Texas has many natural fuel resources – let’s use them all in ERCOT

By Howard Arey

The Austin Journal, September 27, 2022


The diversification of the Texas energy marketplace is a smart step for all Texans that will ensure all Texans are blessed with abundant energy at the lowest price in the decades ahead.


In response to Mr. Peacock’s article, “Why Texans are paying more for less electricity” I am reminded of the saying, “there is a lot to unpack here.” And that unpacking gets harder when the author lumps all PUC policy decisions into the tired cliché, “it’s renewables fault”.


The success of ERCOT has been the open marketplace where generators bid in electricity at the lowest price. ERCOT historically has been the exemplar of market forces acting to provide the lowest cost electricity for Texans. No matter our industry background and political affiliation, we should all question whether the latest Public Utility Commission policy directions to subtly shift from an energy market to a quasi-capacity market is what was intended by the Texas Legislature and best for all Texans. But to lump these PUC and ERCOT policy changes as part of some sinister effort by the renewables industry and co-opted politicians is disingenuous at best. This isn’t an apples and oranges difference; it might be better described as apples and Chevrolets. The latter two aren’t related nor are the latest PUC policy decisions and the integration of renewables.


We should all ask why a proponent of market forces would be scared of…market forces? Of course we can anticipate the quick response, “but renewables aren’t true market forces because they have subsidies!” Do wind and solar really have tax advantages not available to all fuel sources?


Natural gas is undoubtedly the primary fuel sourcefor Texas electric generation. While it’s cousin, oil production, doesn’t participate in electricity generation, the twins (“Oil and Gas”) are nearly always mentioned together. The Texas Oil and Gas Association sees no reason to break the words apart. Past larger-than-life Texas political figures aimed to keep it that way, ensuring that U.S. Code kept a very substantial depletion allowance. Today LBJ and Sam Rayburn would be proud to see the depletion exemption (think form of depreciation) up to the 100% level of taxable income for oil and gas.


Of course, one cannot deplete gusts of wind nor rays of sunshine, so the Federal government provided other forms of tax advantage in the form of production tax credit for wind and a Federal tax credit for solar installed costs.  I’ve been reminded before that there might not be any such thing as a true “free market” and the best we can hope for is the most equal playing field possible, but even that utopia is hard to attain. But we can be sure that taxes and our unending quest to minimize taxation – are part of the American way of life and the best we can do in any given year is operate within the reality set forth.


The biggest irony is calling out Chapter 313 and 312 Texas 10-year exemptions. While Mr. Peacock provides us the dollar figure of the property tax exemption for ten years, he fails to mention that the land being used for solar and wind farms is land that was appraised for agricultural value, better known as “ag-exempt.” This means this land has little if any property tax revenue capacity for its local taxing entities. But with the introduction of solar and wind generation, these parcels will provide substantial property tax revenue at year 11, onward.  The source Mr. Peacock cites to support this claim is his own paper but we’ll use it anyways; 57% of the 313/312 agreements were for solar and wind and of course other forms of electricity generation were equally free to take up these agreements. That percentage is not depicted in Mr. Peacock’s paper.


Texas is blessed with four great natural resources: oil, gas, wind, and solar. We have the capacity and framework to integrate all four for the benefit of all of Texas. It is happening right now. The greatest advantage of ERCOT is its ability to manage our grid to Texas sole benefit; its initiatives to reliably integrate all fuel sources at best value is perhaps its most important feature. If the Ukraine-Russia war has taught us nothing else, it’s that dependence on a single source of fuel is a security risk. Depending even more on natural gas, as the price fluctuated wildly this past year, is the exact wrong step to be taking.


Fortunately, Texas is not moving away from its generation diversification, despite the efforts of some. Let’s stay on this path where Texas benefits from all four of our state’s plentiful natural resources.


Howard Arey is the chair of the Texas Solar Energy Society board of directors and the owner of Solar CenTex, a solar installation company that designs and installs residential, commercial, farm and ranch, and small municipal solar projects.

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