Texas props up wind, solar with hundreds of millions of dollars per year, lawmakers cautious on more $

With a nearly $1 billion federal renewable energy tax credit in doubt, Texas Rep. Mark Strama delivered what to another audience would have been an odd message.

Strama, an Austin Democrat, is an energy guy, a technology guy, whip smart and a little unpredictable. Invited to give the keynote address to the Texas Renewable Energy Industry Association on Dec. 12 at a resort hotel south of Austin, Strama drew a few gasps admitting he supports hydraulic fracturing. Safe and clean hydraulic fracturing, of course.

But the product of that technology, abundant, inexpensive natural gas, was not necessarily a good thing, Strama told the group. Rather than pouring some of the windfall into new energy technology, utilities are providing a palliative, allowing millions of people to pocket their utility savings.

The not so simple truth, Strama said, is that after all of the billions of tax dollars that have been spent no one is any closer to knowing when the wind, solar and biofuels industries can survive without government subsidy.

What’s more, Congress’ reluctant decision to extend the renewable energy tax credit, and for only one year, may be a signal that in an age of cheap natural gas there isn’t the political will to ask ratepayers or taxpayers for more renewables support.

Renewable energy played almost no role in the presidential election dialogue. The energy tax credit passed with no outcry outside of the political class.

Of the roughly 600 bills filed through the end of the second week of the 83rd session of the Texas Legislature, just two contain the phrase renewable energy. One of them, a bill by Strama, is specific to the city of Pflugerville.

The other, House Bill 303, calls for the state to require utilities to get 35 percent of their generating capacity from renewables, two percent of it from solar energy, by Jan. 1, 2020.

The bill, written by state Rep. Eddie Rodriguez, D-Austin, like similar bills in the past two sessions, is likely to go nowhere. Rodriguez chose not to respond to calls and a list of several questions about the bill and renewable energy e-mailed to him by Texas Watchdog.

Strama won’t be offering any major renewable subsidy bill in this session.

“Honestly, a lot of the work I’m going to be doing is to protect what we already have now,” Strama said. “This is just not a priority issue to most people right now.”

Perhaps it isn’t a priority to most people because, at least in the abstract, they like the idea of supporting renewable energy. In 2009 the Cynthia and George Mitchell Foundation in Austin surveyed 993 registered voters, 85 percent of whom thought Texas needed to increase production of wind and solar power. Nearly 80 percent, 73 percent who identified themselves as conservative, supported the idea of subsidies, loans and tax incentives to those energy businesses.

In November, a national survey from the Texas A&M Energy Institute and the Bush School of Government and Public Service found 59 percent of the public for increasing renewable research and development funding and 60 percent supporting tax breaks for companies developing renewable energy technology.

But if all that funding and those tax breaks meant the price of gas going up at their local pump, the survey said nearly 70 percent would change their answer.

A public intolerant of an increase of a few pennies they can see is a public historically oblivious to its donation of billions of dollars it doesn’t see. In November, the Texas Public Policy Foundation, a conservative think tank in Austin, estimated Texas would contribute $567 million a year on the renewable energy tax credit alone.

In their study,Josiah Neeley, policy analyst with the Armstrong Center on Energy & the Environment and Bill Peacock, director of the Center for Economic Freedom for the Foundation, drilled deeper.

Overall, including federal funding through the American Recovery and Reinvestment Act of 2009, wind, solar and other alternative energy got $7.1 billion of taxpayer and ratepayer subsidies since 2006.

The Public Utility Commission last year made way for a nearly $7 billion project at utility ratepayer expense to run electricity transmission lines from West Texas wind farms to urban centers where the generation would be used.

Since 2006, $2.46 billion has supported development of wind farms in something called Competitive Renewable Energy Zones, the study says. The zones were made possible when the Legislature in 2001 passed the Texas Economic Development Act.

Federal grants have pumped another $1.65 billion into wind farms, $290 million from the stimulus for various energy programs, including $52 million for more than 30 solar projects, several of them that will not pay for themselves for 50 or more years.

The cost of supporting the legal requirement that utilities purchase a percentage of renewable energy set by the Renewable Portfolio Standard is estimated to have cost power users an extra $69 million this past year, Neeley and Peacock contend.

The Legislature created the Texas Emerging Technology Fund, which has since 2005 devoted $44 million to  renewable energy-related projects, according to the Governor’s Renewable Energy Industry Report. Two years earlier, lawmakers passed the Texas Enterprise Fund which has invested nearly $5 million in renewable energy projects.

Lucy Nashed, Gov. Rick Perry’s spokeswoman, said, “Here in Texas, we strive toward an all-of-the-above strategy to address our state’s energy challenges and create a diverse and robust electric generating portfolio that uses a variety of sources, including traditional technologies such as natural gas, coal, nuclear, and newer technologies such as wind, clean coal and solar power.”

However, Nashed says Perry favors weaning the entire energy industry off industry-specific credits and subsidies while lowering taxes on domestic energy producers.

The Texas Public Policy Foundation feels the same way, only more so.

“Our message has been very clear,” Neeley said, “we’d like to see no government support for any energy industry and want to see no new energy supports. If natural gas or wind is doing well we’d like it to be due to the work of the market, not the government.”

The numbers suggest wind and solar still need the work of the government to have a hope in the market. With subsidies it currently costs $22 per megawatt hour to produce electricity with wind, 44 cents to produce it with fossil fuels, Neeley says.

Although power generation rates and costs are different for every utility, a customer with Austin Energy can choose to “buy” only renewable power through its GreenChoice program at a cost of 5.7 cents a kilowatt hour compared to the normal rate of 3.4 cents.

The average GreenChoice customer pays $23 more a month, Austin Energy says.

Forecasts by the Electric Power Research Institute show that while wind and solar are getting more competitive, they are unlikely to come close to natural gas at least through 2025. (Please see charts on pages 1-11 and 1-12 of its report here.)

Further lost in the tangle at the intersection of commerce and government is what all the incentives, particularly in the wind industry, do to the pricing of energy.

Wind companies have at times been able to sell their energy below the market price, knowing it must be bought by somebody, and still make a profit, a practice decried both in a study by the consultant NorthBridge group and Donna Nelson, chairwoman of the Texas Public Utility Commission.

Advocates, including Strama, acknowledge the wind and solar industries would collapse without taxpayer and ratepayer subsidy but contend that coal, oil and gas have been subsidized for 100 years, renewable energy for a few decades.

Neeley says the Energy Information Administration points out that in 2010 renewable energy generates less than 10 percent of the energy in the country but gobbles up 55 percent of the subsidies. Fossil fuels are responsible for 70 percent of the generation while taking 16 percent of all energy subsidies.

Neeley says the public ought to be concerned that in an energy market commanded by already low prices for natural gas, artificial pricing for renewable sources will cut further into profits.

“In the long term there is a real threat to investment by the industry,” Neeley says. “If you can bid onto the grid at negative prices, nobody is making any money.”

“I don’t think the public has a good grasp of what is in their energy bill,” Fred Beach, with the Center for International Energy and Environmental Policy at the University of Texas, says. “They have a very poor appreciation of who pays for what in energy generation. There is a need for much greater transparency.”

Beach refers to himself as a technologist, someone paid to examine the role of science and technology in energy policy. An opponent of direct government investment in renewable energy, Beach is, nonetheless, in favor of utilities meeting state standards for renewable energy use, however they do it.

Like Strama, Beach considers natural gas a low-cost bridge fuel to help consumers and the industry along while wind and solar technologies are improved.

“Right now, I think it’s a bridge to nowhere, an opportunity being wasted,” Beach says. “The industry doesn’t need that much more help. And I’m not a big fan of the government spending yours and my tax money. I am in favor of regulation that says meet this standard. We don’t care how you get there.”

Beach said energy consumers are further hurt by renewable policies pushing large-scale development of wind and solar power with a power plant model developed for coal more than 100 years ago.

Wind technology is ideal for large-scale generation. Solar power, at least today, is best suited to individual arrays on top of homes and businesses, Beach says.

This hasn’t stopped CPS Energy in San Antonio from going forward with a $1 billion, 400-megawatt solar development or Austin Energy considering a plan to have ratepayers underwrite $750 million to increase the city’s total solar power generation by 50 times by 2020.

San Antonio, with Democratic Mayor Julián Castro’s enthusiastic support, is resisting what Colin Meehan calls a “sugar rush” of low natural gas prices that cannot last.

Meehan, an energy analyst for the Environmental Defense Fund in Austin, objects to criticism of renewable energy development rooted in the present. Wind and solar power continue to get cheaper.

Nor is Meehan patient with the idea that the Legislature is incapable of big thinking when it comes to renewables. In 2009 the House and Senate passed a $500 million plan by former Sen. Troy Fraser, R-Horseshoe Bay, to offer rebates to individuals and companies to install solar arrays.

The bill, however, died over a procedural disagreement as the session expired. No similar bill has been introduced since.

This fall, when the Environmental Defense Fund joined several other groups in asking that the Public Utility Commission on its own order utilities to increase their renewable percentages, the commission refused the petition.

Strama says he believes the window of opportunity to attract promising solar businesses has closed. Renewable energy industry leaders, in particular wind energy, are predicting a very quiet 2013.

In recognition of the reduced circumstances, Strama says he intends to introduce a bill that would have ratepayers underwrite the construction of solar arrays on public school rooftops.

The same bill in the 2011 session never made it out of Calendars Committee.

In his speech to the Texas Renewables Energy Industry Association, Strama said he thought the Legislature was further from its renewable goals than five years ago. Still, he remained confident technology would eventually do the only thing that could sustain renewable energy: lower prices.

“We’ve been providing energy from coal on an enormous scale for 100 years,” Strama said. “Nothing you could say would convince me we won’t someday be able to provide renewable energy on an enormous scale.

“People are right to ask about a timetable. We don’t have a timetable.”

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Contact Mark Lisheron at 512-299-2318 or [email protected] or on Twitter at @marktxwatchdog.

Photos of wind turbines by flickr users nikkorsnapper and and the russians are here, used via Creative Commons licenses.