Policy Studies Energy and Environment

Improving the market for clean energy in Texas

The last few years have seen an incredible decline in the price of technologies that provide clean energy or increase energy efficiency. The cost of solar power has fallen by more than half since 2009. In April 2015, Tesla announced the release of its new Powerwall battery, providing commercially available electrical-storage options for residential and commercial consumers, as well as for utilities.

The untapped benefits to Texas from clean-energy technologies are enormous. Texas has more solar-power potential than any other state. A 2008 study by the Public Utility Commission of Texas found that energy-efficiency measures could save Texans between $4.2 billion and $11.9 billion. Moreover, the Lone Star State’s considerable manufacturing base is ideally suited to take advantage of large-scale cogeneration, in which heat generated as a side-effect of the manufacturing process is used to produce electricity.

Yet when we turn from potential to reality, Texas often lags. Despite falling prices, Texas ranks behind such states as Colorado and New Jersey in solar-electric capacity. Many energy-efficiency and other projects that generate significant cost savings on paper remain undeveloped.

The key question – is Texas’ low utilization of clean energy and energy efficiency something about which free-market advocates should be concerned? The answer depends on the cause of the lag. Other states may use more solar power because government subsidies and mandates have increased demand artificially.

To the extent that lower use of clean energy and energy-efficiency technologies is genuinely the result of market forces and consumer preferences, this should be respected. Government should not use subsidies or mandates to increase demand for clean-energy sources.

On the other hand, if Texas isn’t meeting its potential on clean energy because of structural factors, regulatory barriers or a lack of appropriate financing options, addressing these problems should be seen as an opportunity to allow the market to function more effectively by removing obstacles in its path. Many clean-energy technologies require high upfront costs that are repaid over the lifetime of the system. These initial costs may deter widespread adoption, either because of uncertainty or lack of financing.

Fortunately, the last few years have seen the development of a number of new financing options that allow for greater access to clean energy without undercutting market forces.

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