Texas Could Probably Meet EPA’s Carbon Goals If State Lawmakers Leave the Energy Market Alone

By Cyrus Reed

If you were to read the pretty, glossy one-pagers from the Texas Public Policy Foundation, or listen to the testimony by the Public Utility Commission, or lobbyists representing American Electric Power, or those entities suing the EPA over its proposed Clean Power Plan (CPP), you would think the EPA is trying to force Texas to stop using air conditioning or shut off all of our coal plants tomorrow. The reality is that it Texas is in great position to meet those goals if market trends continue.  However, these opponents of EPA’s plan are fighting those trends. That’s not very business friendly, is it?

These opposition groups frame the CPP as a Federal takeover of our electric grid – an unprecedented Federal power grab for our state sovereignty. Our state leaders seem to agree. Over the course of the last few weeks, Governor Greg Abbott met with Senate Majority Leader Mitch McConnell (R-KY) and expressed his support to the “Just Say No” Crowd, Texas Attorney General Ken Paxton announced his intent to sue the EPA over the CPP, and State Sen. Kelly Hancock (R-North Richland Hills) filed SCR 27 – a Resolution that orders the Public Utility Commission and the Texas Commission on Environmental Quality to do, drum roll please… you guessed it… nothing! Don’t even develop a plan to comply with any future regulation, Texas.  In fact, invite the Federal government to step in and develop a plan for us, while we fight them in the courts.

Are they correct?

Would the EPA requirement be so burdensome for Texas that it is better to not even try to meet it and instead sue the Feds? Is it better to do what we have already done as a state – fight new standards and hope we win? This strategy has been all too common in recent years – from the Cross-State Air Pollution Rule (Texas lost) to Obamacare (Texas lost).

Lets consider the facts first before we jump into another long and costly lawsuit that sets progress back years.

Under EPA’s proposed Clean Power Plan, Texas is expected to reduce its rate of carbon dioxide (CO₂) emissions from our existing fleet of power plants to 791 lbs. of CO₂ per megawatt-hour (MWh), a roughly 40 percent reduction from 2012 levels. Those opposed to the EPA are right on one thing: Texas is expected to reduce more CO₂ than most states.

And that is only befitting. While our rate of emissions is not really that much more than average, our size and the amount of energy we use means that we are the largest emitter of carbon dioxide by a long-shot – more in fact than the next two states – Florida and Pennsylvania – combined. As they say in Spiderman, with great power comes great responsibility.

How does the EPA think we can do this?

If you’re familiar with how the Clean Power Plan proposal is structured, skip ahead. Essentially, states would have the flexibility to create their own CO₂ reduction plan using the most cost-effective resources at their disposal. These resources basically fall into four types of building blocks:

1. Efficiency improvements or pollution reduction at the coal plant
2. Renewable energy
3. Utilizing existing natural gas more
4. Energy efficiency

To help Texas initiate their plan, the EPA developed a draft plan unique to Texas to show how their building blocks could stack up to meet the 40 percent reduction goal. For example, a huge block would be renewable energy given the state’s vast wind and solar resources.

In other words, they said, “Texas, you could meet your goals this way, but you don’t have to. You can come up with your own plan.”

Here is what the opposition won't tell you.

Both the interim carbon reduction goal for Texas under the proposed plan (853 lbs./MWh) and the final goal (791 lbs./MWh) are readily achievable if we keep accelerating the trend we are on. In other words, if Texas just continues along present trends we will get there.

This is not to say we don’t need to develop a plan, but the data show we are well on our way. Indeed, if these renewable energy market trends were included in a state-developed Clean Power Plan for Texas, it would send a clear market signal that would whet even more investor appetites and grow the Texas economy even more.

But first, let’s look at those trends in recent math from ERCOT. The table and chart below show how the amount of wind and natural gas – which produce no CO₂ and substantially less CO₂ than coal respectively – has risen even as coal has declined. Back in 2011, nearly 39 percent of the ERCOT market need was met with coal, and in the first three months of 2015, only about 26 percent was met with coal. Natural gas, helped of course by relatively low prices, has grown from 40.1 percent to around 49 percent in the first three months of 2015. Meanwhile, wind has grown from roughly 8.5 percent of the market to more than 10 percent.

While solar is still just a small fraction of the market, it is growing with several plants coming online in 2014 and 2015 and more on the way. By the end of 2015, solar may have its own category in ERCOT rather than just being lumped into “other.”

Source: ERCOT, Demand and Energy Reports, 2011-2015

In addition, according to ERCOT’s latest Operations Report as well as its Generation Interconnection Reports, the percentage of energy being provided by wind and solar will only grow, even in the next two or three years, further reducing energy provided by coal plants and some of the older gas plants. On March 29 of this year, ERCOT had a wind penetration record of 10,308 MW, accounting for 40.6 percent of the total 25,400 MW of ERCOT system load.

In fact, there are now more than 13,000 MW of wind capacity installed within ERCOT, and the latest figure shows over 22,000 MW are possible by the beginning of 2018. Thus, by 2018, there might be double the amount of wind installed in ERCOT than there was in 2012. While those opposed to the CPP focus on the fact that the EPA’s proposal assumes Texas could meet a 20 percent renewable goal by 2030, Texas will likely meet this goal by 2018, and certainly by 2020, without any need for doing anything but allowing it to develop.

In addition to wind, solar appears to be growing in Texas. In the latest Generation Interconnection Report, developers are considering nearly 8,000 MW of solar within ERCOT.

And then there is natural gas.

Put simply, the new fossil fuel plants being developed in Texas over the last few years are more efficient single cycle and combined cycle plants. The Panda Plant in Temple is coming online this month, while LCRA has replaced its old Ferguson plant with a brand new one. The newer plants coming online are not only more efficient, they are also able to respond quicker to changes and to the variability of wind and solar. In short, Texas’s wind, gas, and solar resources are likely to squeeze out the use of coal. Energy storage technology is still relatively new, with a few resources online and a few more in the queue, but an unknown future.

Opponents of the CPP seem to believe that Texas must keep all of its coal plants in good operating conditions to maintain system reliability, and yet the latest Capacity, Demand and Resource Reports from ERCOT suggest that Texas can maintain its target reserve of 13.75 percent through 2023, suggesting there is room in the system for some of the oldest coal plants to retire. And this is as it should be. There is room and opportunity for the oldest coal and gas plants to retire, and for new resources to replace them while maintaining Texas’ energy-only market.

And yet our state leaders seem intent on ignoring the reality in front of them. They would prefer to fight, as they have done in the past, and they will likely lose.

We have been down that road, Texans. When EPA first began requiring greenhouse gas permits for new power plants a few years ago, Texas refused to implement the program, and we had to rely on the Feds to run the program. If our state leaders had been proactive and developed our own program, we would have saved taxpayer money and saved businesses time and money as well. What happened instead was a program that took too long, and hurt both our economy and our environment because our state leaders preferred the kicking and screaming approach. The legislature stepped in, due to industry pressure, and passed legislation to require TCEQ to develop its own program.

And here we are with history seemingly repeating itself once again.

Abbott, Paxton, Hancock, and others in state leadership are forcing Texas into a proven failure of a strategy that is increasingly divorced from market realities.

It’s time we tap these leaders on the shoulder and say, “Wrong way.” Please reach out to your State Senator and tell them SCR 27 is a bad resolution, and it’s time to let the market work for clean energy!