Subsidized Solar in Texas Perpetuates Itself (ITC, PTC need immediate elimination)

By Robert Bradley Jr. -- April 24, 2025

“Do not dare say that Texas is ‘deregulated’ or the free market or ‘competition’ failed in the Lone Star State. All of the state and federal laws [listed] need to be repealed where the owners of assets gain control of them–and customers make voluntary transactions with government out of the picture….”

Doug Sheridan, a top energy analyst with a large social media footprint, noted the dirty hidden secret behind Texas’s beleaguered grid.

When we examine the cost of solar energy, we assume all energy comes from new assets built at current costs. Those assets are assumed to power a hypothetical grid in a US region rich in both natural gas and sunlight.

The results of the analyses show a breakeven cost of generation of $54.24 per MWh for a 100% newbuild gas-fired system. Each 10% market share increment captured by newbuild solar raises the system breakeven by $3.21 per MWh. At 50% solar penetration, the breakeven reaches $70.39 per MWh. The findings highlight the economic challenges of solar energy.

The real-world offers an even bleaker picture, however. That’s because new solar power is, in reality, being added to grids already being served by older, existing gas-fired generation. The large influx of incremental new solar capacity is lowering wholesale energy prices and forcing these older gas-fired assets to the back of the line.

Okay, so what’s the problem?

Well, these older gas-fired assets were built under the expectation they’d be given a fair shot at achieving sufficient returns over their operating lives. The rules changed when solar power, boosted by subsidies and regulatory favoritism, came into play.

Today, subsidized solar captures a large share of volumes and revenues on many systems, leading to much lower returns for gas-fired generation. With no way to reverse their investment decision, older plants must simply accept whatever price they can get in oversupplied markets. For now, this cannibalization of legacy assets is keeping a lid on wholesale prices. In the long run, however, it will only push prices up as legacy assets retire and systems become laden with too much of the wrong kind of capacity.

This erosion of gas-fired generation’s economics rarely makes the news. Yet, its impact is clear on systems like ERCOT, where solar capacity is growing quickly. Gas-fired project developers once felt confident in Texas. Now, they hesitate to invest on a system where their financial prospects are uncertain. It’s totally understandable.

Even the $10B Texas Energy Fund, which offers subsidized loans for new gas-fired projects, is seeing developers unable to come to terms (two more just this week). Our guess is developers distrust the state’s poor record on regulatory and economic fairness. Having poisoned the well for dispatchable gas-fired generation to such a degree and for so long, the Texas grid now faces an increasingly risky future when it comes to reliability and affordability.

It’s clear subsidized solar is disrupting grid economics and threatening reliability on systems like ERCOT. If history is any indication, Texas officials will attempt to hide the damage, or blame it on demand growth, instead of tackling the issue head on. Bad idea. The longer policymakers allow time-tested dispatchable generation to be undermined on ERCOT, the worse the outcome will be for Texans.

Sheridan added in a comment:

A slow-motion train wreck that Texas officials will attempt to claim was caused by demand growth rather than bad policy and poor management. You watch.

Comment

Electricity is arguably the second most regulated U.S. sector next to money and banking. The Federal Power Act of 1935, Public Utility Regulatory Policies Act of 1978, Energy Policy Act of 1992, Inflation Reduction Act of 2022, Texas Public Utility Regulatory Act of 1975, Texas Public Utility Regulatory Act of 1995, Texas Electric Restructuring Act of 1999….

The Federal Energy Regulatory Commission (né Federal Power Commission), Security and Exchange Commission, Public Utility Commission of Texas, Electric Reliability Council of Texas, North American Electric Reliability Corporation, National Association of Regulatory Utility Commissioners….

So don’t dare say that Texas is ‘deregulated’ or that the free market or ‘competition’ failed in the Lone Star State. All of the above laws need to be repealed where the owners of assets gain control of them–and customers make voluntary transactions with government out of the picture except for keeping the peace (explained here).

Time to think big–big free markets!