Senate pushes to add natural gas plants
Package of bills walking back deregulated electricity market has bipartisan support
State senators are aggressively pursuing a plan to build more natural gas power plants and curb the growth of wind and solar energy in Texas, getting behind a suite of bills that energy experts say will walk back the state’s deregulated electricity market.
The nine-bill package has bipartisan support, and Lt. Gov. Dan Patrick has threatened to force a special session if lawmakers don’t agree to bolster natural gas production this spring. Senators say the federal government offers unfair incentives to wind and solar plants, given how unreliable they can be during extreme weather events, making it tough for nonrenewable energy providers to compete.
Texas has to have generation “that can be counted on when the wind is not blowing and the sun is not shining,” state Sen. Charles Schwertner, a Georgetown Republican and the chair of the Senate Business and Commerce Committee, said during a news conference last week.
The legislation would add to grid reforms the Legislature passed after the deadly winter freeze in 2021, which Gov. Greg Abbott and other Republicans have unduly blamed on wind and solar generation. Those failures were mostly attributable to a massive drop in natural gas production that prolonged statewide outages, federal investigators determined.
Chief among the proposals is a plan to create a Texas “electricity insurance” program that would pay for 10,000 megawatts of new natural-gas-fired generation to be ready during an extreme weather event. Schwertner, who authored Senate Bill 6, compared it to a statewide backup generator.
Senate Bill 7 would require solar and wind providers to
have battery backups or agreements with natural gas plants to help them provide electricity if necessary. Another measure would require at least half of all new generation built in Texas to be coal- or natural-gas-powered — what’s known as “dispatchable” energy — starting in 2024.
The remaining six bills include less contentious legislation to prevent market power abuse and to protect the state’s electric grid from cyberattacks.
Higher costs
Doug Lewin, a renewable energy consultant, warned that the proposals will be “extremely expensive,” sending costs straight to consumers, and will “effectively shut down” the renewable industry.
“Any time that you hear a policymaker talking about raising costs on renewables, that’s raising costs on customers,” Lewin said. “Renewables benefit customers, and it’s nothing but a tax on electricity. That’s what it is — a massive tax on electricity that all Texans are going to pay.”
Proponents of the bills and some energy experts said the situation may not be that dire — and while the bills would certainly affect the renewables industry, they would only slow down its growth.
“We’re going to build those plants, and we’re going to have renewables that help keep our air clean and our prices low,” said Patrick, who oversees the Senate. “That’s why a lot of companies move here. And we’re going to have dispatchable that guarantees, in the worst weather conditions, that when you hit that light switch, the lights come on.
“Businesses won’t come to Texas, and citizens won’t feel safe, unless they know we have the dispatchable power for the growing needs of Texas,” he said.
It’s a concern at the federal level, too, as the Biden administration promotes renewable energy in an ongoing effort to curb climate change.
“What keeps me up at night is making sure that we have ample dispatchable baseload power,” U.S. Energy Secretary Jennifer Granholm said in a meeting with Hearst Newspapers.
She said there are ways to make renewables more reliable that don’t involve more natural gas, like using battery storage. Officials also can turn to clean energy sources that are more consistent, like geothermal, hydroelectric and nuclear.
Patrick has said he will force a special session in Austin “if we do not get the grid fixed” by the time the regular legislative session ends in May. Both Republicans and Democrats are supporting the Senate bills, and senators say they also are working with House members to garner support in the lower chamber.
A spokesperson for Rep. Craig Goldman, the Fort Worth Republican who heads the House Energy Resources Committee, did not respond to a request for comment.
‘No incentive to build’
Under the current Texas electricity market, power generation is supposed to be unregulated with a competitive market structure that only pays for the electricity produced.
Patrick, during last week’s news conference, said the new legislation was not a move away from that design.
But University of Houston Energy Fellow Ed Hirs said the plan, which he supports, is a “complete repudiation” of the electricity market design the Legislature passed in the late ’90s and the state implemented in 2002.
That plan broke the electricity market up into the three segments seen today: deregulated power plants that are only paid for the energy they produce; regulated transmission and distribution companies, like Centerpoint, that earn a guaranteed rate of return for building transmission lines and other infrastructure; and deregulated retail electricity providers that buy power on the market and sell it to consumers.
Hirs said that market design was shortsighted from the start, moving the state to a system that fails to encourage maintenance and continued growth to account for increasing population and other variables.
“It does not matter what the source of power is — renewable, nuclear, natural gas,” Hirs said. “There’s been no incentive to build new power plants. That’s the issue.”
Hirs said Texas would be facing these problems even if renewables hadn’t come onto the system with so much gusto. But because wind and solar energy has become so cheap to produce and doesn’t have a fuel cost like natural gas, it has been hard for legacy plants to compete in the Texas system, he said.
That means a system must be in place, Hirs said, to incentivize natural gas and coal plants to be ready to go when electricity demand is high and renewable generation is low — like during an extreme weather event — even though, overall, natural gas and coal will likely give way to more and more renewable generation.
The proposed legislation would do just that, Hirs noted, but he doesn’t credit Patrick for coming up with the fix.
“He’s been backed into a box that he helped create,” Hirs said, adding that state lawmakers should have seen the need for emergency generation before it became dire during weather events like freezes in 2011 and 2021.