk shift wrong. Solar has not taken the risk out of the peak load situations. At least no more than peaker plants have done in the past. Investment in solar has shifted the burden of carrying load from peaker plants to solar.
But September 6 clearly demonstrates that solar has failed in this task. Solar did not take the risk out of the grid during peak demand, it simply shifted to a later time. Only non-intermittent, quick-start generation like peaker plants can actually reduce the reliability risk to the grid.
Renewables from Government Favor
Money, or, more specifically, money taken from taxpayers and paid to renewable generators by the government is the reason renewable energy has taken over the Texas grid. Originally, Texas’ competitive electricity market allowed investors that made wise decisions to earn money. A lot of money for many of them. Money flowed from investors to generators to build the plants. Then, as the generators sold their electricity into the market, money flowed from consumers to generators and back to investors to pay for the plants.
That was the case before subsidies for renewable energy helped destroy market pricing signals that allowed for these transactions to take place. This is why for the first fifteen to twenty or so years of Texas’ competitive electricity market the grid was able to handle very high peak loads as the Texas economy and population grew. Texas never suffered blackouts because of insufficient generation during peak loads on hot summer afternoons.
Since that time, however, investment in natural gas, coal, and nuclear generation has dropped to almost zero. Already in 2009 investment in wind generation had overtaken natural gas. New generation requests from wind in 2009 totaled 44,900 MW versus only 14,100 MW from natural gas. Today the problem is much worse. From 2018 to 2021, renewables made up 85 percent of all new generation. A study completed for the Public Utility Commission of Texas (PUCT) estimates that renewables will make up 98.7 percent of all new generation from 2022-2026. By that time, the installed capacity of renewables will make up 57.1 percent of all generation on the grid.
This rapid change in the generation mix on the Texas grid is not happening because of market forces. Investors did not shift from natural gas to renewables because generation from wind and solar farms is more efficient or profitable—at least in the market. The shift came because billions of dollars of federal, state and local subsidies guaranteed profits to investors who no longer had to deal with the uncertainty of prices. No matter what the price of electricity is on any given day, the subsidies guaranteed investors at least a marginal profit for every kilowatt of electricity sold. In 2018, for example, 28.8 percent of the income of renewable energy generators came from government subsidies and benefits.
NextEra Energy, for example, received $5.7 billion from the federal government’s Production Tax Credit (PTC) from 2007 to 2016. Over the same period, Texas’ NRG received $1.1 billion. During that time, the top 15 recipients of the PTC received $19.4 billion.
Money also flowed to renewable generators from Texas. A lot of it. From 2006 through 2023, about $29 billion of subsidies and benefits have flowed to renewable generators in Texas. $15.3 billion of that came from the federal government, $11.7 from the Texas government, and $2.1 billion from local Texas governments. All of the money, though, eventually came from the pockets of taxpayers.
|Renewable Subsidies in Texas 2006-2023|
Investment in reliable generation was also brought to a stop because renewable subsidies destroyed market prices in ERCOT. When the wind blows at night for instance when demand is very low, wind generators drop prices to force their electricity on the grid at the expense of thermal generators. Wind generators can do this because they have no fuel costs and because of the subsidies. This allows them to actually give away their electricity for free and still earn a profit. Thermal generators must either drop out of the market at this point or sell their electricity at a loss. In either case, thermal generators lose revenue making investment less attractive.
This problem is magnified in times of higher demand. When solar or wind generation increases output at these times, prices may be relatively high, but the subsidies ensure that renewable generators can price their energy to ensure they gain market share. This either pushes peaker plants offline or reduces the revenue they can earn while on the grid. More than anything else, this is the problem that is plaguing Texas today; renewable generation has brough investment in new peaker plants to a halt.
Without renewable subsidies, none of this would have happened because Texas would have almost no renewable energy on the grid. In the late 1800s, consumers rejected renewable energy—a four-thousand-year-old technology—as soon as fossil fuel became widely available. Oil and coal became the energy product of choice because it was more efficient, more reliable, and less expensive than wind and solar. That is still the case today, and always will be.
The intervention in energy markets through renewable energy subsidies has distorted market prices, thus distorting and reducing the information available to buyers and sellers. And reducing the quality of the decisions made by them.
An extension of this is that intervention, by design, changes or even prohibits the market outcomes that would have resulted through the voluntary actions of buyers and sellers in the market. The result is that intervention replaces preferences of market participants (to a greater or lesser extent) with those of the regulators and other parties, usually those seeking to profit through regulation. We can see this clearly today in the Texas electricity market, where renewables are making the Texas grid less affordable and less reliable.
The consequences of this were clearly seen on September 6. Solar has taken over the role of natural gas peaker plants only because subsidies for wind and solar energy have led to few or no new gas peaker plants. No longer, then, can Texas safely operate on reserve margins of 10 percent or below as it did less than a decade ago.
ERCOT said earlier this year that Texas has 146,719 MW of installed generating capacity. Yet only two-thirds (97,138 MW) was expected to be available during the summer, largely because wind and solar always operate far below their installed capacity.
But even renewables’ expected capacity has proven to be fickle. ERCOT’s projected reserve margin of 17 percent this year shrank to 1.6 percent at 7:25 p.m. on September 6 when renewables failed to show up. The only thing left for the operators of the Texas grid to do was declare an emergency.
Likewise, Governor Greg Abbot should declare an energy emergency and call the Texas Legislature into special session and keep them there until they eliminate all Texas subsidies for renewable energy and force renewable generators to pay for the costs they have imposed on Texas consumers.
Part I was yesterday. This concludes the two-part series.
Bill Peacock is director of the Energy Alliance of the Texas Business Coalition. TBC highlights the aspects of the energy market that matter most to consumers: Reliability, Affordability, and Efficiency. Our research can be found at www.theenergyalliance.com.