Spending money to help consumers, especially renters and landlords, to improve energy efficiency is 39 percent cheaper than building new fossil fuel power plants, data shows.
The cheapest kilowatt-hour of electricity is the one you do not use.
Yet conservation has enormous value to the grid, and the Electric Reliability Council of Texas should pay more for it.
The Public Utility Commission of Texas and grid operator ERCOT rely on companies and consumers to reduce demand when temperatures approach extremes and electricity supply runs low. The Texas Legislature allows prices to rise from about 5 cents a kilowatt-hour to $5 because they want to reward generation and encourage consumers to cut back when supply is tight.
Consumers, though, consider it price-gouging when rates spike at the moment we need electricity the most. But spending billions of dollars building power plants to meet a level of demand we only experience for a few hours a year would cost even more. The better investment is in greater energy efficiency and easier demand response, which the Public Utility Commission of Texas has still not prioritized since the grid failed in February 2021.
The commission, appointed by Gov. Greg Abbott, is an energy efficiency laggard compared to other states, according to the American Council for an Energy-Efficient Economy, a nonpartisan, nonprofit advocacy group.
Spending money to help consumers, especially renters and landlords, to improve energy efficiency is 39 percent cheaper than building new fossil fuel power plants, ACEEE data shows. But the PUC and Texas lawmakers continue to push fossil fuel power plants that will benefit Republican Party donors.
"Wasting electricity in Texas when power demand is peaking just doesn't make sense," Steven Nadel, executive director of ACEEE, wrote back in October. "Home efficiency upgrades and technology that shifts when electricity is used simply costs less than building new plants, and we have the numbers to prove it."
Across the country, states spent an average of 1.5 percent of electricity sales on energy efficiency programs in 2020, but Texas only spent 0.5 percent, according to ACEEE data. The lackluster spending to upgrade the homes of low-income consumers or subsidize commercial demand response has led to higher prices by setting new electricity demand records.
The best way to reduce prices is to reduce demand. In 2020, energy efficiency programs reduced electricity usage in Massachusetts by 2.3 percent, California by 1.7 percent and Arizona by 1.2 percent, according to government data. Texas' programs only achieved a 0.2 percent reduction.
Texas could do so much more if lawmakers applied the right incentives.
The most crucial step is to reward profit-seeking corporations for promoting conservation. Texas law requires utilities to offer energy efficiency programs in return for bonus payments. But because the goals have remained unchanged since 2011, utilities achieve them with little effort. Electricity demand, meanwhile, continues to set records.
The PUC should set higher energy efficiency goals and reward utilities more for reducing demand, Cyrus Reed, conservation director of the Sierra Club's Lone Star Chapter, told commissioners at a hearing last month.
The PUC could also save money by dramatically reducing peak demand over the next five years with energy efficiency and demand response programs for residential consumers, the American Council for an Energy-Efficient Economy determined in a white paper. Helping homeowners upgrade from electric furnaces to electric heat pumps, improving attic insulation and duct sealing, switching to smart thermostats and installing heat pump water heaters are the more cost-efficient efficiency steps.
Demand response programs could include paying consumers for allowing their utility to shift when their central air conditioners, water heaters and electric vehicle chargers are used, the ACEEE suggested.
Implementing these programs would cost Texas $4.9 billion over five years and eliminate the need to build $8 billion worth of fossil fuel powerplants, the ACEEE calculated.
To their credit, the PUC has recommended expanding the Emergency Response System that pays big commercial and industrial customers to drop off the grid during peak periods. Regulations capped the program at $50 million a year in 2007, but the PUC has proposed raising the budget to $75 million.
Mona Tierney-Lloyd, head of U.S. public policy for energy company Enel, said ERCOT has already seen the benefits of paying companies to reduce demand. She says her company would like to expand demand response services.
"This year is going to be a proof point of whether that additional $25 million is adequate or whether we should think about more investment," Tierney Lloyd told me.
Texas will need more electricity, and the vast majority should come from wind and solar resources coupled with battery backup. We will also require new natural gas plants for when demand peaks, but not for routine generation.
Energy efficiency and demand response will save money and conserve resources year-round. The PUC should set rules that make saving energy as profitable as generating it.
Chris Tomlinson of the Houston Chronicle, named 2021 columnist of the year by the Texas Managing Editors, writes commentary about money, politics and life in Texas. He can be reached at firstname.lastname@example.org.