Texas may still be a red state on election day, but it’s producing a lot of green for renewable energy developers and their hosts, several panelists said during the virtual Texas Energy Summit last week.
Former FERC Chairman Pat Wood III, a Republican who also chaired the Texas Public Utility Commission from 1995 to 2001, recalled a time when the state’s wind energy numbers were in the triple figures and it had a renewable portfolio standard of only 2,000 MW. Now, he noted, renewable energy’s nameplate capacity is almost half of the 74 GW of energy the state consumes on a hot day.
“To start from nothing, offering little more than a big welcome mat known as the RPS … the good Lord blessed us with resources,” Wood, now CEO of the Hunt Energy Network, said during the event by Texas A&M’s Energy Systems Laboratory (ESL), which attracted 550 participants over five days. “The culture change isn’t as big as people on the coasts like to think. It’s been bipartisan all the way. It’s just been fascinating to see the grassroots leadership. It’s not being driven by a government mandate to buy so much renewable power. Renewable power plants are cheaper or just as cheap as traditional power plants.”
“Republicans love to see head-to-head competition. They love to see competitive markets,” said Charles Hernick, vice president of policy and advocacy for Citizens for Responsible Energy Solutions. “We’re at a point where renewables, even without tax credits and subsidies, can outperform gas anywhere in the country. It’s a remarkable tipping point. It seems like every day there’s another company making a proclamation to go to 100% renewable energy by 2040 or 2050. They can purchase renewables and do it cheaper than almost any other resource.”
Clockwise from top middle, former FERC Chair Pat Wood, Houston Chronicle’s Chris Tomlinson, State Sen. Sarah Eckhardt, consultant, Alison Silverstein and Charles Hernick, Citizens for Responsible Energy Solutions, discuss coming energy issues. | Texas Energy Summit
Wood and energy consultant Alison Silverstein credited ERCOT’s energy-only market for part of Texas’ success with renewables. The recently added operating reserve demand curve leads to higher prices when energy is scarce, avoiding the uplift policies found in other markets.
“If it gets really scarce, there’ll be a little administrative adder to make that price dearer to the customer, which, of course, encourages demand response,” Wood said. “We’re not paying for this big slug of unused capacity.”
Silverstein, an adviser to Wood at both the PUC and FERC, said Texas is unlikely to adopt a PJM-style capacity market. “The logs are rolling in the other direction,” she said. “The reason Texas and ERCOT is one of the few places where that adder will work is [because] we have a single regulator. Our regulators and politicians spent the last decade resisting the temptation to panic. They’ve been willing to let the market set prices and let the market to respond. It’s a unique political aspect we’ve been fortunate to have, or we would have been stuck with too many polluting coal and gas plants.”
“The United Kingdom, Spain, Portugal and Texas,” Wood said, ticking off some of the world’s renewable leaders. “It’s going to be fun to have Texas be a leader in clean energy for a change.”
Dems Introduce Climate Plan
As a lawyer without a scientific background, Texas Rep. Gina Hinojosa (D) admitted she has found greenhouse gas emissions to be an “overwhelming” issue. But she said that didn’t stop her from using her office to find “the best minds on this issue” and draft the “Texas Climate Plan.”
State Rep. Gina Hinojosa | Gina Hinojosa For State Representative
Representatives from the House Democratic Caucus’ Special Committee on Clean Air, Clean Water and Climate Change introduced the plan in October. It includes targets to reduce greenhouse gas emissions, disaster resilience strategies, a timeline to end routine flaring at oil and gas wells, and planning to ensure a just transition for affected workers.
The plan also has two pieces of legislation. The Modern Infrastructure Act proposes investments in grid capacity and resilience, electric vehicle charging stations, battery storage and electrification of mass transit. The Protections over Pollution Act seeks to strengthen agency enforcement and improve transparency “so Texas can build a culture of proactive compliance,” Hinojosa said.
Were it a country, Hinojosa noted, Texas would rank seventh globally in carbon emissions, just before Brazil. “Any plan for the United States to reduce greenhouse gas emissions needs to have a large Texas component,” she said, emphasizing the word “large.”
“If the power sector is getting cleaner, can we electrify other sectors?” asked Michael Webber, ENGIE’s chief science and technology officer. “Market forces are still driving that transition to electrification. There’s more bipartisan collaboration at the local level.”
The transportation sector is the state’s largest producer of carbon emissions, Hinojosa said, noting that EV purchases in Texas have grown 254% over the last three years.
“Market forces, right?” Hinojosa said. EVs are “more fun and zippy, and they’re also more efficient,” Hinojosa said. “You cannot underestimate the economic opportunities that come with the transitioning energy economy. If there’s not political pressure of the system, you’re not going to get there.”
Clean-energy Transition Underway
For some, that transition is already here. Speaking during a different panel, Southwestern Public Service President David Hudson highlighted his company’s recent announcement that it will convert a three-unit, 1,018-MW coal-fired generating facility northeast of Amarillo to natural gas by 2025.
Why the change? Economics.
“We will spend $59 million to convert to gas. If we were to put scrubbers on these units, it would cost hundreds of millions of dollars. The analysis was simple,” Hudson said.
Alison Silverstein | © RTO Insider
SPS is also upping its investment in renewables. The company has about 1.5 GW of wind capacity in its Texas and New Mexico footprints, but that number will increase when the 522-MW Sagamore Wind Project in New Mexico is energized by year-end.
“We’re reducing our reliance on coal. Once Sagamore is completed, we’ll be in the upper 40s [percentage] of our energy coming from renewables,” Hudson said. “Wind energy, with the production tax credits, is extremely beneficial to retail customers. It has lowered costs, especially [during] the first 10 years of the tax credits. We are going to be doing some major transitions through the 2020s.”
“Natural gas and wind are replacing coal,” said Beth Garza, ERCOT’s former market monitor, now a senior fellow with think tank R Street Institute. About the same time SPS made its announcement, American Electric Power said it too would be converting a coal plant to gas and retiring a second plant. The AEP and SPS retirements will remove 2.5 GW of coal-fired generation from the state’s fuel mix.
In 2019, ERCOT got about 20% of its power from coal and another 20% from wind and solar, with gas and nuclear responsible for the remainder. “In 2020, I fully expect wind and solar will provide a substantially larger contribution than coal,” Garza said. Indeed, through October, wind and solar were responsible for 24.25% of ERCOT’s fuel mix, with coal at 17.44%.
Matthew Crosby, Ørsted’s director of policy and regulatory affairs, said the loss of coal plants is not an issue in Texas, with its ample renewable resources.
“We could build plants that sit on the front yards of retired coal plants,” he said. “We’re also talking about tremendous resource potential, particularly in wind and solar in the [Rio Grande] Valley, and bringing that resource to Houston and North Texas. Expanding existing transmission lines is a way to unlock more development in the state.”
“To remain an energy leader, we must absolutely embrace clean-energy technologies and make that shift,” Texas Sen. Sarah Eckhardt (D) said. “We need to be making the shift now, or we won’t be the leader anymore. We’ll be stuck with old technologies, and the market will have moved on without us.”
“Texas can get rich moving into a low-carbon future,” Webber said. “Coal’s going to disappear unless we try to save it.”
Renewables Pay Off Big for Texas
Texas has long enjoyed the economic benefits of the oil and gas industry. Petrochemical facilities dot the state’s coast, and drilling rigs can be found in both rural and urban areas. The Permanent University Fund uses land leased to oil and gas companies to help fund its flagship schools, the University of Texas and Texas A&M.
“Rural Texans are really the leaders of the pack,” Wood said. “For many years, those residents got royalty payments for using their land for oil and gas extraction. Sometimes they would get an easement for transmission lines. More and more, those royalty payments are for solar and wind leases.”
And the payments add up. According to a recent study by UT energy researcher Joshua Rhodes on renewable energy’s economic impact on rural Texas, the current fleet of utility-scale wind and solar projects will generate between $4.7 billion and $5.7 billion in tax revenue to local communities over its lifetime.
Landowners along the breezy Gulf Coast could receive $22.8 million over a 25-year lease to operate a 100-MW wind farm and $33 million for a 35-year lease. Those in West Texas, where the winds are strongest when prices are cheaper, could collect about $16.2 million for a 25-year lease and $24 million for a 35-year lease.
Solar energy has joined wind as a growing fuel source in Texas. | El Paso Electric
Rose Benavidez, president of the Starr County Industrial Foundation in the Rio Grande Valley, said renewables have boosted her community, which has struggled with high unemployment and poverty rates. About half the county’s 64,000 residents are below the poverty line, and its per capita income of $7,069 is the third lowest in the U.S.
With local ranch land not being used because of drought conditions, Benavidez said the community focused on recruiting a wind project to the area. It found a willing developer in Duke Energy Renewables, which built the 910-MW Los Vientos facility in five phases.
“Right off the bat, it created a couple of millionaires in our community,” she said. “[The landowners] could still keep their land, graze their animals and have a secure revenue source for 10 or 20 years. Within a matter of five years, we’ve been able to bring in $2 billion in investment in solar and wind projects into a community that could only dream of having billions of dollars.”
Duke now has four wind facilities in the county, the latest being the 200-MW Mesteño Windpower project. Sammons Renewable Energy has added the 238-MW Rio Bravo wind project.
“A few years ago, the community was in the red. Now it has surplus dollars,” Benavidez said. “It couldn’t have been more timely because in 2020, that’s allowed us to focus on the COVID response and recovery without tapping the excess funds.”
And the rest of the state benefits from the renewable energy production.
“We’ve seen so many companies come to the state because they’ve seen how easy it is to buy wind and solar energy,” Rhodes said.
“A lot of things are working well for the industry,” said Susan Sloan, vice president of state affairs for the American Wind Energy Association. “Texas’ growth is also bringing additional demand. Investors are ready to invest, developers are ready to develop, and customers are ready to buy.”
