by James A. Bacon
Texas, one of the most conservative states in the country, is not exactly what you’d call a hotbed of environmental activism. Yet the Lone Star state has added more wind-based generating capacity than any other; wind turbines and other renewables account for 16% of electrical generating capacity — and as much as half of electricity production at night. Now the state is anticipating a surge in solar power, reports the Wall Street Journal.
Moreover, Texas, long associated with the oil & gas industry, has become a pace-setter in renewable energy while moving from an average retail electricity rate higher than the national average to a rate below the national average — 8.6 cents per kilowatt hour compared to 10.4 cents nationally.
Oh, and it did so within the context of a free-market-based electricity system — no state subsidies. (Federal subsidies still apply.)
“Texas officials didn’t invoke global warming to sell the program,” writes the Journal. “They touted renewable energy as a consumer-choice issue, jobs producer and a way to pump money into rural economies.”
Consumer choice: Residents of Houston can pick from 107 rate plans offering 5% to 100% renewable power. Reliant, a unit of NRG Energy Inc., charges 7.1 cents per kilowatt-hour for an all-renewable plan compared to 5.9 cents for one that’s 5% green.
Jobs: The Texas Workforce Commission estimates that the state now has more than 100,000 people working in renewable energy, which includes manufacturing, construction and ongoing operations. Construction of wind turbines and power lines created jobs in rural counties and gave landowners new sources of income.
How did this transformation occur? The Journal doesn’t delve into details, but here are the highlights. In 1999 then-Governor George W. Bush signed legislation overhauling the Texas power market. Deregulation broke the grip of monopoly utilities that controlled generation, transmission and retail sales of electricity and introduced competitive auctions for wholesale power. Texas also mandated at least 2,000 megawatts of renewable generating capacity by 2009, not an idea inspired by free market principles, but the mandate wasn’t a major factor. Texas blew past that goal by 2005.
State government also charged electric-system users billions of dollars to build transmission lines to wheel power from windy west Texas where the wind turbines were to urban centers where the demand resided.
The Journal article doesn’t address the issue of service reliability, other than to note that Texas officials are “obsessive” about anticipating changes in the weather that might affect wind-powered production.
Bacon’s bottom line: It would be a mistake to portray the Texas approach as purely market driven. The state did enact mandates (although they apparently were not decisive) and it did dun ratepayers to upgrade transmission lines. But the deregulation of retail allowed Texas greenies to exercise their consumer power by purchasing renewables at a modest premium. And the development of wholesale electricity auctions ensured that new wind and solar producers had someone to sell to.
The big question for Virginians is whether the Texas model can be replicated here, and I’m just not sure of the answer. Some of the necessary elements are in place. For example, Virginia does participate in wholesale electricity markets; we’re part of PJM Interconnection, a cooperative zone of a dozen states in the Midwest and Mid-Atlantic. On the other hand, building transmission lines is exceedingly contentious. It’s one thing to install high-voltage towers in empty Texas ranchland; it’s quite another to build them in a Virginia countryside rich in historical, cultural and environmental resources where landowners value the land not only for its productive capacity but for its viewsheds.
Virginia also experimented with retail deregulation, which was deemed a failure. But it’s been a decade since re-regulation, and times have changed. Thanks to the success of retail deregulation in places like Texas, there are enterprises with proven business models that might make retail competition more meaningful here in Virginia.
Finally, there are important climatic differences between Texas and Virginia. With its vast, windy plains, Texas is superbly suited to on-shore wind. Except along isolated mountain ridges, Virginia is not. While the Old Dominion potentially could tap off-shore wind, the business infrastructure to support it does not exist. As for solar, Texas is an arid state where solar panels get more direct sunlight than in Virginia.
Still, while politically “blue” states from California to New York give extensive thought to what the electric grid of the future will look like, Virginia needs to do so as well. Texas’ market-oriented model might be one that Virginians are more comfortable with.