Reports indicate that the Public Utility Commission of Texas (PUC) is on the verge of considering a redesign of the Texas electricity market. In July 2021, Texas Gov. Greg Abbott wrote a letter directing the PUC to begin work on redesigning the market. Energy market spectators are wary of the potential shifts saying that the reliability of Texas electricity "may get worse before it gets better."
Abbott wrote the letter following one of the largest blackouts in U.S. history which left millions of Texas without electricity and water for several days. Abbott told the PUC commissioners that their objective was "to ensure that all Texans have access to safe, reliable and affordable power," and that they should achieve this task "in the quickest possible way." The governor also directed the PUC to "allocate reliability costs to generation resources that cannot guarantee their own availability, such as wind or solar power."
RTO Insider reports that according to PUC Commissioner Lori Cobos, the goal is to get more electricity from "dispatchable" resources like natural gas, nuclear and coal-fired generation. Electricity from renewable generation like wind and solar farms is not dispatchable but intermittent, meaning that because it relies on the weather it cannot be considered as reliable as "fast-responding dispatchable generation."
Addressing the Energy Bar Association Texas Chapter’s Energy Symposium last week, Cobos said, "Texas must maintain year-round reliability under all weather conditions, and to do this, we will need to drive investment in new and existing dispatchable generation through market-based price signals and a reliability-driven framework.”
Bill Peacock, policy director for the Energy Alliance, responded to reports of the proposed redesign of the Electric Reliability Council of Texas (ERCOT) market with the following statements:
"PUC Commissioner Lori Cobos' comments seem to indicate that Texas will abandon its energy-only electricity market which is designed to let market prices and participants determine investment in generation," Peacock said. "Her comment that Texas 'will need to drive investment in new and existing dispatchable generation' suggests that Texas will rely instead on subsidies for dispatchable generation to increase investment. With Cobos targeting 'fast-responding dispatchable generation,' it is likely that natural gas generators will be the beneficiary of most of the subsidies."
"When the PUC meets to take up market redesign, which could be as early as Nov. 10, it will be considering a report from E3, a consulting company hired by the PUC to examine possibilities for market redesign. Some critics have complained of a conflict of interest because E3 had previously been hired by NRG, one of the largest generators in Texas, to propose a market redesign favorable to NRG's interests."
"One of the directives Abbott gave to the PUC last July was to make sure that renewable generators paid their share of the cost they impose on the market because of their intermittency and distortions in the market caused by the subsidies they receive from federal, state and local governments. Cobos gave no indication whether the upcoming report will address the problems caused by renewable energy subsidies. When the Texas Legislature responded to the blackout last year, it passed several bills addressing concerns about the market, including the lack of weatherization of traditional and renewable generation. However, it did nothing to reduce or eliminate Texas subsidies for renewable energy or give direction to the PUC how it should address the harm caused by federal renewable subsidies."
"The PUC may have taken its direction from the Legislature by focusing on eliminating the energy-only market and increasing subsidies for generators in the market rather than tackling the harmful but popular subsidies for green energy. If this is the case, the reliability of the Texas electricity market may get worse before it gets better."
According to the Congressional Research Service, the recently passed Inflation Reduction Act vastly increased subsidies for renewable energy. Next year subsidies for wind generation will increase by $1,562 billion nationwide. Similarly, subsidies for solar generation will increase by $2,140 billion.
These subsidies are on top of $2 billion of existing renewable energy subsidies the Energy Alliance reports are already in place for Texas in 2023.
Bill Peacock is the policy director for the Energy Alliance, an organization highlighting the aspects of energy markets that matter most to consumers: Reliability, affordability and efficiency.