EnergyIssuesRenewable Energy Booming in Texas as Oil and Gas Struggles

Electricity from Texas wind farms hit its highest market share in April, while demand for oil is down over 10 percent resulting in unemployment for many in the industry.
May 11, 2020
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Electricity from wind farms in Texas hit its highest market share ever in April, generating 27.6 percent of the electricity used by Texans in the Electric Reliability Council of Texas (ERCOT) market, which covers more than 26 million Texas electric customers.

On May 2, wind generation set a one-day record by providing 59.3 percent of the electricity used in ERCOT.

This continues the rapid growth of wind energy exhibited last year, when wind provided 20 percent of the electricity used, matching coal generation for the first time. This year, wind has extended its lead at coal’s expense, with coal-fired generation dropping to a 16 percent share for the year.

Solar energy also reached its highest market share on record in April at 2.2 percent.

Renewable energy’s surge contrasts sharply with the downturn in the oil and gas market. Demand for oil is down over 10 percent. And prices have plummeted; after peaking at $63.05 per barrel on January 3, West Texas Intermediate crude is currently trading around $23.

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The reductions in prices and demand have had predictable results in employment. The oil and gas industry lost nearly 51,000 drilling and refining jobs in March, a 9 percent drop. Oil titan Halliburton recently added to that total, closing facilities in Kilgore and San Antonio after experiencing a $1 billion loss in value during the first quarter. 

Federal, state, and local subsidies for renewable energy may be a significant factor in the difference between the current experiences of the two industries.

Life:Powered, a project of the Texas Public Policy Foundation, reported in April that federal subsidies for wind and solar power far outpace subsidies for oil and gas, coal, and nuclear energy. 

“Federal energy subsidies have left a legacy of distorting energy markets, a legacy that began with fossil fuel tax breaks and grew dramatically with the explosion of renewable energy subsidies in the past decade,” said Life:Powered’s Brent Bennett.

From 2010 through 2019, federal subsidies for renewables totaled $71.2 billion, compared to $25 billion for oil and gas, $15.4 billion for nuclear, and $12.8 billion for coal. 

The level of subsidies favoring renewables are even more pronounced when taking into account the amount of energy each source produces. “Wind has received nearly 40 times and solar nearly 200 times more subsidies per unit of electricity generated than oil and gas,” the report finds.

The subsidies, which allow renewable energy to undercut the prices of electricity from traditional fuels, have allowed cities and major corporations to “go green” without incurring higher costs.

The city of Houston, for instance, recently committed to powering all of its municipal operations with 100 percent renewable energy by 2025.

“This announcement is a shining example of how the Houston Climate Action Plan is already in motion,” said Houston Mayor Sylvester Turner. “Expanding our renewable energy investment through our partnership with NRG helps us build a more sustainable city and save over $9 million per year on our electric bill.”

Houston’s move comes on the heels of other Texas cities.

While San Antonio has not committed to 100 percent renewable energy, it has committed to “meet the goal of carbon neutrality by 2050” through its Climate Action Adaptation Plan, which has led it to make major commitments to renewable energy. CPS Energy, San Antonio’s city-owned municipal utility, plans to generate half of its electricity from renewables by 2040.

Jason Issac, with Life:Powered, believes the city’s plan will drive up the cost of energy.

“Unfortunately for San Antonio’s businesses and especially its poorest residents, any plan for the city to reach “carbon neutrality” by 2050 is bound to dramatically drive up the cost of living, increase taxes, and discourage entrepreneurship and business investment,” he wrote.

Others, though, think San Antonio’s plan does not go far enough

“CPS Energy is putting off the acquisition of additional utility-scale renewable energy for far too long and is intent on relying on dirty coal through 2042 despite its public-health risks,” Greg Harmon of the Sierra Club’s Lone Star chapter told the San Antonio Express-News.

Corporations are joining cities in taking advantage of the subsidies to move toward greater renewable energy use.

Data center operator Digital Realty announced in April “a new 7.5-year power and renewable energy credit agreement with Citi to supply clean, renewable energy for Digital Realty’s portfolio of data centers in the Dallas, Texas region.” The electricity will come from the 162-megawatt (MW) Bearkat Wind Energy wind farm in Glasscock County.

The 338-megawatt Sage Draw wind farm, with more than 120 wind turbines across Garza and Lynn Counties, just came online in April. ExxonMobil will receive about 250 MW of wind power from the facility.

Wind farms are not the only renewable generators taking advantage of subsidies, as the construction of solar generation is also on the rise. 

AP Solar Holdings announced on May 1 that it is partnering with J-Power USA Development to build the Red-Tailed Hawk solar project in Wharton County. Also, Origis Energy announced last month a virtual power purchase agreement (VPPA) with Royal DSM (a Dutch company) for renewable electricity from the planned Rockhound Solar C project located in Ector County, Texas. 

“This is the large step forward, representing approximately 40% of our total purchased electricity volume in the USA,” said Harry Coorens, the vice president of DSM procurement sustainability.

The VPPA may not result in the actual use of renewable energy from the Rockhound Solar C project, however. Instead, Royal DSM will receive renewable energy credits that it can count toward its goals under RE100, a global corporate leadership initiative bringing together influential businesses committed to 100 percent renewable electricity. The credits allow companies to claim higher levels of renewable energy use than they are actually achieving.

ERCOT manages the electric grid within the ERCOT area. Its forecast confirms the growth of renewables in Texas this year. 

ERCOT projects wind generation will increase by almost 30 percent this year and solar generation by almost 160 percent.

However, ERCOT’s projections were made before the COVID-19 lockdown, which has affected the renewable energy industry.

“Pre-pandemic, there were great dreams and aspirations for a record-setting year,” said Paul Gaynor, CEO of Longroad Energy. “I’m sure we’re not going to have that.”

There is still optimism for renewable energy’s future, though. 

“My hope is that we would use this as an opportunity to build toward an economy that doesn’t depend on burning coal and oil and that is more resilient to the climate impacts that are heading our way,” said Andrew Pershing, of the Gulf of Maine Research Institute in Portland, Maines.

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Bill Peacock

Bill Peacock

Bill Peacock is a writer and public policy consultant in Austin, TX. He has extensive experience in Texas government and policy on a variety of issues, including economic regulation, energy, taxes and budgets, property rights, and corporate welfare. His work has focused on identifying and reducing the harmful effects of regulations on the economy, businesses, and consumers.