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What is the Impact of Wind Energy on Texas Electricity Rates?

Texas is a leader in wind electricity. The state gets a substantial amount of its power from wind turbines. The percentage of electricity coming from wind has increased steadily in Texas over the past couple of decades. But what impact does all of this wind power have on Texas electricity rates?

Electricity rates are low when the wind is blowing because electricity prices in Texas are based on the wholesale electricity market. The  providers pay a generator (coal, gas, or wind) for electricity at a price per megawatt hour that fluctuates based on market demand. Since wind power costs less than coal or natural gas-based generators, it’s can often be cheaper for electricity companies to buy  from wind farms.

Timing is important when it comes to wind energy

Electricity rates are low when the wind is blowing. Wind, especially in Texas, has a habit of blowing more when electricity demand is at it’s lowest. The peak season for wind in Texas is during the spring and, in particular, at night. Because the need for air conditioning is relatively low on spring evenings in Texas, wholesale electricity rates can plummet when electricity is being produced faster than it is needed for the grid.

This can be an opportunity for savvy consumers. This imbalance between supply and demand and the resulting price swings is why time-of-day plans such as the TXU Free Nights plan have become popular in Texas. TXU was one of the first to introduce such plans. But today many electric companies in Texas offer similar plans. Many consumers are able to shift their habits and use more of their power during these periods where electricity is sometimes free. This results in overall lower electricity rates.

Improving technology makes wind energy more competitive each year

Some of the recent improvements in wind turbine technology include taller towers, increased efficiency, onsite assembly and construction. Bigger blades are also an improvement because they increase power output. Increased efficiency means it requires less input to produce the same amount of electricity. With onsite assembly and construction, turbines can be assembled quickly with less expense. This has lead to a proliferation of wind turbines in West Texas.

A major portion of the cost of wind turbines is the initial construction and assembly. The average wind turbine can last as long as 20 years. Wind turbines spur growth because developers only need to deal with transport and installation costs, not the costs of purchasing land and building a tower. A single large wind turbine creates an estimated $6 million over its lifetime in savings for equipment manufacturing and almost $5 million in health and pollution.

Natural gas still drives the cost of electricity in Texas.

“Even though electricity rates have been going down, a large percent of that is due to natural gas prices,” said Paul Wattles, former director of energy markets at the Electric Reliability Council of Texas (ERCOT).  “The electricity generation mix has changed significantly over the last few years, but natural gas is still the largest source of electricity.”

The electricity generation mix has changed significantly over the last few years, but natural gas is still the largest source of electricity.  According to Wattles, electricity rates tend to go up when natural gas prices go up.

Expect wind energy to decrease electricity rates in Texas going forward

Wind relied heavily on government subsidies in the past. Today wind energy can compete on it’s own merit. The technology has improved to the point that with the proper infrastructure in place, wind energy can have a decidedly positive impact on electricity rates. This is a trend that is expected to continue for many years to come. Even without major new breakthroughs in technology, incremental improvements will continue for the foreseeable future.

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