Blackout aftermath: An end to Texas' renewable boom?

Wind turbines spin as a pump jack pulls up oil near Harrold, Texas, in this July 31, 2020, photo. Texas is the largest producer of wind energy in the United States.  

After years of relentless growth, renewable energy in Texas is facing new pressures that threaten to slow the rise of an industry caught in the long shadow of oil and gas.

The state's February freeze, which left millions of Texans without power, reenergized a clash over the role of wind and solar on the grid. Bills now under consideration in the state Legislature could reshuffle the main Texas electric market by adding new costs to intermittent power and taking benefits away from wind and solar.

Some Texas leaders, meanwhile, have tried to tie the blackouts to renewables, although units powered by natural gas, coal and nuclear also failed to provide electricity during the crisis. Financial questions also trail the renewables industry after surging commodity prices during the winter storm created huge costs for companies across Texas' energy sector.

While it's unclear what new restrictions or costs could mean for renewable projects, the state's green boom now carries new question marks that run in the billions of dollars. With Texas having more wind capacity than other states by far, the outcome of the state's decisions could have national repercussions for clean energy. The state also highlights a national clash between many elected Republicans and an expanding renewables sector.

"All that'll happen is they'll raise the prices of wind and solar, but people want it," Jim Marston, an environmental advocate who's retired from the Environmental Defense Fund, said during a recent webinar about the Texas grid. "And maybe it'll move more to another state rather than Texas. And that's a shame."

For years, wind and solar expanded amid a tenuous embrace from Texas. The state surpassed renewable energy standards years ago, and pro-business officials mention wind and solar energy as part of an all-of-the-above strategy. But critics have been relentless in mocking intermittent power resources and questioning a roughly $7 billion program that enabled a transmission build-out and helped wind energy to soar from sites in West Texas. It was known as CREZ for competitive renewable energy zones.

The renewable growth has been striking. Wind was the top source of energy in the main Texas power region in March 2021 and was second only to natural gas during all of 2020. Solar remained relatively small at less than 3% of the region's electricity mix during the first quarter of 2021. But solar's potential megawatts lead the way in a queue of projects proposed for the main Texas grid, which is managed by the Electric Reliability Council of Texas (ERCOT).

Texas accounted for over one-fifth of utility-scale U.S. wind, solar and energy storage capacity at the end of 2020, based on numbers from the American Clean Power Association. The state has seen over $60 billion in renewable energy investment, according to the Partnership for Renewable Energy Finance.

Still, the pushback — which has never been too far off stage in a state where fossil fuel companies carry a lot of weight — intensified following a winter storm and blackouts that the Houston Chronicle said were linked to the deaths of nearly 200 people in Texas.

The Texas Public Policy Foundation, a conservative research institute that has commented on the rise of "unreliable energy sources" over the past decade, said in a graphic recently shared with E&E News that "wind and solar still didn't come through when Texans needed it."

In the Legislature, lawmakers are considering multiple bills that could set back renewables, including provisions that could add costs for connecting to the grid, change tax benefits and make contracts retroactively more expensive for clean energy.

Through the Partnership for Renewable Energy Finance, companies such as Inc. and Bank of America Corp. sent a letter this month to Texas leaders including Gov. Greg Abbott (R) to highlight concern about pending legislation that they said could hurt renewables.

"It is important to note that these changes neither enhance electric reliability nor lower consumer costs," the partnership said. "They appear to be premised on the assumption that renewable energy was disproportionately responsible for the state's February power outages, a thesis that has been unequivocally discredited."

Other companies with concerns about pending Texas legislation include NextEra Energy Resources, Duke Renewables and Southern Power, which sent a combined letter to Abbott and other Texas leaders this month taking issue with language in several pending bills. The companies said their trust in having the state maintain a stable business environment would be eroded if Texas enacted legislation to rewrite market rules retroactively.

In another case, a Texas House discussion this month on a job training program for veterans saw a state representative attempt to strip away wind and solar generation's eligibility in that realm, though the proposed amendment was withdrawn.

"We've entered the silly season for anti-wind and solar bills this legislative session in Texas," Daniel Cohan, an associate professor of environmental engineering at Rice University, said on Twitter.

Beyond legislation, the Financial Times recently reported on reassessments by renewable energy investors after complicated financial setups were left "in a shambles" amid the fallout from the February crisis. Wholesale prices soared for days, causing disruption throughout the market.

A $100 million-plus tussle related to a wind farm in Texas also is drawing national headlines, including from The Wall Street Journal.

Paul Patterson, an analyst with Glenrock Associates LLC, said there likely will be electricity reforms in Texas in the wake of all the finger-pointing.

"And until there's a better picture as to what those reforms are going to be," he said, "I think that the operative word will be uncertainty."

A 'cautionary tale'?

The current renewables debate among Texas lawmakers echoes arguments that have been floating around conservative circles for years.

The Texas Public Policy Foundation (TPPF) may be the most prominent voice that routinely goes after wind in the state. Funding of the nonprofit remains shrouded in some mystery, although its board of directors includes a number of people with fossil fuel ties. The group has supported bills that wind and solar advocates say would discriminate against renewable energy businesses.

"The Texas electricity market and its experiment with wind offer a real-life, cautionary tale on the real effects of relying on renewable energy," Jason Isaac, director of the Life:Powered project at TPPF, said in a statement last month. "When Texas needs electricity the most, wind proves most of the time to be a 'no-show' while fossil fuels keep on powering the state."

Bill Peacock, who used to be at TPPF, said renewables are getting increased scrutiny after the blackouts because they and government intervention amounted to "primary" causes. Peacock is now policy director at the Energy Alliance project of the Texas Business Coalition.

He said "proximate" causes included the historic nature of the winter storm and weatherization issues for the prolonged cold. He also pointed to grid management, including around power cuts to critical infrastructure. Peacock called for getting rid of state subsidies for renewables and requiring renewable generators to pay for costs they impose on the system.

Critics of those arguments see dark money groups trying to be opportunistic in pushing bills after a crisis, though defenders of renewables have significant funding as well. ERCOT data shows that more natural gas-fueled generation capacity was unavailable during the storm than any other single resource, even if gas provided much of the generation that was possible.

"The confidence in the ERCOT market was shaken in February for a variety of reasons," said Jeff Clark, president of the Advanced Power Alliance, which advocates for wind, solar and storage. "We think passing legislation that is patently unfair would be an additional setback. It's not necessary. It doesn't address any problem. It's clearly punitive. Let's not do it."

Peacock countered that it's not opportunistic to say, "Look, what we've been telling you came true."

At a hearing this month, state Rep. Joe Deshotel (D) said he thought a bill proposed by state Rep. Phil King (R) to shift certain costs to wind and solar resources was wrong in the wake of the winter outages. The debate is related to ancillary services that are used to help maintain a reliable grid.

"Renewables were not the only ones that were intermittent during that period of time," Deshotel said.

King responded that it wasn't about the storm. "This is something that happens daily, weekly, and has been happening for years," he said.

ERCOT, fees and interconnections

The Texas Capitol in Austin went dark to save energy in February after severe winter weather struck an unprepared Lone Star State.  

Many of the renewable provisions are tied to proposed changes within the ERCOT market. There is widespread agreement among observers that the region needs change, even if parties don't agree on the solutions.

"I think it's hard to say, 'Oh this was the gold standard' ... when you've been this badly tarnished," said Patterson of Glenrock Associates.

The market wasn't prepared for what occurred, he said, but that doesn't mean it can't adjust to it. Patterson said some powerful interests are arguing for offsetting the effect of existing subsidies or providing new economic benefits for various electricity resources.

There does appear to be a preference among Texas electricity interests to retain much of the competitive nature that's baked into the wholesale scene as several key issues dominate the debate among lawmakers.

One involves ancillary services, which are purchased to help ERCOT maintain a balanced grid. H.B. 4466 by King as well as language in S.B. 3 and S.B. 1278 could require intermittent resources to pay for certain services and replacement power even though ancillary service costs are currently spread among power users. S.B. 3 is from Sen. Charles Schwertner (R), while Sen. Kelly Hancock (R) is the author of S.B. 1278.

TPPF's Isaac said in a recent statement that "current market structures do not properly price the reliability and variability costs of wind and solar."

Michael Jewell, who has spoken against H.B. 4466 on behalf of the Solar Energy Industries Association, said the bill would be unfair and inefficient. He said renewable generators could have to worry about managing ups and downs in their resources as well as in demand from customers.

Critics have slammed the proposal as unfairly targeting renewables. Depending on the final wording, the potential change could affect existing contracts by retroactively making green energy more expensive.

"Anytime you change the rules on investors after the investment is made, you have a chilling effect on future investment," Clark said.

He said changing the ancillary services setup could cost Texas renewable project owners and customers billions of dollars collectively over the life of projects in the state.

Beth Garza, a senior fellow with the R Street Institute and former director of the market monitor for the ERCOT wholesale market, said that wind and solar capacity in the region tripled over a decade while annual average ancillary service requirements declined. She has expressed opposition to H.B. 4466.

Even state Rep. Chris Paddie (R), who chairs the Texas House committee that discussed H.B. 4466 this month, sounded notes of a deliberate approach when he said market changes might take time. The House previously moved ahead on a batch of potential bills to look at issues such as weatherization of power generation assets and changes related to ERCOT. Lawmakers also are working on potential financing plans for high storm-related costs.

Another issue arises in H.B. 4502 authored by Rep. Cody Vasut (R). That bill involves the potential to add some of the cost of interconnections to the grid onto new resources. That's notable because renewables and storage dominate proposed projects. It also would mark a change from the spreading of certain costs among customers in the ERCOT region.

Brent Bennett of TPPF told lawmakers the bill would level the playing field with some existing generation that didn't locate as far from load centers. And he said it would "put some brakes on" what some critics call a "blank check" on what's provided now. Critics routinely say wind projects are too far from population centers.

Jewell, who spoke against the bill on behalf of the Solar Energy Industries Association, said new generation needs to locate where the resources are.

"This is true for wind. This is true for solar," he told state lawmakers. "It's true for coal. It's true for hydro. It even has an impact when it comes to gas because they got to have water."

A companion bill, S.B. 1282, authored by Hancock, was passed by the Texas Senate this week. It remains to be seen how the proposal will fare in the House.

Then there's a push to strip renewables' eligibility for favorable tax treatment through an abatement mechanism known as Chapter 313 via a proposal such as S.B. 1255 from Sen. Brian Birdwell (R). Some parties want the entire program to go away for new projects, but others argue that wind and solar should remain eligible if other projects can qualify henceforth. Wind and solar also could be locked out of a related program called Chapter 312 in the future if S.B. 1256 from Birdwell were to move ahead.

Market design is another concern for renewable advocates who've seen benefits of ERCOT's competitive setup. But a proposal from Paddie to require regulators to adopt rules to promote adequacy of generation supply received a cool reception in a House committee this month. In addition, a proposal that could lead to billions of dollars of investments in natural gas-fueled generation from Berkshire Hathaway Inc. has seen pushback from existing power companies in Texas.

While a number of high-profile bills that worry renewable energy supporters are led by Republicans, measures affecting clean energy in the Texas Legislature cross party lines.

Deshotel, a Democrat, is author of a bill that aims to head off the possibility of local bans on natural gas, for example. A version of that proposal, H.B. 17, has received a favorable vote from a Senate committee after being passed out of the House.

Still other bills could affect how solar and energy storage are decommissioned and how well renewables are represented on the ERCOT board of directors.

'Too much discretion for industry'

For renewable advocates, there is optimism that Texas will remain a good place to expand wind and solar, whether that's in spite of legislation or because of it.

Cyrus Reed, interim director at the Lone Star Chapter of the Sierra Club, said Texas' governor pulled back from some messaging that blamed renewables on Fox News as the power crisis unfolded. Reed said some pending bills could make electricity more expensive, and he expressed concern about S.B. 1278.

Still, he was pretty positive about the long-term prospects for wind and solar in Texas. He noted that solar and storage could offer particular help at peak times.

"We've got land. We've got wind. We've got sun," Reed said.

Robin Schneider, executive director of the Texas Campaign for the Environment, said the main Texas market needs to be strengthened so there aren't more deaths from a freeze, which she called untenable and indefensible. Adequate energy asset weatherization has not been required, she said, citing issues in the natural gas supply chain.

"We have too much discretion for industry," Schneider said. "We can tighten that without destroying the ability of renewables to thrive. They're not an either-or."

She said wind also has to weatherize, and perhaps better technology will be more appropriate for Texas.

One bright spot for the industry could involve transmission, including H.B. 1607, which could help push ahead more power line projects.

Clark of the Advanced Power Alliance is advocating for improvements to the electric grid to make sure renewables can be delivered when they're available. Some power couldn't get to customers during the crisis because of a broken grid, he said.

Pat Wood III, who spoke on a Pecan Street research group webinar with Marston recently, said Texas probably needs to keep some of its old plants around and run them less. For example, he said, that could mean moving to a scenario where electricity for 80% of the kilowatt-hours comes from zero-carbon resources, while the other 20% is derived from cleaned-up fossil fuels.

Wood, who is working to roll out energy storage projects as CEO of the Hunt Energy Network, said there may need to be market design changes so dispatchable plants can afford to stay around. There's also the matter of continued decentralizing in power generation.

Wood told E&E News this week that Texas has let the market make it a leader in renewables. And he said state lawmakers "should stick with that big welcome mat for renewables and all technologies."

The push against a proposed wind project near the Texas-Mexico border that has faced fierce opposition amid worries about Chinese ownership also reflects the nuanced outlook in Texas (Energywire, Aug. 27, 2020). An employee of the company behind the wind proposal has suggested it could bring more renewable energy to the state while saying the project will follow the applicable review process.

Opponents are hoping various bills succeed, and some of their arguments are tied to specifics of the Devils River region. They've discussed wildlife, tourism, national security and military training.

Randy Nunns, president of the Devils River Conservancy, said he isn't against all wind projects. But he doesn't view the natural location of the Devils River region as being appropriate. Nunns has property in the area.

"I think it's prudent to do all of the above, but just do it thoughtfully," he said of energy resources.

This week, a Texas Senate committee endorsed S.B. 2116, offered by Sen. Donna Campbell (R). It would seek to prohibit agreements with companies tied to citizens of certain countries, including China, when it comes to critical infrastructure such as the power grid.

And a Texas House committee voted in favor of H.B. 783, from Rep. John Cyrier (R). That bill could lead to prohibiting the proposed Chinese-linked wind development in Val Verde County, Texas. Clark of the Advanced Power Alliance said Texas will need to be ready for the next storm. That remains the backdrop for major policy discussions after what happened in February.

"Our imagination failed us, and our planning was insufficient," Clark said. "Going forward, we have to be better prepared for bigger, more intense weather events — be it a winter storm, a hurricane, intense summer heat."

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