[Ed. note: Previous posts at MasterResource have documented the landowner and budgetary problems of the Competitive Renewable Energy Zone (CREZ) transmission line.]

The cost of building transmission for expensive wind power in Texas is coming in nearly 40 percent higher than initially promised. Instead of $4.9 billion, as estimated in 2008, the transmission lines are now expected to cost $6.8 billion, according to a report prepared by the RS&H infrastructure consulting firm for the Texas Public Utility Commission.  This amounts to approximately $800 per household in the state, or at least $5 per month per ratepayer.

Cost Gaming

The report states several factors caused the initial underestimate of transmission line construction costs. For example, the initial estimate assumed transmission lines would be built in direct, straight lines from point to point.…

“It is well known that Texas is undergoing a major challenge in maintaining resource adequacy due to improper price signals; less well known is that a significant portion of the problem can be laid directly on the doorstep of subsidies for wind generation.”

The federal Production Tax Credit (PTC), which currently provides a $0.022/kWh subsidy to qualifying renewables, is set to expire at year-end. Just the prospect of expiration has dramatically slowed new construction of industrial wind capacity, despite a raft of other subsidies to politically correct energy. [1]

The Texas Public Policy Foundation has released a new paper looking at the effect of the production tax credit both on taxpayers and consumers. Bill Peacock and I found that PTC continuance puts the Texas electricity market at increased risk of price spikes and blackout by discouraging the construction of new reliable, on-peak generating capacity.…

“Renewable energy subsidies harm the reliability of Texas electricity markets by resulting in artificially low sales prices, victimizing conventional energy generators and investors. Why build a new gas-fired plant when spot prices might be below production cost because wind receives a $0.02/kWh federal production tax credit?”

Last month, a cold front propelled Texas to a new record for wind power, according to the Electric Reliability Council of Texas (ERCOT). Wind-generated electricity provided 9,481 MW on Feb. 9, almost 28 percent of the power generated in ERCOT at that time. This surpassed the previous record of 8,667 MW set only two weeks earlier.

Hold the applause. These records are being set because of Texas’s renewable-energy mandate–the strictest in the nation–and a raft of special tax subsidies. This government largesse harms taxpayers, consumers, and businesses as documented in a study released by the Texas Public Policy Foundation (TPPF) last November.…

“With Texas wind power capacity at more than double the state’s RPS minimum, repeal is unlikely to do much to change the profile of renewable energy in Texas. But repeal is still important, because it sends a clear signal that markets, not politics, should decide what kinds of energy Texans use.”

Texas has always been big on energy. The state’s long history of oil and gas production is well known. And on the electric generation side, Texas ranks first in the nation nuclear power and has the most installed wind capacity of any state.

While the willingness to develop our energy potential is unrivaled, the means has not always been the best. Like in other states, and the U.S. as a whole, Texas has periodically tried to prop up or hold back different forms of energy via special protections, subsidies, or mandates, rather than letting markets and the price system decide the best energy mix.…