Renewable energy subsidies are wrong for Texas

Texas Public Policy, Cutter González, 08/10/2018

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It’s 2018, and the days of warm, evening sun setting on scenic Texas plains are gone for some rural areas like Comanche County. Folks accustomed to unencumbered views will have to look elsewhere. Now, those views are pierced by the sharp teeth of a wind turbine. Summer breezes have transformed into the cyclical swooshing—and occasionally loud creaking—of nearby machinery.

Yet the summer heat remains, reminding us that Texas is facing a tight energy supply—with less reliable energy sources. Three coal plants shut down this year, pulling reserves below the desired target level to meet the energy demands of scorching August afternoons. Many things led to the closures, but the profitability of coal plants in the face of billions of dollars of subsidies for renewable energy—particularly wind—is certainly among the most powerful.

Wind developers are the beneficiaries of disproportionate levels and types of government aid. At the federal level, they receive a production tax credit, which costs taxpayers over $5 billion per year. On top of that, Texas stepped in, providing billions of dollars of additional state and local subsidies.

Chapters 312 and 313 of the Texas Property Tax Code offer a major source of subsides. These allow local governments and school districts to abate property taxes that would otherwise be paid by a business in their jurisdiction. In the case of school district abatements, the lost local revenue is replenished from state coffers. As an added benefit, districts can receive “supplemental payments” that don’t count against their state reimbursement, nor are they subject to the Robin Hood rule, under which funds over a certain threshold are distributed to poorer districts across Texas. School districts have nothing (economically) to lose.

In fairness, there is a requirement that projects provide a certain number of jobs upon receiving these local benefits. But renewable energy projects are rarely able to meet the already low state requirements. In fact, 87 percent of the job requirement waivers to 313 abatement recipients were in the renewable industry.

These aren’t the only hidden costs.

Wind and solar are highly volatile sources of energy. The wind doesn’t always blow and the sun doesn’t always shine. This instability has a cost as other, more reliable sources of power (read: coal and natural gas) are required to be on standby, just in case. On top of that, there is the multi-billion dollar cost of constructing the Competitive Renewable Energy Zones transmission lines from West Texas to the “Texas Triangle,” where most of our power-users live.

It isn’t just the cost that’s hidden. Almost all of the negotiations to bring wind farms to an area take place behind closed doors. Exemptions for Chapters 312 and 313 tax abatements from Texas’s open meetings and public information laws allow almost all activity related to these subsidies, except the final vote, to be conducted outside of public scrutiny.

This isn’t good for taxpayers or for residents whose lives can be severely disrupted by the noise and sound pollution created by neighboring wind farms. For many residents, the hidden negotiations mean that they don’t even know the abatements are being granted or when wind farms are coming until the first trucks grind down their roads, bringing the thousand-plus tons of concrete and steel rebar needed to support each turbine.

All of this is essential when evaluating the renewable policies adopted by the Texas Legislature. If we want to avoid the high energy prices seen in places like California and New York while enjoying supplies of reliable energy, subsidies won’t work. If we want our neighbors to live healthy lives, if we believe in an open, democratic political process, and if we believe in the prosperity provided by the free market, our current path of subsidizing renewable energy is the wrong one.

This commentary was originally featured in the Texas Tribune on August 10, 2018. 

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