What has been the primary cause of rising electricity prices in Texas?
Surprisingly, the answer is renewable energy. State-enacted renewable energy mandates raise the cost of electricity by requiring electricity companies to produce or purchase expensive renewable energy. State and national energy requirements distort the energy market by creating artificial demand for renewable fuel sources that didn’t previously exist. Furthermore, government renewable energy programs work by decreasing electricity consumption, reducing economic growth and decreasing wealth for most Texans.
As costs for renewable fuels rise, Texans will begin to pay mounting costs that producers should have to shoulder. First, building transmission lines to transfer wind-generated electricity from storage in the Competitive Renewable Energy Zones will cost Texans approximately $1.3 billion annually by 2015. Producers pay nothing for these lines. Furthermore, increasing wind generation capacity to utilize the new lines and employing backup generation could cost Texans an additional $1.82 billion per year. In light of these costs, some consider wind energy “the most expensive form of generation we have in Texas.”
Meanwhile, some claim that support to traditional fuels distort the Texas market. Such a claim underestimates the much more market distorting renewable fuel subsidies. For example, wind energy receives $23.37 of subsidy per unit of production; nearly fifteen times more than the nuclear, per-unit, subsidy of $1.59, and nearly 53 times the per-unit subsidy that coal receives.
Several bills in the Texas Legislature would increase the state’s renewable portfolio standard (RPS) and therefore require companies to produce even more electricity from renewable sources. House Bill 774 proposes to require an additional 1,500 megawatts, of non-wind, renewable electricity generation by 2020. This would distort the market further with exorbitant subsidies to costly electricity sources such as solar and others. Instead, Texas should eliminate its current RPS to save Texans as much as $41 million annually.
-Ben SnodgrassResearch Fellow, Center for Economic Freedom