“If Americans want to keep their gasoline-powered cars and their large refrigerators … be able to afford travel across their states and country … avoid European—and California—style energy poverty, their only hope is to convince politicians to end subsidies for renewables and all other forms of energy.”

It is common for advocates of renewable energy to complain about the subsidies given to fossil fuels. “We have heard testimony,” stated U.S. Senator Sheldon Whitehouse, “about the threat climate change poses to entire sectors of our economy.”

So, what are we, the federal government, doing to protect against these threats?  Actually, we are subsidizing the danger.  As we’ll hear today, the United States subsidizes the fossil fuel industry with taxpayer dollars.

Joining Sen. Whitehouse in this vein are groups like the International Monetary Fund, The Future is Electric, and the Natural Resources Defense Council.…

“Government increased the cost of Texas electricity by $20 Billion in 2023.”

On July 1, Texas Gov. Greg Abbott and Lt. Gov. Dan Patrick announced that they “will seek to expand the [Texas Energy Fund] to $10 billion to build more new [generation] plants as soon as possible.” The Texas Legislature, with voter approval, created the Fund last year with initial funding of $5 billion.

Subsidizing multi-billion dollar generators and electric utilities using Texans’ money is nothing new in Texas. Figure 1 shows that in 2023 the U.S. government, Texas’ state government, and Texas local governments increased the cost of electricity in the Texas area served by the Electric Reliability Council of Texas (ERCOT) by $19.9 billion, most of it by providing subsidies and benefits to generators and transmission companies. This represented 42.7% of the total cost of electricity to Texans in ERCOT.…

“Texas politicians have added at least $38 billion to the cost of electricity through higher bills or higher taxes since 2019…. Retail rates haven’t reached the level of New York ($0.24 per KWh) or California ($0.32), but Texas’s rising $0.15 rate is disconcerting.”

With its grid overwhelmed by renewable energy, Texas is putting natural gas back in the game. The Public Utility Commission of Texas (PUC) has received 125 notices of intent that propose more than 55,000 megawatts of new generation, most of it gas-fired.

Texans should not be surprised at this turn of events. Generators are simply following the money. Taxpayer money, that is.

Background

After Winter Storm Uri, public pressure forced Texas politicians to wake up to—though not confess—the damage they had caused by throwing billions of taxpayer dollars at generation that only works when the weather permits.…

“This seems a little crazy. During these negative price periods, suppliers are paying ERCOT to take their power…. You could … build a giant toaster in West Texas and be paid by generators to operate it.”

Some 15 years ago, Michael Giberson at Knowledge Problem commented on a strange phenomenon–negative pricing by wind power, where operators with very low marginal costs (the wind is free) were paying takers per KWh to gain big tax credits, mostly federal.

Giberson’s analysis (reposted below) identified the malinvestment and ‘big anti-conservation incentive’. But he did not focus on what cumulatively would result from this distortion: a wounded Texas grid from chronic low prices/margins knocking out thermal generation. The unreliables–via government privilege– knocking out the reliables (what Bill Peacock would call predatory pricing).…