Longview Times

When renewable energy plants are subsidized in Texas, the actual full cost of building the facilities is socialized, according to a professor of energy economics.

“The impact that a plant has on prices is not going to be born by the people who own it,” said Robert Michaels, a professor at California State University Fullerton. “Instead, somebody else is footing the bill. It’s spread across all the people in Texas. People who get their power from other generators, for example, or people who self-generate. The money gets folded into the wholesale price and everybody takes a little bit of a hit from it.”

For example, the Holstein solar project in Nolan County, Texas, became commercially operational July 10. Executives from 8minute Solar Energy and Duke Energy Renewables, which launched the farm, boasted in a statement online of the project’s affordability and low cost without mentioning that it had received generous tax abatements.

“When someone buys wind or solar power, it’s power that’s of inferior quality,” Michaels told the Longview Times. “It’s inferior because it’s intermittent. Nobody would ever buy or finance a plant if they weren’t somehow getting enough to cover all the costs.” 

Energy generated by the Holstein solar project is expected to be sold to J. Aron & Co.,  a subsidiary of Goldman Sachs, according to media reports.

“Think of them as a middleman,” Michaels said in an interview. “Ultimately, the power that goes to them is going to be resold and it gets resold in Texas at rates that largely reflect the cost of ordinary power. What you're getting with the plant is a thing that really couldn't pay its own way but looks like it's cost-competitive.” 

 According to documents obtained through the Texas Comptroller's Office, the project is receiving tax breaks from Nolan County and a local hospital district worth a combined $490,000 per year for 10 years beginning in 2021. The $490,000 break reduces what would be a $700,000 annual tax levy to only a $210,000 annual tax levy.

“The question is if the plant is only worth having when there's a tax abatement, why do they bother going through all the planning and permitting if this plant will only work economically if it has special handouts,” Michaels said.

Blackwell Consolidated Independent School District also provided a tax abatement, which reduces the annual taxable value of the project from more than $130 million to a mere $30 million for 10 years, also starting in 2021.

“There are things that would pass a market test in the sense that investors will get their money back while users of power will be getting rates that are actually competitive,” Michaels said. “The problem in Texas is that plants don't pay the full freight. The full amount that a plant costs is not just the capital. It also includes the burden it imposes on the rest of the electrical sphere because somebody has to pick up for the interruptions in power for it to be worth anything at all.”