‘Green’ Cities: Higher Costs, Lower Electricity Reliability

Published August 26, 2019

Among the many places jumping on the bandwagon of renewable energy initiatives in recent years are the Texas cities of Austin, Georgetown, and now San Antonio, each of which maintains a monopolistic, municipally owned electricity provider from which residents are forced to purchase electricity.

All these cities have pursued highly publicized “green” initiatives to increase the amount of renewable energy they provide to their captive electric power customers.

These initiatives have led to higher costs for consumers and poor investment decisions on the cities’ part, costing residents millions of dollars and reducing the reliability of the electric grid.

Behind these initiatives are government subsidies, such as the federal Production Tax Credit (PTC), that have allowed renewable energy producers to charge an extremely low price for their energy—sometimes even selling power at a loss.

Although this may seem like a good deal for energy consumers, these residents are also paying huge amounts in taxes to fund the incentives. Cost estimates of taxpayer subsidies for renewables in Texas show the cost to be as high as $36 billion from 2006 through 2029, when the PTC is currently scheduled to expire.

Green Energy Burns Budgets

Residents are also footing the bill in other ways for poor investment decisions made by cities in efforts to “go green.”

The city of Georgetown, home to a mere 71,000 residents, went $32.7 million over budget for renewable energy production from 2016 through 2018, and in 2018 Georgetown spent a whopping $53.6 million on electricity—22 percent above the $44 million the city budgeted for.

Not to be outdone by its neighbor, Austin built a biomass production plant to provide renewable energy to the city. And it did—for two whole months, before the city closed it down. This green experiment cost Austin residents $838 million, including a $460 million buyout of the 20-year contract originally worth $2.3 billion.

Renewable-Induced Energy Shortages

In addition to this costly malinvestment of tax dollars, Texas residents also face heightened threats of energy shortages as the use of renewables increases.

This is because of another fundamental problem with renewables: Wind and solar generation are inherently intermittent. The wind does not always blow, and the sun does not always shine. Also, the energy from renewable sources cannot be effectively stored for use at times of peak demand. Therefore, much of the energy generated—when these plants are actually generating power—is wasted, and unavailable when it is needed most.

In addition, renewable generation plants are typically located in less-populated areas away from the greatest demand, so the electricity must be transmitted over vast distances to reach the market. Power is lost in transmission, meaning additional power must be delivered from other sources to meet demand.

Texans have also borne $14 billion in costs for the transmission lines running from unpopulated west Texas, which doesn’t need the additional electricity, to populated cities like Austin and Dallas, which do, for these renewable power schemes.

Distorting the System

Finally, the extremely low prices for renewable energy, as a direct result of subsidies, are resulting in significantly less investment in reliable and affordable generation powered by natural gas and coal, placing a huge strain on the grid.

Coal and natural gas are more efficient and reliable than their renewable counterparts. However, during periods of high wind and sunlight unhampered by clouds, electricity prices can become so low that coal and natural gas plants must sell power at a loss. As money-losing plants are closed, the reserve margin shrinks, which threatens the entire grid because providers don’t have enough “spare” generating capacity to satisfy peak demand when renewables fail to deliver. The difference between the supply and demand of electricity may be as low as 7.4 percent this summer, a record low threatening to result in intermittent power shortages across the state at the peak periods.

The Texas Legislature can and should ameliorate these problems by eliminating the preferential treatment Texas affords renewables. In addition to doing this at the state level through the Public Utility Commission, it can also take away the power of cities to impose costly, inefficient initiatives simply to support the latest environmental fads.

These steps would allow the market to provide more affordable and reliable energy for all Texans, and they would work in other states as well.

Carly Good ([email protected]) is a policy intern at the Texas Public Policy Foundation in Austin, Texas.