An analysis of renewable tax incentives and electricity pricing in Texas

Texas has abundant natural resources, making it a good place for renewable energy facilities to build. Unfortunately, property taxes are the highest tax an incoming renewable energy facility have in the state (Texas Taxpayers and Research Association, 2021). To increase renewable energy in the state, Texas tax code Chapter 313 was introduced. Chapter 313 allows school districts the opportunity to offer a 10-year limit, ranging from 10 million dollars to 100 million dollars, on the taxable value of a new, green energy project (Texas Taxpayers and Research Association, 2021). With Chapter 313 ending in 2022, the question is: how tax incentives that increase the number of applications for producing renewable energy in ERCOT relates to wholesale, real-time pricing of electricity in the state? Skew-t regression models were implemented on a large dataset, focusing on the North, Houston, and West regions of the Electricity Reliability Council of Texas (ERCOT), since these regions account for 80% of the state's energy consumption. Analysis focused on the hours ending at 3am, 11am, and 4pm, due to ERCOT's time-of-day pricing. Energy demand is generally low at 3am, while it increases during the day, peaking around 4pm to 6pm. The regressions in this analysis are association models, meaning no causality is implied in any of the results. When tax incentives increase the number of active wind and solar facilities there is a reduction in wholesale electricity price ($/MWh), ranging between 2.31% and 6.6% across ERCOT during different hours of the day, this is statistically significant (p<0.0001). And electricity price reductions from solar are much lower than those from wind generation.