Texas now leads the nation in solar energy: What that means for the grid

AUSTIN — For about five hours on Feb. 25, electricity for most of Texas cost nothing.

As the sun shone on a banner day of near-perfect sunny, mild and breezy weather across the state, wind and solar produced electricity at an unprecedented rate.

At its peak, renewable energy produced nearly three-quarters of Texas electricity that day — setting a record that pushed the real-time price of energy to $0 for five hours as nuclear and fossil fuel plants offered lower and lower prices to stay competitive and keep from making the costlier decision to shut their operations down.

It was a record driven partly by a four-year build-up that saw solar energy’s capacity increase eightfold in the past five years.

Late last year, Texas topped California to become the No. 1 state for utility-scale solar energy, marking a second renewable energy boom in Texas following the recent rise of wind energy. More than anywhere else in the country, Texas has capitalized on renewable energy in the past decade.

“It’s an exciting time,” said Judd Messer, vice president of the renewable energy group Advanced Power Alliance. “We’re going to break solar records, it seems, several times a month from here on out.”

Advocates hope solar can provide daytime renewable energy that complements wind energy’s tendency to produce more actively after sundown. But it is not without its obstacles.

While solar is now the fastest-growing energy sector in Texas and rivals wind in its share of energy production, critics say renewable energy has made the grid less reliable because it can be limited by cloudy days and calm winds.

Others say solar includes hidden costs that outweigh the benefits of a clean energy source.

And while solar — like wind — has the inherent advantage of zero-cost fuel over its non-renewable counterparts like coal or natural gas, consumers have seen little in energy cost savings.

“Renewables can serve to reduce the price of electricity,” said Joshua Rhodes, a research scientist with the Webber Energy Group at the University of Texas at Austin. “I’ve done research showing that and showing the impacts of renewables and how much money they’ve saved.”

But Rhodes said that the amount of money being spent on electricity has increased even as low-cost renewable energy has ramped up.

“The past couple of years, we’ve actually seen more revenue in the market,” he said

Record-breaking production

Solar has set new electricity production records five times this year. In a growing energy sector, the pace is not unheard of.

The current record was set on Feb. 19, when solar generated 17,200 megawatts, a 50% increase in one year, according to the market tracking website GridStatus.io. In four years, solar production under ideal conditions has jumped from providing enough electricity to power half a million homes to enough electricity for 3.4 million homes.

Wind power still tops solar in total capacity in the ERCOT power grid, but its rise has slowed in recent years. Solar, however, has seen massive year-over-year increases in the past decade, jumping from about 1% of renewable energy in 2013 to about 36% in 2023, according to ERCOT, which oversees the power grid serving most of Texas.

Solar projects capable of producing more than 150,000 megawatts are in the planning stages in the ERCOT grid. That’s four times more than wind energy projects and nearly 10 times more than natural gas projects in the early stages of development.

The only sector approaching that level of development is battery storage, which is also primed for huge increases in Texas. Solar power is playing a role in that industry’s rise, as some developers have coupled battery storage to new and existing solar arrays, according to Ben Gaffaney, a vice president at the Association of Electric Companies of Texas trade group.

“Twenty years is a very short period of time in the world of electricity, and it’s really an impressive amount of changes,” Gaffaney said.

Solar power and batteries are also buoyed by federal incentives under the Inflation Reduction Act, as well as huge reductions in costs for the materials that create solar arrays.

But Texas is trying to level the playing field.

Tilting the market toward natural gas

The 2021 winter freeze that triggered blackouts across Texas and led to more than 200 deaths triggered major regulatory policy changes.

While problems with all power sources played a role in the blackouts, ERCOT, the Public Utility Commission and the Texas Legislature have — in the name of shoring up the grid’s resiliency — taken action that made it more profitable to operate natural gas plants in Texas.

Together they have earmarked billions in taxpayer dollars and are revamping the state’s energy market to encourage construction of more gas power plants.

The Legislature took the most direct approach by creating the Texas Energy Fund, a $5 billion pot of taxpayer money largely dedicated to low-interest loans and cash reimbursements for companies that quickly connect new natural gas power plants to the system. Voters approved the fund in November.

The Public Utility Commission is ironing out details of the loan program, which could be approved as early as Thursday.

According to Rhodes, if Texas turns away from a future where renewable energy and battery storage become the dominant electricity source, then regulators and ERCOT will need to create conditions that allow fossil fuel plants to turn a profit.

Lt. Gov. Dan Patrick and investment giant BlackRock rolled out the red carpet for natural gas power producers earlier this year in a daylong summit in Houston to pitch the Texas Energy Fund. Attendees who spoke to The News described being warmly received, and at a Feb. 15 meeting of the Public Utility Commission, Commissioner Jimmy Glotfelty said interest in the fund appeared high.

Glotfelty advised natural gas power producers to put their “best foot forward” when applying to participate in the fund.

“Everything that I’ve heard about the energy fund is we’re going to be totally oversubscribed,” he said.

In response to the proliferation of renewable energy, ERCOT last year introduced the ERCOT Contingency Reserve Service — or ECRS, designed to encourage “dispatchable” power sources to begin generating electricity when power reserves dip.

Dispatchable generally refers to natural gas plants because they can begin producing energy — when operational — at the flip of a switch.

Within months of ECRS’s introduction, the state’s independent market monitor published a scathing report estimating that the ancillary service had cost consumers $8 billion by creating the appearance of energy shortages. That number has swelled to $12 billion.

The Public Utility Commission is also in the process of overhauling the ERCOT market. The regulatory board in late 2022 approved a plan to create a separate energy market allowing power producers to bid for performance credits under the promise that they would provide electricity when called upon if demand rises.

Though regulators have said they are “agnostic” on what kinds of power plants can participate, the design favors natural gas-fueled facilities. State lawmakers capped the market at $1 billion during last year’s legislative session amid skepticism of its effectiveness.

“These kinds of out-of-market actions just add cost after cost after cost,” said energy expert Doug Lewin, who publishes the influential Texas Energy Power Newsletter. “Those benefits aren’t reaching the consumers. To the contrary, bills are actually going up.”

Obstacles dim solar’s future

While solar has seen huge capacity gains in recent years, its growth could be constrained by the grid’s ability to move solar-produced electricity to homes and businesses.

The power grid saw that in September, when electricity produced in South Texas became bottlenecked in transmission lines leading from the Rio Grande Valley to San Antonio.

It prompted ERCOT to declare an emergency and was the closest the grid has come to rotating blackouts since the 2021 winter storm.

Messer, the head of Texas advocacy at Advanced Power Alliance, said new transmission lines being built to the Permian Basin — where a large swath of renewable energy is located — will be near capacity almost as soon as they are finished. Without the ability to move electrons from sun-scorched West Texas to population centers hundreds of miles away, investing in solar becomes less attractive.

“If you build more cars, but you don’t build any more roads, then people can’t move,” Messer said. “I think that’s unfortunately what could end up happening if we don’t either start doing some things to update our existing transmission lines or we don’t build some new ones.”

Critics are also taking notice of the indirect costs of solar.

Brent Bennett at the conservative think tank Texas Public Policy Foundation pointed to a $892 million ERCOT project to build power inverters that address how renewable energy can destabilize the grid.

“This is another problem that becomes exponentially more difficult the more wind and solar you have in the system,” said Bennett, the foundation’s policy director for energy.

The industry could also face legislation designed to slow or stop its growth in Texas.

During last year’s legislative session, proposals that gained traction included bills that would have subjected renewable-energy projects to onerous zoning requirements, costly environmental studies and hard caps on investment that, if applicable today, would have sharply limited plans for new wind and solar projects.

Several of those proposals passed the Senate but died in the House.

“If the other side’s answer is making already cheap power more expensive … I think the only people who suffer there are Texas consumers,” Messer said.