Today, the American Council for an Energy Efficient Economy released an astounding report showing that Texas could slash electricity demand by more than 16,000 megawatts in winter through the widespread use of efficient heat pumps, smart thermostats, and demand response programs aimed at electric vehicles.

That’s more than 80% of the missing megawatts during Uri; ERCOT demand was about 20,000 megawatts more than available supply.

It’s also about 20% of the peak demand that the PUC and ERCOT leaders fretted over last week and 50% more capacity than the infamous Berkshire Hathaway spending binge would create.

The cost savings are about as dramatic. The Berkshire Hathaway plan is now projected to cost $18 billion; to reduce the same amount of power, if utilities and policymakers focused on three highly cost effective offerings (heat pumps, thermostats, and EV demand response), runs about $100 million per year .

Another comparison: the Lieutenant Governor’s newest proposal for zero-interest loans and “completion bonuses” for gas plants is estimated to cost Texans about $1 billion for every gigawatt of electricity that’s added to the grid. The ACEEE study shows that Texas could cut a gigawatt of demand for about $42 million or less than1/20th of that cost — 95% less…

As the clock ticks down on this year’s session, the Texas Legislature is on the threshold of making game-changing decisions to improve — or not to improve — grid reliability in the state. 

The Senate has a very checkered record on energy bills this year — but it also has, to its credit, passed a bipartisan trio of praiseworthy bills focused on energy efficiency (SB 258), demand response (SB 114), and distributed energy resources (or DERs; SB 2112). 

Now, the ball is in the House's court. It has just more than two weeks to pass these critical bills.

The need for the bills has never been clearer. Even in their deeply problematic and misleading press conference last week, ERCOT CEO Pablo Vegas and PUC Chair Peter Lake talked about addressing the grid’s supply and demand challenges. The Independent Market Monitor, meanwhile, points to the lack of operational flexibility as the state’s main challenge. 

Either way, solutions like efficiency, demand response and DERs provide a cost-effective, speedy way to bolster flexibility and improve grid reliability. No matter how you look at it, the demand side must be part of the solution.

I’ll write in coming days about efficiency and demand response. Today, let’s focus on DERs.

With a little less than four weeks to go in the Texas legislative session, things are picking up steam.

A Late Entry

In a very rare move, Chair Schwertner introduced a new bill, Senate Bill 2627, yesterday, and then he passed it out of committee today. The bill filing deadline was nearly two months ago, but the Senate is famously loose with its rules. Expect this bill on the floor very soon, perhaps as soon as this week.

SB 2627 would provide zero-interest loans and a cash grant (Sen. Schwertner is calling it “a completion bonus,” though the bill is silent on the amount of the bonus) for entities that will build new gas plants. The bill currently explicitly excludes energy storage.

It’s unclear why the Senate would exclude storage, particularly various forms of Long Duration Energy Storage, which are not yet otherwise being built in Texas. An example is Form’s iron-air battery, which can last for 100 hours — these kind of subsidies might prompt Form to take a look at Texas for one of its first deployments.

With only six weeks left in the 88th Regular Session, the pressure is mounting. As the countdown to Sine Die (the final day) ticks away, I'll keep you in the loop with regular updates here on Substack and on Twitter.

Here's a sneak peek at what's happening this week.

A Senate Market Design Bill Heads to the House

After the House adjourns on Wednesday, the House State Affairs Committee will dive into one of the Senate's market design bills, SB 2012. The bill aims to control the costs of the Performance Credit Mechanism (PCM); the PCM is a favorite among ERCOT generators but not many others. The bill caps the cost of performance credits at $500 million and mandates real-time co-optimization (RTC) implementation (likely by 2026) before PCM takes effect.

However, the Senate's version includes provisions that would burden renewable energy with the costs of ancillary services and performance credits, ultimately raising consumer costs. It also prevents demand response and storage from earning performance credits, making PCM more expensive and increasing reliability risks, since the state already relies heavily on natural gas. To increase reliability, policymakers need to deal with “correlated risk;” diversifying dispatchable resources to include storage and demand side resources would help. SB 2012 cuts them out.

When the Texas House State Affairs Committee heard market reform bills for the first time last week, Chairman Todd Hunter implored witnesses to focus on the Texans who too often have been lost in the conversations about Texas’ energy future: “Now the one name I never hear is the word consumer or public or the taxpayer or the ratepayer. … Look at the impact on the public, the consumer, the ratepayer and the taxpayer.”

Good.

Because Texas consumers and ratepayers will certainly be missing from this week’s energy conversation on the other side of the Capitol. The Senate is poised to approve bills this week that could send electricity costs skyrocketing — no one knows by how much. And Senators, it seems, couldn’t care less…

Four years ago, Texas legislators asked the Texas Department of Motor Vehicles (DMV) to study and recommend a fair electric vehicles (EV) tax that would hit EV drivers no harder than the gas tax hits drivers of conventional cars and trucks.

About 29% of the money that pays for road building and repairs in Texas comes from the gas tax — which, of course, EV owners don't pay.

The DMV put forward a study suggesting roughly $100 would more than cover EV owners’ fair share of the state’s road responsibilities: “If the objective is to replace the average amount of state motor fuel tax that an equivalent conventional vehicle pays, the amount is estimated to be about $100 a year for an electric vehicle” (p. 6).

The legislature, in turn, ignored the study it commissioned. The Senate passed a $200 EV tax instead, which died in the House in the waning days of the last session. So legislators are back at it — the Senate passed the $200 tax again just this week. An identical bill (HB 2199) will be heard in the House Committee on Transportation on Wednesday.

To be clear, drivers of trucks that get ~20 miles per gallon (mpg) end up paying about $108 per year in state gas taxes, according to Texas Transportation Institute (TTI). Sedans pay, according to the DMV, $63.27 a year.

Texas leaders apparently think EV drivers — regardless of what model they drive — should be taxed at twice the highest rate in Texas and should pay more than three times the tax paid by drivers of conventional cars…

Senate Bill 6 would mean the end of electric market competition in Texas.

Last week, a Texas court ruled that the Public Utility Commission of Texas (PUC) set prices too high during Winter Storm Uri in 2021.

The Third Court of Appeals noted that the Texas Legislature enshrined competition as the cornerstone of the electric market. By fixing the price, the court ruled, the PUC overstepped its bounds and arbitrarily raised Texans’ energy bills.

There are a few reasons that energy bills are poised to climb even higher in Texas — it’s not just a bad PUC decision or two (though those have certainly made things worse). It’s also because state government — especially the Texas Senate — is moving rapidly away from the competitive principles that have been at the core of Texas’ electricity system since Dan Patrick was on AM radio…