Texas bills call for renewables to help save declining fossil fuel sector

(The Hill) – The Texas Senate on Wednesday passed a package of bills that would cut support from wind and solar power and force renewable electricity producers to help pay for new fossil fuel power plants. 

The five bills are part of a larger campaign by the Republican-controlled body to redirect growth in the states' flourishing renewable energy sector — by far the largest in the country — toward oil and gas.

The effort seeks to establish the long-term primacy of “dispatchable” electricity — in practice, gas powered plants — over renewables.

The package acts as a counterpoint to the shifting reality of Texas’ energy landscape. While the state is by far the nation’s largest emitter of fossil fuels, new renewable electricity is cheaper and often more attractive than new gas power plants — particularly with the 30 percent renewable energy tax credits passed by Democrats last September. Plus, wind and solar power has been crucial to keeping Texans’ lights on through bouts of record demand, which have been fueled by both rising populations and record temperatures.

But while blackouts have fallen in conjunction with the rise in renewable generation, Texas Republicans have largely blamed wind and solar energy for the state's electric woes — and cast “dispatchable” natural gas plants as the solution.

In a statement on Thursday, Lt. Gov. Dan Patrick (R), who presides over the state Senate, cast fossil fuels as the underdog in the contest to ensure electricity to the state’s rapidly-growing cities. 

The new package “levels the playing field between dispatchable and renewable energy sources,” Patrick said.

Opposing the bill was a strange-bedfellows coalition of power utilities, environmental groups and electric coops — groups that generally have little in common. 

"Rarely have I seen so many groups with opposing views hate a piece of legislation,” veteran Texas columnist Chris Tomlinson wrote in the Houston Chronicle.

While the bills sailed through the Senate — which Patrick largely controls — and are supported by Gov. Greg Abbott (R) they will face a tougher fight in the House, with its stronger caucuses of both Democrats and more independent Republicans.

Seeking a solution for growing demand

The Senate bills focus on incentivizing the creation of new “dispatchable” resources, which can be spun up on demand to provide a quick-fix of power to the grid. In effect, they would shift growth in the states’ booming renewables sector toward its fossil fuel industry — a move state leadership has explained as essential to meet the state’s expanding demand for electricity.

“Dispatchable” power is a broad category that includes the enormous battery storage facilities being built across the state, which allow wind and solar power to be stored at periods of high supply and disbursed during periods of high demand. Battery storage is increasingly becoming a key part of new solar installations in the state, Reuters reported in March.

In addition to its rapidly growing population, Texas faces the combined assaults of heat and ice upon the state’s creaky grid — which, uniquely among U.S. grids, is effectively an island with minimal connections to the remainder of the continent's power systems.

Last summer alone, the state hit all-time records for demand 10 times, according to the Electric Reliability Council of Texas (ERCOT). 

In part that rising demand has been driven by migration: According to the state comptroller’s office, Texas has added 4 million people since 2012, nearly 90 percent of it in state metro areas, and 63 companies moved their headquarters to the state in 2021 alone. 

But the climate also pushed the grid to its limits. That summer was the second hottest in state history, which points to a vicious cycle: The strain on the grid is tied to the rise in temperatures, which is overwhelmingly driven by the burning of fossil fuels.

As demand soared last summer, wind and solar contributed more to the state grid than they had in 2021, ERCOT reported. According to Texas Monthly, as natural gas “underperformed” and hot, still air cut power from West Texas wind farms, rising solar generation and other wind power on Texas’ breezy coast helped stop the gaps.

Why renewables have succeeded in Texas

The state's robust renewables sector is a result of both Texas's favorable sun and wind conditions and an incentive program dating back to the early-2000s that helped the renewable industry grow to about 39 percent of the state energy supply. That boom now dramatically outstrips the growth in fossil fuel energy, according to a report by financial analytics firm S&P Global.

A 1999 law obligated the state to hit a set amount of renewable energy by 2009 — a target the state legislature repeatedly increased. To meet state renewables goals, Texas regulators required power suppliers to either produce their own renewable energy — or buy credits from companies that had.

That program was overwhelmingly successful — virtually everyone, even Senate Republicans, agree — at standing up a state renewable electricity industry. 

How successful? In 1999, legislators hoped to add 2 gigawatts of all renewables within 10 years. But in 2023 alone, the state is on track to add 2 gigawatts in wind — and 8 gigawatts of solar power, according to the Energy Information Administration.

Some power producers argue that the call for non-renewable “dispatchables” is obsolete. In New England, for example, advances in forecasting, remote measurement and power sharing have allowed the regional grid to dispense renewable energy from wind, solar and hydropower on demand. 

Last December, ERCOT approved nearly 654 megawatts of wind and solar power — and no new gas plants. (As an independent operator, ERCOT does not comment on legislation as a matter of policy.)

That growth in renewables suggest that support for the industry is no longer needed, GOP legislators wrote in their summary of Senate Bill 2014, which would end the renewable energy credit program.

The program was meant "to support a[n] emerging renewable generation industry," the bill authors wrote.

"It was meant to provide a 'jump start,' and was not meant to be a permanent mandate or subsidy once these technologies became cost-competitive," they added.

Legislation bolsters natural gas plants

In his statement on Thursday, Patrick said that since the deadly winter storm of 2021, in which gas-power generation froze across the state, “I have been abundantly clear that we must bring new dispatchable generation (primarily new natural gas plants) online as soon as possible to make sure that Texans have reliable power under any circumstance,” Patrick said. 

State GOP members cast the state’s growth in renewables as a problem — and one that federal subsidies are set to exacerbate. The federal tax credits “distort” Texas’s electricity market by giving “less reliable generators an unfair market advantage over reliable generators,” Senate Republicans wrote in analysis of Senate Bill 7, a linchpin of the package.

That bill would require such “non-dispatchable” sources — in other words, wind and solar — to pay more for state services like building and maintaining the grid. 

It also requires the state utility commission to report yearly to the legislature on how state subsidies can be tweaked to ensure sufficient “dispatchable generation to maintain reliability standards for at least five years.”

A companion bill, Senate Bill 6, would amount to social welfare for gas plants. The bill creates the Texas Energy Insurance Program, which would stand “outside of the competitive market,” according to Patrick’s statement. It would pay for the state to operate 10,000 megawatts “of natural gas or similar sources.” It also offers low-interest loans to keep aging and uneconomic power plants online — a category which in Texas mostly refers to coal and gas.

Renewables would boost 'dispatchable' energy

In 2021, the Texas legislature created a natural gas credit trading program to incentivize the construction of new gas power plants.

This program repurposes the state’s renewable tax credit system as a guaranteed carve-out to fossil fuels. In Senate Bill 2015, members voted to require all utilities and electric cooperatives in the state to purchase at least 50 percent of their power from such sources.

In practice, that electricity will have to come from coal and gas, because Senate Bill 2012 clarifies that battery storage facilities don’t count.

That means that if utilities come up short — or want to run their operations on more than 50 percent renewables — they’ll have to make up the difference by buying up “dispatchable” credits that in practice can only be created by natural gas producers.

In effect, the two bills “require renewable energy companies to subsidize the construction of new fossil fuel plants,” Luke Metzger of the advocacy group Environment Texas wrote in a statement.

In their commentary on the bill, even its opponents emphasized the importance — even necessity — of what the state legislature attempted: an unprecedented attempt to bolster a resilient, isolated grid that could absorb millions of additional residents and the continual battering of heat and cold. 

One negotiator on the package, Senate Democrat Nate Johnson (D-Dallas), emphasized the difficulty of what is being attempted as Texas politicians seek to bolster the state’s grid.

"This is difficult stuff," Johnson wrote The Hill. “There is no tried and true blueprint, and to a large degree we’re breaking new ground. So there’s bound to be disagreement, and it’s going to take patience and good faith work to reach the best solution.”

As Johnson described it to The Hill, the package is meant to be more than the sum of its individual bills: something like the parts in a turbine. 

“They are intended to work as an inter-operating set of mechanisms, and in many respects they do. But – despite some major improvements during the final hours of bipartisan discussions – the package has some very rough edges and needs more work,” Johnson wrote.

One such potential added part could be Johnson’s own Senate Bill 2112, which would create a standardized system of publicly-owned backup generators at critical facilities like police stations and hospitals — which could help supply their neighborhoods in crisis.

Package opposition is broad

A wide array of generally-opposed groups — primarily electric utilities and environmental groups —  united in their condemnation of the package, with the main supporters being oil, gas and petrochemical companies. 

The pushback against the bills took on a particularly Texan-slant — as utilities and the renewables industry panned the package as an example of California-esque state control. 

The package amounts to a carve-out of 50 percent of the Texas power market for “natural gas, coal, and other conventional, higher-cost energy resources,” Trish Demeter of the Texas Advanced Energy Business Alliance wrote The Hill.

That approach “subverts the long-standing tenet of the Texas market that embraces tech-neutrality,” Demeter wrote, noting that it was still unclear whether battery generation would be allowed to participate at all.

Some slammed the bill package as an example of anti-competitive state meddling in the Texas economy, which they said would raise prices to little purpose. The package is “a fundamental departure from a competitive electric market,” Michele Richmond, executive director of Texas Competitive Power Advocates, wrote The Hill.