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A Texas-Sized Energy Problem: Republicans, Democrats, and ‘Baptists & Bootleggers’ Running Wild in the Lone Star State (Obama sends his thanks)

“Texas is the nation’s leader in wind energy thanks to our long-term commitment to bolstering renewable energy sources and diversifying the state’s energy portfolio.”

- Rick Perry, Texas Governor

“Our representatives [in the Texas Legislature] now have less than six weeks to pass the best of nearly 100 bills that have been introduced on clean power and green jobs. These energy efficiency and renewable energy bills set the stage for rebuilding, repowering and renewing our state’s economy during tough times. They will build a sustainable future for Texas.”

- Sierra Club, Environmental Defense Fund, Public Citizen

As reported by Russell Gold in yesterday’s Wall Street Journal, Texas, which has the strictest renewable energy mandate in the country, is about to increase its quota for the third time. Now the wind capital of the U.S., Texas’s new law would make the state the leader in solar power as well. Expensive and intermittent, wind- and solar-forcing will work only to increase electricity rates for captive consumers and reduce reliability on the grid. Taxpayers are on the hook as well.

In a 2008 study for the Texas Public Policy Foundation, “Texas Wind Energy: Past, Present, Future,” Drew Thornley concluded:

The distinction between wind and wind energy is critical. The wind itself is free, but wind energy is anything but. Cost estimates for wind-energy generation typically include only turbine construction and maintenance. Left out are many of wind energy’s costs—transmission, grid connection and management, and backup generation—that ultimately will be borne by Texas’ electric ratepayers. Direct subsidies, tax breaks, and increased production and ancillary costs associated with wind energy could cost Texas more than $4 billion per year and at least $60 billion through 2025.

How Did the Perverse Happen?

Government goes to those who show up. With utilities financially protected and not wanting to be labeled as anti-”green,” and principled taxpayer, consumer, and free-market groups virtually absent, the interventionists have taken over. Full-time environmental activists and lobbyists for rent-seeking private companies have virtually no opposition–a “Baptists and Bootleggers” scenario in the parlance of political economy.

How has Texas, which consumer choice made the leading oil and gas state, become the second most politicized energy state in the nation (after California)?

The regulatory spiral can be traced back  to Enron, which in 1999 spearheaded a provision in the state electricity restructuring law (Senate Bill 7, signed by governor George W. Bush) establishing a statewide renewable-energy mandate. Enron’s lobbyists had the special interest of Enron Wind Company, which is now part of General Electric, in mind.

It was a double win for the politically connected company. First, as the leading power marketer, and with its eyes on becoming the leading electriicty retailer as well, Enron coveted mandatory open-access of electricity in the state. Secondly, it needed a big market for its money-losing Enron Wind. Cloaking both corporate-welfare goals in the guise of a renewable mandate got media-worshipped environmental groups on board to help push SB 7 across the finish line.

The 1999/2005 Texas Mandates

The Texas Renewable Portfolio Standard was originally (SB7) for  2,000 megawatts of new qualifying capacity, but the 2005 Texas Legislature (SB 20) increased the mandate to 5,880 MW by 2015 and a target of 10,000 MW in 2025. Virtually all of this capacity has been wind power; the prospective (third) mandate would tack-on 3,000 of non-wind (read solar) renewable capacity.

The mechanics of the mandate are interesting. All electricity providers in the state–whether competitive retailers, municipal electric utilities, or electric cooperatives–must buy renewables based on the their market share of energy sales or utilize a Renewable Energy Credit trading program managed by the Electric Reliability Council of Texas (ERCOT). Thus, a utility in windy West Texas sells credits to those without access, such as a utility in wind-still South Texas.

SB7, by the way, also mandated that at least 10% of an investor-owned utility’s annual growth in electricity demand be met through energy efficiency programs each year–politicization on the demand side. Expect more increases as well given the current politicized setup.

The Problem in Miniature: Lobbyist Spiel

Three environmental lobbyists working the Texas Legislature penned an Earth Day editorial in the Houston Chronicle, “Enact Energy Laws to Clear Air, Create Jobs. They are:

  • KEN KRAMER: director of the Lone Star Chapter of the Sierra Club
  • JIM MARSTON: director of the Texas regional offices of Environmental Defense Fund
  • TOM “SMITTY” SMITH: director of the Texas office of Public Citizen

Here is their something-for-nothing, everybody-wins, get-on-the-bandwagon editorial:

Texas citizens get it.

More of us than ever are mindful of switching off lights, weatherizing our homes and doing all that we can to save energy. State legislators can get it too. This session, they have an opportunity and responsibility to save us even more money on our electricity bills, create thousands of green jobs and reduce pollution across the state. Our representatives now have less than six weeks to pass the best of nearly 100 bills that have been introduced on clean power and green jobs. These energy efficiency and renewable energy bills set the stage for rebuilding, repowering and renewing our state’s economy during tough times. They will build a sustainable future for Texas.

The energy efficiency bills contain plans for helping Texas families by creating jobs while reducing consumption of electricity in our homes and buildings. When our homes and buildings are well-insulated and our appliances more efficient, we don’t need to burn wasteful and damaging amounts of dirty fossil fuels for electricity.

An additional benefit to creating Texas’ new clean energy economy is that we can clean up our air and address climate change at the same time. As we provide new jobs installing clean energy technologies, we can decrease the public health risks and costs associated with the impacts of burning coal.

Texas citizens began rising to the call for statewide energy efficiency when we voted with our consciences and our pocketbooks, replacing millions of our hot-burning, incandescent light bulbs with more efficient compact fluorescent light bulbs. Clearly, we were up to the challenge then and believe now that all of us can do more to help the Lone Star State.

For example, utilities can set more aggressive energy efficiency goals and put programs into place that will reduce the need to use so much electricity. The bills currently being considered in the Legislature require utilities to expand energy efficiency programs to meet 1 percent of peak electricity demand by the end of 2015 and 2 percent of peak electricity demand by 2020. While these goals may seem modest, meeting them would mean saving 1,176 megawatts of electricity — as much power as could be generated from two coal-fired power plants.

Utilities can also provide home energy audits that tell us how to increase our efficiency. Based on those audits, we can caulk or replace leaky windows, insulate our attics, repair our duct work, and install programmable thermostats, which allow us to preselect when we use our air conditioners, heaters and water heaters.

Cities can also help the energy efficiency cause by providing some up-front financing for energy-saving improvements. In addition, Texas will soon receive $327 million of federal stimulus funds for weatherization through the Texas Department of Housing & Community Affairs with reporting requirements on green job creation, energy savings and pollution reduction through the use of these funds.

These programs are good for Texas families. They’re good for the environment and they’re good for the economy. Study after study — including a report completed in December 2008 by the Public Utility Commission of Texas — shows that Texas can reduce its peak electricity demand and growth in electricity by 23 percent by implementing a variety of energy efficiency measures. The PUC study also found that every dollar spent by Texas on energy efficiency has a three-to-one payback.

But we need action now by Texas legislators to achieve energy efficiency’s full potential to meet our state’s energy challenges. This Legislature can and should continue the important work begun last session, when now-Speaker of the House Joe Straus led energy efficiency legislation.

Energy efficiency is the cheapest, quickest and cleanest way for Texas to meet its power needs. The Texas legislators who are championing these bills this session should be thanked for paving the way for a cleaner, sustainable future. We now call on all of our state legislators to swiftly move these bills out of committees and through floor debates to begin our sustainable future.

What about the costs of government energy-forcing? Instead of enlarging quota requirements, should Texas repeal mandates (these are not infant industries but mature ones that have promised viability for decades)? Blatantly anti-ratepayer, pro-corporate-welfare energy intervention in the post-Enron era deserves a reconsideration. As one study recently opined:

Over the past 10 years, Texas has become a leader in encouraging the development of renewable power. However, the aggressive build-out of wind power in West Texas is projected to
drive up transmission costs [$4.9 billion for starters] for all Texans and create new reliability challenges.

Governor Rick Perry, do you really want Texas to be an Obama energy state? Just because George W. Bush started the mess does not mean you have to complete it.

Where will this case study of political capitalism end?

Is it past time for free-market, consumerist, taxpayer-friendly parties to show up to the “green energy” orgy. Texas lawmakers need counter-education and pressure against the likes of Ken Kramer, Jim Marston, and Smitty Smith.

14 comments

1 Stuart { 04.24.09 at 8:32 am }

Your source: Texas Public Policy Foundation, “Texas Wind Energy: Past, Present, Future,” Drew Thornley should not be considered. It was funded by special interest, coal and nuclear.

Wind energy is the cheapest for of energy generation in Texas 4 cent per kWh. Nuclear and Clean Coal, which doesn’t exist yet, both are proposed to be build further away from demand loads (places to sell the energy i.e. Dallas, Houston and other large population centers) than wind. So when you start doing the math for cost of “the free market – which never exist because traditional fuel sources coal, oil and natural gas, received $95 in Federal subsidies for every $1 wind energy got (Texas Comptroller’s 2008 Energy Report), you need to be honest and add the transmission, and connection cost for them as well. Plus EROCT waste 2000 MW of energy 24/7 – it is the reserve need to cover the sudden and unexpected crash of traditional generators… you don’t need this with wind power.

2 rbradley { 04.24.09 at 8:39 am }

Stuart:

If wind is economic, as you say, then why the mandates?

The reason is that wind is both more expensive and an inferior product because of intermittency. The Energy Information Administration estimates that wind is about 1/4th more expensive without the tax credit. But importantly, even if wind was cheaper, the quality problem makes it a loser–sort of a decision not to buy a cheaper car because it has a trick motor.

Glad you are bringing up these issues and hope others will respond more specificially.

3 johnson { 04.24.09 at 9:47 am }

What are the subsidies per kilowatt hour for each of the technologies? I can imagine both your comments being true.

4 Stan { 04.24.09 at 9:58 am }

Stuart,
Your criticism of the Texas Public Policy Foundation’s report is a good example of an ad hominem attack. Please make real arguments.

Your arguments about the cost of wind are deeply flawed. I don’t know where you get your cost estimates since you did not provide a source. Economist Gilbert Metcalf of Tufts University, that compares the cost of electricity from various sources. When you level the playing the field (tax breaks, subsidies, etc.) coal costs 3.79 cents kWh, natural gas costs 5.61 cents kWh, and wind costs 6.64 cent kWh. http://web.mit.edu/globalchange/www/MITJPSPGC_Rpt142.pdf Saying that wind costs 4 cent kHw is not accurate because it does not consider the subsidies and special tax treatment that wind gets.

5 Is Texas the new California? | OpenMarket.org { 04.24.09 at 1:50 pm }

[...] capitalism, chronicles the lastest chapter in the Lone Star State’s patronage of Big Green here. « Obama: 100 Days of Lies and Broken [...]

6 Andrew { 04.24.09 at 3:07 pm }

Strange bedfellows I do see.

7 Tom Tanton { 04.25.09 at 8:23 am }

johnson, wind receives way more (>10 times) the subsidy per kwh than other technologies. see my paper here
http://www.perc.org/articles/article586.php and this table in particular (table 2 of paper, but comments section does seem to allow cut/paste of jpgs)
http://www.perc.org/images/publications/percreports/sept05_table2.jpg

8 rbradley { 04.26.09 at 8:31 am }

Stuart:

Today’s post (http://masterresource.org/?p=2064) is in response to your comment.

9 Is Texas the new California? | GlobalWarming.org { 04.28.09 at 10:25 am }

[...] capitalism, chronicles the lastest chapter in the Lone Star State’s patronage of Big Green here. « Obama: 100 Days of Lies and Broken Promises Climate or Potholes? [...]

10 Topics about Wind-energy » Archive » A Texas-Sized Energy Problem: Republicans, Democrats, and { 04.28.09 at 2:41 pm }

[...] National Wind Watch: News placed an observative post today on A Texas-Sized Energy Problem: Republicans, Democrats, andHere’s a quick excerpt“Texas is the nation’s leader in wind energy thanks to our long-term commitment to bolstering renewable energy sources and diversifying the [...]

11 Joe { 04.30.09 at 5:53 pm }

Texas plan on electric wind power reminds me of how Arkansas handled natural gas conservation a couple of years ago. They required the natural gas distributors to give low income customers money to insulate their homes. Next step was to allow two rate increases. One was to provide the money for insulation. The second was to make up for the reduced usage because of the insulation. Everyone now is happy except for the unaware rate payer.

12 Texas’s "Solar Session" Fails to Enact Renewable Mandate #3 (a reality check for a federal RES?) — MasterResource { 06.09.09 at 8:10 am }

[...] The Texas Legislature, which meets every two years, fell to Enron and environmental lobbyists back in 1999 when the nation’s strictest renewable energy mandate was passed and signed into law by then Gov. George W. Bush. In 2005, the renewable quota was increased again, making Texas the national leader in industrial wind parks–and energy liabilities parading as assets (see here). [...]

13 Who Was Ken Lay? (The Senate should know the industry father of U.S.-side cap-and-trade) — MasterResource { 07.07.09 at 6:46 am }

[...] but he got a very damaging renewable energy mandate passed in his home state of Texas. I asked: How has Texas, which consumer choice made the leading oil and gas state, become the second most [...]

14 Texas Wind Power: Reality vs. Hype (despite burdensome state mandate, only a 1.2% share projected for 2014) — MasterResource { 08.24.09 at 7:53 am }

[...] result of the free-market energy choices. It resulted from statewide renewable mandates passed in 1999 and 2005. The state’s Republican governor, Rick Perry, has been among the state’s most ardent wind power [...]

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