Texas consumers to pay steep price for rush to wind energy

Foundation report looks at costs, challenges of harnessing wind for electricity

AUSTIN – Texas’ efforts to make it the nation’s leading wind energy state have come at a cost – at least $60 billion between now and 2025 – that will be borne by consumers and taxpayers, according to a report released today by the Texas Public Policy Foundation.

“The combined cost of subsidies, tax breaks, market disruptions, and increased production and ancillary costs associated with wind energy in Texas could top out at more than $4 billion per year, and total at least $60 billion through 2025,” according to Bill Peacock, Director of the Foundation’s Center for Economic Freedom.

The report, “Texas Wind Energy: Past, Present, and Future,” examines the growth of wind energy in Texas over the last decade. While many policymakers and business leaders foresee wind as a major contributor to America’s electricity supply, the report identifies several practical obstacles that stand in the way of achieving that vision.

“Wind power is, and will continue to be, part of Texas’ energy supply,” said Drew Thornley, the report’s author. “However, Texas’ policymakers must thoroughly examine both the benefits and limitations of wind energy, particularly the issues of reliability, transmission, and cost.”

The Public Utility Commission’s recent approval of a $5 billion plan to connect proposed West Texas wind farms to Texas’ metropolitan centers is just the beginning of the costs to Texas’ electric ratepayers. “These costs do not include escalating labor and material costs or financing costs during construction,” Thornley said. “Thus, the installed costs, which will be used to establish future transmission rates, should be considerably higher. The total cost of transmission construction should increase electricity prices by about $17.1 billion through 2025.”

Texas wind energy will be subsidized to the tune of $28.3 billion through 2025. Besides transmission costs, the subsidies include Texas’ program for mandating production of wind energy through the renewable portfolio standard and renewable energy credits ($1.4 billion) and the federal production tax credit ($9 billion). Texas consumers and taxpayers should expect to bear more than $20 billion of this directly, with the rest paid by U.S. taxpayers. The remainder of the $60 billion cost of Texas wind energy comes from increased generation and system management costs, economic costs from disruptions of service due to unreliability, and from additional tax breaks.

In addition to the cost, Thornley identified the three major challenges to the expansion of Texas wind energy as the intermittent nature of wind, the inability to store electricity on a large scale, and the limitations on electric transmission infrastructure.

“The greatest impediment to wind’s large-scale contribution to our energy supply is its intermittent nature,” Thornley said. “The wind must blow in order for wind turbines to produce power. In Texas, however, wind blows the least during the summer months when we need power the most.” He added that the Electric Reliability Council of Texas relies on a mere 8.7 percent of wind power’s installed capacity during peak summer hours.

Thornley debunked the notion that wind could replace natural gas as a fuel source for electricity. “Because there is presently no adequate wind-power storage system, wind-generating units must be backed up by units that generate electricity from traditional fuels,” Thornley said. “In Texas’ case, that has most often meant natural gas.”

“Wind power is not an energy-supply panacea,” Thornley said, “but rather a supplement with the potential to play a beneficial role in Texas’ energy mix for years to come.”

The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin, Texas. The report, “Texas Wind Energy: Past, Present, and Future” is available online at http://www.TexasPolicy.com.

Bill Peacock is Director of the Center for Economic Freedom at the Texas Public Policy Foundation.

Drew Thornley is a natural resources and economic freedom policy analyst at the Texas Public Policy Foundation.