Texas Is Too Windy and Sunny for Old Energy Companies to Make Money

6.20.17

As attractive a renewable-energy concept as wind power is, it’s plagued by a fundamental flaw. It blows the most in the dead of night, precisely when there’s the least demand for electricity. That’s true for just about every wind-blown spot across the U.S., from the foothills of the Tehachapi Mountains in California to the coastal plains of North Carolina.

And then there’s South Texas.

It is to wind, engineers have discovered in recent years, a bit like what Napa Valley is to wine and Georgia is to peaches. For not only does the state’s Gulf Coast generate strong evening gusts, but it also blows fiercely in the middle of the day, just as electricity consumption is peaking.

It’s the result of something called convection currents—a phenomenon caused by the gap between the temperature on the water and land—and it’s allowing wind farms owned by Apex Clean Energy Inc. and Avangrid Inc. to tap into the midday spike in electricity prices that comes as air conditioners start to hum.

In the cut-throat Texas energy market, the construction of these coastal wind turbines—some 900 in all—has had a profound impact. It’s been terrific for consumers, helping further drive down electricity bills, but horrible for natural gas-fired generators. They had ramped up capacity in recent years anticipating that midday price surge would mostly be theirs, not something to share with renewable energy companies. Without that steady cash influx, the business model doesn’t really work, the profits aren’t there and companies including Calpine Corp., NRG Energy Inc. and Exelon Corp. are now either postponing new gas-fired plants or ditching them all together.

Wind power “is a disruptive technology and it’s increasing,” said Paul Patterson, a utility analyst at Glenrock Associates LLC in New York. “That’s a problem for other resources that are competing in that market.”

And it’s not just the coastal turbines that are cutting into gas-fired plants’ business. When inland farms are included, wind power now supplies about a fifth of Texas’s electricity market. Solar power is also growing in the state. All of this helped push the average on-peak price set by Ercot—the grid operator that controls most of the Texas market—down 55 percent the past five years to $25.34 per megawatt hour, according to data compiled by Genscape Inc.

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