The increasing threat of blackouts is spurring Texas politicians to consider a plan to fund new natural gas-fired power plants that would provide back-up power to the grid. The plan is to build up to 10 gigawatts to provide backup generation that is weatherized and has on-site fuel, creating an energy insurance fund. Builders of the facilities would be assured returns of up to 10 percent. The plan is estimated to cost $18 billion, putting the price tag of the “Texas Energy Insurance Program” around $7 billion over what had previously been estimated. The bill, SB 6, sets aside $10.8 billion to finance 10,000 megawatts of natural gas power plants. The power plants would be used only in case of power grid emergencies, acting similar to a backup generator for the state power grid.
SB 6 leaves open the question of whether the plants would be paid for using state funds or through extra charges to electricity customers served by the Electric Reliability Council of Texas (ERCOT), which covers most of the state. A $10.8 billion price tag would mean an extra cost of less than $4 a month for residential customers, according to Alicia Knapp, president and CEO of Berkshire Hathaway Energy Renewables. The plan would direct the state to hire one or several entities such as the river authority to build power plants that could come online during emergencies. The plants would be able to supply 2 million homes during peak demand and could run for days, unlike battery backup power.
The State Senate also passed bills that would establish payouts for power plants that are online certain hours each year, furthering a $6 billion plan, and capping the annual net increase in cost to consumers to $500 million. Lawmakers also backed a plan to label gas-fired electricity as “green” and to launch new energy credits for plants that are seen as ensuring grid stability. The bills need the approval of the State House and the signature of Governor Greg Abbott to become law.
The cost of the insurance policy, which requires an extra fleet of reliable generating plants, raises the question of why the state doesn’t use just one set of reliable generators because the duplication will increase electricity bills for consumers that are already increasing. Residential customers in Texas paid 12 percent more for electricity in 2022 than they did in 2021. Texas currently generates 26 percent of its electricity from weather-driven wind and solar power that operate only when the wind blows and the sun shines, requiring backup power from expensive batteries or other generators. Texas has the most wind capacity of any state in the nation at 39 gigawatts, adding 4.6 gigawatts last year, and 11.2 gigawatts of solar PV, second only to California.
Through aggressive subsidies, incentives and mandates, Texas has moved its electricity grid from a reliable, on-demand (dispatchable) system towards a renewable system run by intermittent wind and solar power whose backup needs increase along with the percentage of renewable generation. Having already invested money into renewables, the state is now considering pouring more money into systems to reliably back them up. A legitimate question for the legislature is “why did you do it in the first place?” The same could be asked of the Biden Administration, which is pursuing a set of policies to replicate for the entire United States the failures now being witnessed in Texas and California, the leaders in intermittent renewable energy.
The insurance plan also puts in question the role of the competitive electricity market in Texas. The plan endorsed by the Senate would be the first time that the state directly taps consumers to pay for power generation since its electricity market was deregulated more than two decades ago. Texas previously spent around $7 billion to establish the “Competitive Renewable Energy Zone” (CREZ), a transmission upgrade and expansion to bring renewable electricity from far-flung parts of Texas to demand centers. The intermittent nature of wind and solar power, however, meant that their capacity added little reliable power toward meeting demand.
Background
Texas politicians are pursuing power-system reforms in an effort to avoid repeating the deadly week-long grid collapse of February 2021 during a historic freeze. During that freeze over 4 million Texas electricity customers had no power for days, many of those with power received enormous electricity bills, and, most tragically, dozens of people died.
Wind energy went from producing over 40 percent of the state’s generation before the freeze to a small fraction during the freeze, resulting in coal, natural gas, and nuclear power generating the lion’s share. When wind generation faltered and natural gas supplies were prioritized to meet home heating needs, coal capacity picked up the slack. Despite renewable proponents believing that the intermittency of solar and wind power can be managed with energy storage and massive investments in new transmission infrastructure, the truth is that grid-scale energy storage is very expensive and building new, cross-country high-voltage transmission lines are also expensive and difficult to permit.
Conclusion
Texas was lucky to have coal, natural gas, and nuclear capacity to take up the slack of lost wind power during the historic freeze in 2021. Now the Texas Senate wants to build 10 gigawatts of natural gas capacity for emergency use to back-up its weather-dependent wind and solar power. The estimated cost of the duplicative power is $18 billion. In actuality, it would be more efficient to run the state’s emergency natural gas capacity at full power than to use wind and solar power, which generate less than half the electricity that natural gas combined cycle generates from the same amount of capacity, and it would be cheaper since no back-up power would be needed.
Transitioning the electric grid to all renewable energy, mostly wind and solar power, is expensive as can be seen by the Texas plan. Either costly batteries or other generating technologies are needed as back-up power. Despite this fact, President Biden wants the United States to put all its eggs in the renewable basket. His plan would make the United States dependent on electricity generated mainly by renewable energy and provide that energy for the entire energy system, at tremendous cost to taxpayers and consumers.
It is important that Americans understand the limits of generating technologies so that they can be informed of the realities of depending on one energy source—electricity—being produced mainly by intermittent renewable energy. Diversity of supply was the motto for many decades within the United States because of its benefits to reliability and grid stability, but the Biden administration acts like it has never heard of it judging by their push to electrify everything and accomplish it with weather-driven renewable energy.
