Policy & Regulation

Texas power struggle: How the nation’s top wind power state turned against renewable energy

Texas power struggle: How the nation’s top wind power state turned against renewable energy

By Emily Foxhall, Kai Elwood-Dieu and Zach Despart, The Texas Tribune

State Rep. Jared Patterson disagreed with his Republican colleague that Texas should keep supporting the booming renewable energy industry here.

Rep. John Smithee was arguing on the House floor in early May that certain solar and wind farms should be eligible for school tax breaks. A similar program the state offered for the past 20 years drew renewable energy projects to rural parts of Texas, including Smithee’s Amarillo district.

Patterson, whose district north of Dallas as of late last year had no wind turbines and barely any solar generation, shot back: Renewable power companies get enough help from federal tax credits already.

“Are you saying that we need to add more incentives for wind and solar for them to build?” Patterson asked in disbelief.

After decades of support for renewable energy made Texas able to produce more wind power than any other state, its political leaders have turned against wind and solar. This year, they’re pushing through legislation to prop up fossil fuel-burning power plants instead.

What they decide could have lasting consequences by raising the cost of electricity and spurring the construction of gas-powered plants that will produce carbon emissions for decades.

“Right now, the wind blows strongly against renewables, and that’s where we are,” said Bill Miller, a longtime lobbyist in Austin.

The about-face by Texas elected officials came after renewable energy got so big that it threatened coal- and gas-fueled power in the country’s biggest oil and gas state. Cheap electricity from wind turbines and solar panels provided about 26% of electricity in Texas last year, according to the U.S. Energy Information Administration, up from 0.7% in 2002.

At the same time, renewable energy has become intensely politicized. Texas Republicans condemned the federal Green New Deal pushed in 2019 by Democrats because it aimed to end the burning of fossil fuels for electricity. Politicians here rarely discuss the need for reducing greenhouse gas emissions, though the state suffers from climate change and the hotter summers, stronger hurricanes and heavier rains it has brought.

Texas Sunset
Texas Sunset

In 2021, Gov. Greg Abbott and other state leaders ramped up their criticism of renewables — and gave fossil fuel power plants a strong endorsement — after a devastating winter storm knocked out power for millions of Texans and killed hundreds of people.

It was a deeply embarrassing political episode. Oklahoma and Louisiana, neighboring states that are part of one of the nation’s two major power grids, dealt with similar freezing weather during the storm without the same disastrous results. (Most of Texas is served by a separate grid that has limited connections to the two large national grids.)

Furious residents wanted something to blame. Abbott and other elected Republicans furnished a culprit: renewables. The governor criticized wind and solar generation as unreliable in times of crisis; Agriculture Commissioner Sid Miller proclaimed another wind turbine should never be built in Texas.

In truth, all types of power generators failed during the winter storm in Texas. But many state politicians said that more money needed to go toward building more “on demand” electricity to solve the problem. That meant the kind of power that didn’t rely on wind or sun, such as gas-powered electricity plants or batteries.

During this year’s legislative session, lobbyists for gas-fueled electricity generation companies such as NRG, Calpine and Vistra told legislators they needed to be able to make more money in the state’s electricity market if they were going to build and operate the new plants lawmakers said they wanted.

Meanwhile, large Texas companies wary of paying higher electricity bills said legislators didn’t need to make the type of extreme change to how power generators make money that they were considering.

With little time left before the regular legislative session ends, politicians are taking sides. Renewable power supporters are losing, including lawmakers who represent rural areas that benefit from it.

Legislators have passed bills to prop up gas-fueled power generators. One would offer companies low- or zero-interest loans to modernize existing plants or build new ones; another would likely raise electricity costs to send more money to plants that promise to be available to produce power when grid conditions are tight. Senators also pushed a bill that would restrict wind and solar developments.

The stark turn has disappointed renewable energy advocates such as Matt Welch, state director of Conservative Texans for Energy Innovation. Welch wondered if he was living in “a version of ‘The Twilight Zone,’” he wrote, where limited government intervention in the free market no longer mattered in Texas.

On the House floor, Smithee fought a losing battle defending renewable energy.

“We need to put aside our special interests, and what [energy] source we may prefer,” he urged the House members before they passed House Bill 5, which excluded wind and solar projects from the valuable state tax breaks.

Growing threat to fossil fuels

Nearly three decades ago, Republican Gov. George W. Bush, a former oilman who grew up in Midland, decided Texas should support the nascent wind power business. Breezy West Texas offered some of the best sites for wind turbines in the country.

In 1996, Bush told the state’s top electricity regulator, Pat Wood, “Oh, Pat, by the way, we like wind,” Kate Galbraith and Asher Price report in their book, “The Great Texas Wind Rush.”

Another big change was afoot. Republican state Sen. David Sibley of Waco began convening a committee to consider altering how the Texas electricity market worked.

Bush, Wood and Sibley in 1999 led a massive change: The state deregulated its electricity market. This meant breaking up monopoly utilities that produced and sold power into separate companies for each step of the process. The intent was to lower electricity prices by forcing competition.

A small part of the electricity market legislation also created a renewable energy goal for the state.

Diversifying the state’s energy portfolio made sense as good business to Sibley. Coal was getting more expensive, and the price of natural gas could rise and fall quickly. They set a modest goal: Legislators called for 2,880 megawatts of wind capacity by 2009, enough to power some 576,000 homes.

A pumpjack in Texas.

To reach that bar, the state created a financial credit system to direct more money from electricity sellers to renewable energy projects. Other states have done this, too. The tool funneled millions of dollars a year to renewable energy companies, a University of Texas study found.

“We were proud of it,” Sibley said.

In 2005, Gov. Rick Perry set the bar for the desired number of megawatts from renewable energy in Texas even higher. Perry is from a small town north of Abilene, another part of the state that stood to benefit from wind companies and the money they bring local governments and schools. Perry also supported legislation that directed state regulators to build ratepayer-funded transmission lines to carry wind energy from wide open West Texas to more populated parts of Texas.

The state blew past its renewable energy goals: By the beginning of 2021, wind and solar provided about a quarter of electricity production in Texas, nearly 80 times their share two decades earlier. State leaders set a 2025 goal of getting 10,000 megawatts of power from renewables; the state already has five times more than that, mostly from wind.

Perhaps politicians didn’t expect wind to get as big as it did as fast as it did and take such a significant share of the electricity business from coal and gas. Whatever power is produced from solar and wind is typically put on the market first because it’s cheapest. That’s because renewable companies don’t have to pay for fuel, like coal- and gas-powered plants do, and federal tax credits lower their costs even further.

“It wasn’t seen as a real resource, real threatening,” said Dub Taylor, the longtime director of the state energy conservation office. “And then suddenly overnight it was.”

Rural communities welcome renewable projects

In West Texas, San Angelo welcomed two new multimillion-dollar solar farms, said Michael Looney, vice president of economic development for the San Angelo Chamber of Commerce. The first went online in 2020 and a second followed in 2022. Neither created many jobs, but they do pay the landowners whose land they’re leasing for their installations.

“They’re actually very good projects for rural communities, especially in West Texas,” Looney said. “That’s because we have a lot of both wind and sun, a lot of relatively flat terrain [and] very willing landowners.”

Depending on the location and length of the contract, landowners could receive between $16 million and $33 million over the lifetime of a 100-megawatt wind farm, according to a 2023 report by University of Texas research scientist Joshua Rhodes. Revenue from an equally powerful solar farm could be between $5.2 million and $28 million.

Republican state Rep. Drew Darby, who represents San Angelo, is a member of the House Energy Resources Committee and has been named a “legislative champion” by the Texas Oil and Gas Association. He said he’s taken an all-of-the-above approach with energy policy.

Texas wind turbines.

“The fact is that renewables have greatly benefited this state,” Darby said, but he acknowledged other members of his party don’t agree.

He authored bills that supported the developing geothermal energy and hydrogen industries. He also voted for House Bill 5, the tax benefit bill that left out renewables, as well as the bills that aim to help gas-powered plant construction and operation, Senate Bills 7 and 2627.

In the Rio Grande Valley, two wind turbines loom over the campus of Lyford Consolidated Independent School District, part of five wind projects that provide a steady stream of income through the former school tax break program.

The average home in Lyford CISD costs less than $70,000, and most of the county’s 1,400 students qualify for free or reduced lunch, Superintendent Kristin Brown said.

The $4.2 million that Lyford CISD collected from the wind farms during the 2021-22 school year accounted for more than 20% of the district’s budget, according to school budget documents. Brown said that the additional revenue helped pay for a new wing at the elementary school, repairs to aging buildings and a drainage system for the flood-prone athletic fields.

“How much this is saving taxpayers is huge,” Brown said. “How it’s benefiting rural communities is huge.”

The district sits in Willacy County, where agriculture dominates the economy and where there’s more wind power capacity benefiting from current tax agreements than in any county on the state grid, according to a Texas Tribune analysis. Meanwhile, the budgets for the Willacy County hospital and emergency services districts have more than doubled, the leaders of those entities said.

County Judge Aurelio Guerra said wind revenue was crucial to offsetting the financial impact of the closure of a prison last year.

Farmer Gary Busse, whose family has grown cotton and sorghum there since the 1930s, leases land with relatives for 11 wind turbines. The revenue the 73-year-old retiree collects is not life-changing, he said, but he repeated a joke his brother tells about leasing land for wind turbines.

“If you don’t own one, they make a rumbling, swishing sound that’s loud like a jet plane,” Busse said. “If you do, it sounds like ‘ka-ching, ka-ching, ka-ching.’”

How much will new laws change the power balance?

Those benefits haven’t been enough to sway lawmakers, who in the final days of the legislative session are ironing the details of several major bills that are designed to change the future of how electricity is produced here.

The policies would use state funds and the money from an expected increase in most Texans’ electricity costs to spur the construction of new gas-fueled power plants and keep them operating into the future.

But legislators didn’t appear poised to go as far as renewable energy companies feared they might. And the legislation they have championed has gas-powered generators arguing that the plan still wouldn’t give them enough money to justify building and running the new plants the state needs.

Both the Senate and House have supported some version of a cap to limit how much electricity payments might go up in the Texas electricity market — which would limit how much extra revenue these companies could earn for promising to be able to generate extra power to help keep the lights on when electricity demand soars.

Brad Jones, who served as interim CEO for the state’s grid operator, the Electric Reliability Council of Texas, called the new revenue stream the “last, best chance to ensure future reliability of our grid” by building up and retaining the number of power plants that can be turned on quickly regardless of weather — which wind and solar can’t do if the wind isn’t blowing or the sun isn’t shining.

But generators have said a cap would basically kill the concept, leaving consumers at risk of future calls to conserve energy to prevent blackouts and perhaps paying for another grid disaster.

It remains to be seen just how restrictive the cap will be.

Meanwhile, a bill that renewable energy companies dreaded, Senate Bill 624, has been watered down from one that would have imposed extra regulatory reviews and requirements on all wind and solar projects to a more targeted version aimed at projects near environmentally valuable sites such as rivers, state parks and wildlife management areas. The bill stalled in the House, and its author, state Rep. Lois Kolkhorst, suggested it could be tacked onto different legislation that’s expected to pass.

When the session ends next week, it appears lawmakers will block renewables from accessing the state tax breaks, loan offers and additional revenue that fossil fuel generators will get — although they could still agree to include battery facilities that store wind or solar electricity. Renewables likely won’t be hit with major new regulations. And Texans who get power from the state grid will likely see their bills rise.

This article originally appeared in The Texas Tribune at https://www.texastribune.org/2023/05/25/texas-energy-renewables-natural-gas-grid-politics/. The Texas Tribune is a member-supported, nonpartisan newsroom informing and engaging Texans on state politics and policy. Learn more at texastribune.org.