Texas Bill Aimed at Choking Clean Energy

Texas currently considering laws meant to hobble the roaring renewable energy business in the state, which would effectively do to the Texas economy what tariffs are doing to the US as a whole.
Above, Texas grid expert Doug Lewin gives are very worthwhile overview.

Get coffee. This is a long but important read.

Houston Chronicle (gift link):

Texas Republicans are getting closer than ever to killing the state’s renewable energy boom, according to the clean energy industry — not only by halting new development in its tracks, but also by possibly sending scores of existing projects to an early grave. 

Many in the Texas electric power industry were focused on two companion bills, House Bill 3356 and Senate Bill 715, as the Senate version passed Thursday afternoon. 

The bills would require nearly every solar and wind farm in the state to back up their electricity output with natural gas power plants or a fleet of batteries. 

If an existing renewable project doesn’t have backup power so it can supply electricity when the sun isn’t shining or the wind isn’t blowing, its owner would have to pay a steep fine — or stop operating the project completely.

Such a requirement could be so cost-prohibitive that thousands of megawatts of existing renewable energy projects in Texas might shut down, and companies wanting to develop new ones would go elsewhere, industry leaders say.

“I cannot recall legislation as damaging to our industry and to the energy market as House Bill 3356 and Senate Bill 715 being considered in both chambers this late in session,” said Mark Stover, executive director of Texas Solar and Storage Association, a trade group. 

The reduction in electricity supply would come just as Texas needs more electricity than ever before. Such an imbalance could raise the risk of rotating outages across the state’s main power grid, energy researchers and consultants warned. 

“(Electricity) prices would skyrocket. Our grid would become less reliable. Our economic growth would be choked off,” said Doug Lewin, president of Stoic Energy Consulting, who made a video arguing the two bills could “break the Texas grid.”

State Rep. Jared Patterson, R-Frisco, author of HB3356, said his goal is to “level the playing field” against “highly subsidized renewable energy” so more natural gas power plants can be built in Texas. 

“Do Texans deserve to have power when they need it? Yes, of course they do. But it can’t happen if we rely too heavily on resources that are on and off with the whims of Mother Nature,” Patterson said during a House committee hearing on his bill last month. 

Yet, even companies that build natural gas power plants — the sector lawmakers say they’re trying to help — aren’t eager to see the bills passed into law. 

The idea of backing up the electricity output of renewable energy resources is not new. In fact, a requirement to do so became law in 2023 — but only for wind and solar farms connected to the Texas power grid after 2027.

The future effective date was a heavily-negotiated compromise, in line with other proposals to regulate future renewable energy projects, not those that already exist. 

Now, the 2023 compromise could be trashed. This concerns the Texas Association of Manufacturers because the proposed House regulations would affect existing renewable energy agreements, said Katie Coleman, an attorney representing the influential trade group. 

If the two bills became law, owners of existing renewable projects would try to pass on their costs of securing backup power or paying fines to Texas manufacturers, Coleman said. Higher electricity bills could then force manufacturers into a tough spot. 

“It’s essentially either going to affect pricing that goes into a product that (manufacturers are) making, or they’re going to make less of that product, or operate elsewhere, or have to go get an alternative power supply,” Coleman said.

Renewable energy companies that can’t pass costs onto their customers might shut down projects instead. 

In fact, 15% of the existing wind fleet in Texas could shutter, according to a recent analysis of HB3356 and SB715 from the consulting firm Aurora Energy Research.

The two bills exempt natural gas and coal-fired power plants. In other words, if fossil fuel power plants aren’t reliable enough per a certain standard, they wouldn’t have to acquire backup power like their renewable energy counterparts.

However, “the retroactive nature of the bills is something that could send a chilling market signal to anybody wanting to do a long-term investment in Texas,” said Walt Baum, CEO of Powering Texans, a trade association representing the largest companies developing gas-fired power plants in the state. 

“It raises a lot of unknowns. No one has really thought through exactly how this is going to work, which is why I don’t think you’ve seen the thermal generation community rush to support this concept right now,” he said. 

Renewable energy companies that can’t pass costs onto their customers might shut down projects instead. 

In fact, 15% of the existing wind fleet in Texas could shutter, according to a recent analysis of HB3356 and SB715 from the consulting firm Aurora Energy Research.

The two bills exempt natural gas and coal-fired power plants. In other words, if fossil fuel power plants aren’t reliable enough per a certain standard, they wouldn’t have to acquire backup power like their renewable energy counterparts.

However, “the retroactive nature of the bills is something that could send a chilling market signal to anybody wanting to do a long-term investment in Texas,” said Walt Baum, CEO of Powering Texans, a trade association representing the largest companies developing gas-fired power plants in the state. 

“It raises a lot of unknowns. No one has really thought through exactly how this is going to work, which is why I don’t think you’ve seen the thermal generation community rush to support this concept right now,” he said.

The potential loss of existing solar and wind farms, plus a slowdown in building new power plants of all types, would reduce the Texas power grid’s available supply. 

Everyday consumers would see higher electricity bills as a result, according to Olivier Beaufils, a head researcher at Aurora Energy Research. 

“It’s basic economics. If there’s less supply, prices are going to get higher,” he said.  Still, legislators who support SB715 and HB3356 say the regulations are needed because they say wind and solar farms drive up electricity costs and are unreliable resources. 

To that point, both Patterson and Sen. Kevin Sparks, R-Midland, have repeatedly cited a February study from the Texas Public Policy Foundation, an influential Austin think tankinvolved in Project 2025, as the basis for their bills. 

Brent Bennett, TPPF’s energy policy director, authored the study, which estimated that variability in wind and solar production added $2.3 billion in electricity costs in 2023. 

Wind and solar are often cited as cheap energy resources, because they have little fuel or operating costs. But Bennett argued that the “hidden” costs of wind and solar show up in the higher electricity costs that owners of natural gas and coal-fired power plants have to charge to break even. 

That’s because fossil fuel resources are not only used less often, but also have to turn on and off more frequently, which is inefficient, Bennett said. Yet, these plants are still needed on the Texas power grid to supply electricity when renewable energy resources are limited, so consumers are forced to bear those higher costs, he said. 

So, the purpose of HB3356 and SB715 is twofold: to create a market signal valuing such reliability, and to allocate the “hidden” market costs to the renewable resources responsible for them, Bennett said. 

If the bills result in less solar and wind on the Texas power grid, that’s fine, he said.

“We think it’d be better if we stopped building wind and solar and built more combined-cycle gas,” Bennett said.

Working in concert 

Critics of HB3356 and SB715, however, say the bills reflect a lack of understanding about how all resources on the Texas power grid work together to keep the lights on.

Pablo Vegas, CEO of the Electric Reliability Council of Texas, the organization operating the state’s primary power grid, told reporters in Austin on Tuesday that the intention behind the two bills — to help fossil fuel power plants make enough money to survive in the market — is good.  

But efforts that incentivize more gas-fired generation by cutting down on renewable energy are concerning, as ERCOT will need all resources to meet an unprecedented growth in electricity demand in the next five years, Vegas said. That’s especially true as gas-fired power plants face challenges in the short-term, such as gas turbine shortages. 

“Characterizing renewables as a problem, I don’t think it’s helpful to the conversation. I don’t think it’s accurate. What we really need is a portfolio that can actually deliver on the resource requirements ahead of us,” he said. 

The bills neglect to consider that all resources have their strengths and weaknesses, and all resources fail, said Joshua Rhodes, a research scientist at the University of Texas at Austin specializing in the power grid. 

Though not inherently dependent on weather conditions like wind and solar, fossil fuel power plants can suffer high levels of unplanned failures in extreme heat or cold. Fossil fuel power plants are also vulnerable to fuel shortages, as what happened during the 2021 freeze. 

Fossil fuel power plants are critical in supplying the power grid during sunset, sunrise and on windless days. But solar can carry the grid through hot summer afternoons and mild sunny days, allowing natural gas and coal-fired power plant owners to perform necessary maintenance. 

“It’s like expecting a trumpet to play a drum line — it’s just not going to work. It’s not the right tool. But if you put all the tools together, then you can get an orchestra,” Rhodes said. 

In that analogy, ERCOT would be the conductor. After all, ERCOT’s job is to balance the mix of power plants supplying electricity to the grid at any given moment, Lewin and Beaufils said. So, having enough backup power is an issue for ERCOT judge on a system-wide basis, not a problem to fix power plant by power plant, they said. 

Drew Darby, R-San Angelo, was one of two Republicans who voted against HB3356 when it was still in committee. 

In an April committee hearing, he said the bill could jeopardize eight gigawatts of solar and wind projects planned for his West Texas district that could help inject tax revenueinto school districts, volunteer fire departments and other public services. 

“We should be working to protect prosperity in rural Texas, not undercut it. This is a solution in search of a problem that rural Texas quite frankly can’t afford,” Darby said.

The House bill narrowly passed the committee, shocking renewable energy insiders who’d come to expect proposals they didn’t like to die in the House. Now, renewable energy companies anxiously wait to see if the House bill will be voted on by the full chamber — and how much of their industry survives come June, when state lawmakers adjourn until 2027. 

Meanwhile, temperatures will soon start to climb as everyday Texans wonder whether the state power grid holds up through another hot summer. 

Texas Energy and Power Newsletter:

Speaking at the ERCOT Innovation Summit, ERCOT CEO Pablo Vegas told the Austin American Statesman that four bills create potential problems for the grid: SB 819, SB 388, and SB 715/HB 3356. He emphasized that in an era of load growth, all energy resources are needed.

Texas is home to the second-largest data center market in the country in the Dallas-Fort Worth area, which trails only Northern Virginia. Austin-San Antonio is a leading secondary market in the U.S., with combined under-construction data center activity more than quadrupling in the first half of 2024.

With this kind of growth, the grid needs all the generation it can get, Vegas said.

“What I’ve said is, I think it’d be better to find ways that are additive in nature than potentially produce a risk of losing generation in the short term, especially since we’re going through a growth mode,” Vegas said. “If we weren’t in a growth mode, if we were in a flat, static mode, perhaps it’d be much lower risk to do something like this, and that we can manage through situations and supply as we got to a rebalancing of the economics. I’m just concerned that if we really think that the market is going to grow for the next three to five years rapidly, we need to have all the resources available to do that. That’s the risk that we have to manage with any of these policy changes.”

With 25 days of session remaining, the fate of those bills, and the reliability of the ERCOT grid, remain uncertain.

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It should be noted that the Texas Legislature recently created a special taxpayer funded subsidy program to shore up the fossil gas industry. That program has been stumbling of late.

Houston Chronicle (gift link):

Two more natural gas power plant projects have been denied loans from Texas’ $5 billion program meant to attract more electricity supply for the state’s primary power grid.

Including these two denials, almost five gigawatts of power plant projects have been denied funding or voluntarily withdrawn from the taxpayer-backed Texas Energy Fund, or enough capacity to power approximately 1.2 million homes. That’s nearly half of the loan program’s goal of incentivizing 10 gigawatts of new gas-fired power generation.

Analysts from the investment bank Citigroup wrote that the Texas Energy Fund was “falling apart” in a research note two weeks ago. Now, as lawmakers contemplate setting aside billions more of taxpayer dollars for the fund, the most recent denials add even more data points to concerns that the program is flawed.

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As Lewin points out above, a big part of this push comes from the Texas legislators fundamental ignorance of the causes of Texas infamous Valentine’s Day blackouts during Winter Storm Uri.
My video on that event is essential viewing for anyone working in this space.

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The Bills mentioned above are the brain children of the Texas Public Policy Foundation, spiritual home of current Secretary of Energy Chris Wright.

I like to continue updating on how Mr Wright’s company, Liberty Energy, a fracking and drilling services firm, is doing under his tenure at DOE.