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Does ‘free’ wind energy in Texas come without a price?

By   /   December 3, 2015  /   News  /   No Comments

AP Photo/Charlie Riedel

FREE AS THE WIND?: A pump jack and wind turbines at work near Lamesa, Texas. Some electric companies offer customers power for no cost at night because of excess wind generation. But is it really free?

 

Thousands of energy customers in Texas are getting electricity at night, powered by wind turbines, without spending a dollar.

Is the energy really “free”? Ratepayers sure think so.

“The first thing I tell my guests is my electricity is free after 9” p.m., elementary school teacher Briana Lamb told the New York Times. It was part of a story heralding how thousands of customers across Texas are taking part in programs from retail electricity companies, such as TXU Energy.

The offer goes like this: If customers wait until 9 p.m. to use electricity, the company doesn’t charge them. That’s because wind turbines in Texas have sprung up across the state in recent years, and the wind typically blows harder after the sun goes down.

So much wind energy has been created that companies — such as TXU Energy — want to encourage energy customers to use power at night, when wholesale electricity prices are at their lowest.

It’s estimated that customers save an average of $40 to $50 per month.

“That is a proverbial win-win for the utility and the customer,” Omar Siddiqui, director of energy efficiency at the Electric Power Research Institute, a nonprofit industry group, told the Times.

Not really, says Robert Bryce.

“This is not a case of, ‘Oh, there’s just winners here,’ ” said Bryce, an energy writer and senior fellow at the Manhattan Institute, a right-of-center think tank. “No, somebody is taking a financial loss.”

While customers don’t get charged overnight, the plans charge them more during the day.

RELATED: Wind and solar subsidies pack a wallop

The federal government provides a production tax credit of up to $23 per megawatt hour for the first 10 years of an eligible wind facility’s operation. Wind production tax credits to generators are estimated to total $4.9 billion from 2015 through 2017.

The wind production tax credit pays 2.3 cents per kilowatt hour to wind farms for electricity sold to the market, provided they qualify. The tax credit expired last year, but Congress passed a revision to allow any project that started construction before Jan. 1 to still earn the credit.

In Texas, the state’s tax code allows school districts to provide property tax credits and waivers for private companies that build wind facilities. According to a report from the state comptroller, this subsidy equated to an estimated $2.29 per megawatt hour from wind in 2013.

A state law passed in 2005 requires an increase of the Texas Renewable Portfolio Standards to 5,880 megawatts of renewable capacity by this year. 

“What’s happening is totally predictable,” Bryce said. “You build a whole lot of generation that’s subsidized. This generation is coming online at night when demand is low and then there’s a surplus. It’s not surprising at all because of the way the market has been distorted by the subsidies and mandates for renewable energy.”

For years, wind’s defenders say, Texas has offered tax breaks and credits to oil and natural gas operators that dwarf what renewables have racked up.

“People ask me, When are we going to cut the subsidies for renewables?” Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin, told the Texas Tribune in 2014. “I say, probably the same day we cut the subsidies for oil and gas, which is never.”

Texas is different 

Programs that offer free electricity at night may be difficult to replicate in other states.

That’s because Texas has its own power grid:

Graphic from ERCOT website

Region covered by the Electric Reliability Council of Texas

Nearly every other state is interconnected with other states to export or import electricity during shortages or surpluses.

In addition, Texas has plenty of flat, open spaces that produce lots of wind. What’s more, Texas has plenty of places with low population density, where large wind turbines can be installed.

“You add those things together, and we are anomalous when it comes to this,” said Bryce, who lives in Austin.

While that’s good news for wind companies, it’s bad news for other electricity companies.

“If you own a nuclear power plant or a coal-fired power plant that has long been relied on as baseload generation, this is terrible news for you because you have companies that are essentially deciding they can give away their electricity,” said Bryce, who has written a number of books on energy, including “Power Hungy: The Myths of ‘Green’ Energy and the Real Fuels of the Future.”

“But if you have a big, installed plant, you have to pay for it, you have to pay for the workers, you have to pay for the fuel and, meanwhile, one of your competitors is giving away electricity because they got federal subsidies,” Bryce said.

Germany’s experience 

Germany has made major financial commitments to dramatically boost renewable energy sources.

But its experiment — called “Energiewende” — has hit some bumps since it rolled out in 2011.

The percentage of renewable sources — such as wind and solar — contributing to Germany’s power production has risen significantly.

But utilities need backup power to keep electricity flowing when the sun doesn’t shine or when the wind doesn’t blow. As a result, Germany has had to rely more on coal, which actually triggered an increase in the country’s carbon emissions.

In addition, a typical German family of four pays €250-€300 per year ($264-$317) to pay the tax that helps support the energy transition.

One of the country’s respected think tanks has estimated the total price tag for Energiewende may reach about €1.1 trillion ($1.2 trillion in U.S. dollars).

Despite higher prices, Germans generally support keeping the program, zealously backed by German Chancellor Angela Merkel.

But will the average American ratepayer be so accommodating?

A CBS News/New York Times poll released last week showed 60 percent opposed to increasing taxes on electricity so people use less of it.

A recent Fox News poll showed just 3 percent rated climate change as the most important issue facing the country. A Harvard professor co-authored a book last year saying 80 percent of Americans would like to see a conversion to renewable sources. But, they were only willing to see their electric bills go up 5 percent — translating to about $5 — to pay for it.

Another issue 

If wind turbines in Texas can produce so much energy electric companies can give it away, it begs the question: Why can’t that excess wind be stored and used later when electricity usage is at its peak?

Storing electricity generated by renewables has been difficult to achieve.

“Therein lies the problem,” Bryce said. “If we have storage, if we have batteries and they can provide delivery, then we have a different game. But we don’t and we won’t because batteries, for all their promise, are extraordinarily small for providing electricity for the grid.”

“It would actually be more energetically efficient to shut down a wind turbine than to store the surplus electricity it generates,” said Stanford University scientist Michael Dale, who co-authored a 2013 study that looked at energy return on investment ratios to store solar and wind energy.

But wind energy advocates are optimistic, saying the U.S. has been able to add more than 60,000 megawatts of wind power to the grid without adding any commercial-scale energy storage.

“While energy storage technologies may currently have difficulty competing economically with conventional sources of flexibility — especially over the time frame most relevant for wind integration — continuing advances in energy storage technology can make energy storage more competitive as a provider of grid flexibility,” a post on the American Wind Energy Association’s website said.

Supporters of wind power refer to free overnight plans as proof customers like what wind can provide.

“With stable policy we can grow wind energy and we can save Texas consumers over $15 billion dollars,” Tom Kiernan, CEO of AWEA, said in a statement. “Because of American ingenuity, wind energy’s costs have dropped by 66 percent in just the last six years, and by continuing to invest in wind, over a billion dollars in savings can be passed onto Texas families and businesses helping to grow the state’s economy.”

“Let’s look at the bigger picture here,” Bryce said. “So, we have federal taxpayers subsidizing the production of wind energy. And this has been going on for three decades, and yet we have the wind energy industry saying, ‘We still need subsidies.’ “

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Rob formerly served as staff reporter for Watchdog.org.