We in Texas are proud of our economic successes over the past several years. One topic that keeps popping up is our energy sector. Texas consumes a great deal of electricity because of its energy-intensive industries. And of course, we have hot summers.
Regular consumers pay the price tag for their air conditioning and these taxpayers hope that there is a rational basis for their energy costs. But when government puts its thumb on the scale and tips the balance toward one energy source over another, things can go awry. Remember Solyndra? The federal government put more than their thumb on the scales on that one – they put $536 million on the scales to support a solar panel maker and the taxpayers had to foot the bill when it went belly up.
With the population and economy growing, and the demand thereby increasing in Texas, it is critical that taxpayers and consumers not be disadvantaged by government policy. My office just issued Texas Power Challenge, a report that looks at the various energy sources used for electricity in Texas. When it comes to the rich subsidies they receive from the state and federal governments, wind generators and their turbines tower above other sources of electricity generation – this is particularly troubling considering the actual electricity they generate, especially during the times when Texans really needs the power.
Texas made a bet on wind nearly 15 years ago by mandating that power companies provide a certain amount of power from wind. The challenge for wind is that it is well, windy, only sometimes. When it is not, it needs a more reliable partner. That is most often natural gas. Nonetheless, we doubled our bet for wind by mandating extensive and very expensive transmission lines that are primarily for wind. When the wind is not blowing, the lines are not being used to their capacity.
The lines, built to provide transmission infrastructure from the Competitive Renewable Energy Zones in West Texas, were projected to cost about $5 billion, but instead spiked to nearly $7 billion (a 40 percent increase in cost to consumers). And consumers are going to be paying these costs for 15 to 20 years. Adding insult to injury, the bulk of wind farms here are least productive at the time of highest demand, in the middle of hot summer days. The Energy Reliability Council of Texas (ERCOT), which manages system reliability for most of the state’s customers, says that summer capacity of wind is about 11,000 megawatts (MW), but it only counts on 963 MW because summer wind generation is so weak.
Subsidies and financial encouragement by states or federal agencies often look to fledgling industries that need a bit of help. With the wind capacity Texas now has, I would argue that market forces would produce a more efficient outcome and that the time for subsidies has passed. Texas has more than twice the amount of wind it originally mandated, and now has more subsidized wind power than any other state.
Because subsidies undoubtedly distort the market, caution should be used in their application. Texas has an economic development program that the wind industry has used extensively to limit property tax value on wind farms. For example, my office estimated in 2011 that wind projects qualified at that time under the property tax value limitation statute would receive nearly $850 million in total tax savings. Those wind projects were expected to create 480 jobs, which equates to about a $1.7 million tax benefit per job. That contrasts sharply with non-energy projects in the same program where the tax benefit per job was $195,565 — for 5,552 jobs. So instead of generating jobs and providing a reliable and consistent energy source, wind projects just generate higher costs. And there are increasing concerns about subsidies being used to encourage wind turbines close to homes, airports, military bases and migratory bird routes.
As the comptroller and chief financial officer of Texas, I worry about choices by policymakers that can have significant and adverse consequences. It seems to me that it is time for wind energy to stand on its own towers.
Susan Combs is the comptroller and chief financial officer of the state of Texas.
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