The energy sector in the state of Texas outperforms California when it comes to generating electricity, with higher reliability and lower prices. While this is commendable, the government interfering with the sector may see so many of these benefits come undone.
By both economic output and population, California and Texas are the biggest states in the country. Despite this, their energy policies are vastly different. While renewable energy produced by California is higher as compared to that produced by Texas, the former’s grid is more prone to black outs.
On the other hand, residents of Texas benefit from steady power supply, higher output, and lower prices. Experts argue that the blackout that occurred during the Winter Storm Uri was a warning sign, as iced-over solar panels and frozen wind turbines weren’t able to meet energy demand.
The poor weather conditions also called to attention the state’s overdependence on intermittent energy sources. For years, the state’s electricity market has been shaped by subsidies and political favoritism.
Its Chapter 313 tax abatements favored wind and solar, with legislators introducing Chapter 403 and an Energy Fund to support new natural gas plants, which was allocated $5 billion. This year, legislators allocated another $5 billion in subsidized loans, with many expecting them to approve nuclear subsidies next.
These developments come as federal tax credits also continue to spur overbuilding of renewables.
However, instead of relying on market pricing to attract private investment, Texas is now repeating mistakes by subsidizing on-demand power plants, skewing decisions and channeling investments toward subsidies rather than genuine consumer demand.
Research from the American Institute for Economic Research has demonstrated that markets distribute resources more effectively when prices mirror true risks and costs. When the government secures profits, investors pursue subsidies instead of real consumer needs.
To prevent Texas from repeating the mistakes of others, the government needs to eliminate all subsidies and tax breaks for any form of energy and fast-track energy infrastructure approval without putting public funds at risk.
The government should also give energy providers and consumers the power to shape the energy portfolio, while allowing Electric Reliability Council of Texas’s market pricing to function free from political influence.
Experts believe that this is the only way Texas can continue to lead in energy production, noting that if this isn’t adhered to, the state may find itself dealing with the same pricing and reliability issues currently affecting California.
As energy generation ramps up in Texas and other states, it is hoped that reliability will keep improving and costs will level off. Entities like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) also have a role to play in this by availing the needed critical minerals that energy generation systems depend on.
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