Testimony Before the Senate Committee on Business and Commerce

Good morning Mr. Chairman, members.

I’m Bill Peacock with the Texas Public Policy Foundation. Thank you for having me here today.

Since its inception, Texas’ energy-only market has provided us with a reliable and affordable supply of electricity. Unfortunately, increasing intervention in the market in recent years has distorted price formation and the demand curve forcing Texans to pay higher costs for a less reliable supply of electricity.

The two most significant interventions the Foundation has identified are renewable energy subsidies and the Operating Reserve Demand Curve. Between these two, the competitive nature of the Texas market is being fundamentally altered

What is happening is that while renewable subsidies have created one industry that wouldn’t otherwise exist, they are also destroying another industry that has supplied Americans with reliable and affordable supplies of energy for over 100 years.

The PUC has had little choice to respond to this by looking for mechanisms to send price signals for new thermal generation. But the ORDC is not working. Instead, ERCOT is beginning to look much like capacity markets in the northeast that feature higher electricity costs and lower reliability.

Renewable energy subsidies contribute significantly to both of these. And no wonder. The Foundation estimates that renewable generators operating in Texas received $2.5 billion in subsidies in 2019. On top of that, the ORDC added $3.9 billion to electricity costs last year.

Yet none of this is working to increase reliability. Wind and solar, rather than reliable thermal generation, still dominate new planned generation.

The answer to the market distortions caused by one subsidy isn’t another subsidy.

Instead, the most obvious answer is for the Legislature to eliminate Chapter 312 and 313 property tax abatements for wind and solar farms and Texas’ renewable portfolio standard.

But that will not be enough. We must also address the distortions caused by federal subsidies like the PTC and ITC by eliminating the ORDC and replacing it with mechanisms that make renewable generators pay for the costs they impose on the grid and increase the firmness of dispatch.

Mr. Chairman, members. Markets work. And that includes energy markets. Texas has proven that. By relying on the world’s most competitive electricity market, we can eliminate a significant portion of the up to $6.4 billion cost being imposed on Texans by renewable energy today.