Time to read: 8 minutes
Rising energy prices have left a lot of Texans scratching their heads. Why are these prices so high? How much higher are they than last year? Is there a way to offset these costs? The truth is that there are actually several factors that contribute to these increases. In this article, we’ll be exploring the reasons why Texans have been seeing a large increase in their energy prices.
Something for perspective
As a concrete example of what Texans are experiencing, we’ve provided a portion of a Texas resident’s PEC electric bill that details their power usage over the course of the past year as well as the increase in costs.
A PEC electric bill for a Texas Resident
This bill shows the current energy usage and costs for July of this year are $96 higher than they were during the same time last year. This is partially caused by the increases in temperature. The maximum temperature increased by 11 degrees, the minimum increased 4 degrees, meaning that the average temperature increased by 7 degrees. In other words, the $96 price increase was partially due to the 7 degree average increase in temperature.
Screenshot from a Texas resident’s Reliant energy bill
In this particular example, you can see that this customer’s energy usage for this year is much higher than it was at nearly every point last year. Above the chart are average temperatures for each month, with the above set of numbers pertaining to the current year. The temperatures from the summer months range from being between 12 to 14 degrees higher than they were one year ago. The increased demand for power due to high temperatures is part of the reason for such a disparity between this year’s power consumption when compared to the previous year.
This increase isn’t isolated to the particular area that these residents live in. Many Texans are seeing similar increases in their energy prices in the San Antonio, Dallas, Fort Worth, and Houston areas. Now that we have an example in place, we finally arrive at the big question.
Why are energy prices high?
The fact of the matter is that there isn’t a single answer to this question. There are several different things that go into why electricity bills have risen so much for Texans.
- Deregulation
The fact that Texas is isolated from the national power grid means that the way that electricity is distributed is different from the rest of the US. The energy market in Texas is deregulated, which means that instead of having a single electricity provider, residents must choose between different providers that buy electricity wholesale. There are a couple of downsides to deregulation. First, there is no incentive for weatherizing equipment or improving efficiency. Second, when utility providers attempt to gain competitive advantages, it can lead to misleading marketing. ERCOT is responsible for regulating the market in Texas, but electric companies in Texas still need to turn a profit. When these companies deal with increasing costs, they end up having to increase the price for the electricity they sell.
- Demand for power
When the demand for power increases at points in time like the hottest part of the day, the wholesale price of energy increases. Increases in population size also increase the demand for energy simply by virtue of there being more people who need power from the grid. The infrastructure of the grid is designed to meet the energy needs of a certain number of Texas residents, and the current population of the lone-star state is higher than what was projected. When more people need electricity than the grid was originally designed for, it needs to work much harder to meet the needs being placed on it.
- Weather and maintenance
As we had pointed out earlier, there is little to no incentive to weatherize infrastructure. Weatherizing prevents the infrastructure from failing in the event of extreme weather like winter storms or hurricanes. The result of putting off or never weatherizing the infrastructure of the grid is that power outages occur. Winter storm Uri is a prime example of this, as the storm caused widespread, rolling blackouts. Residents who were able to keep their power on saw exorbitant increases in their electricity bills due to the high demand for power. When the repairs, maintenance, and weatherizing finally took place, Texans ended up having to help pay for it. In summation, utility companies have no incentives to maintain the infrastructure of the grid, but when they do, Texans are billed for it in the form of higher electricity costs.
- The price of natural gas is increasing
According to an article from Houston Public Media, roughly 50% of the electricity that is produced in Texas comes from natural gas. Due to multiple factors such as the invasion of Ukraine and halted oil production caused by Hurricane Ida, the cost of natural gas has increased. Additionally, according to the Fort Worth Star-Telegram, after winter storm Uri in February 2021, laws and regulations were changed that led to an increase in the supply costs in Texas.
To further put things into perspective, according to the U.S. Energy Information Administration, the current cost of natural gas in July of this year was $7.28 per Btu, which is nearly twice its price in July 2021 of $3.84 Btu. Additionally, the higher-than-average temperatures have increased energy demand, which in turn increased the demand for natural gas. In Texas, spring was hotter than it normally is and the summer heat arrived earlier than expected.
- Record-breaking temperatures
While there are several things that are causing increases in your energy bills, the high heat is consistently one of them. In the electric bill we used as an example, a difference as little as an increase in average temperature of 7 degrees caused a $96 increase in the individual’s bill. Many lay the blame of the rise in energy costs on high temperatures, but this is only one part of the issue.
With these factors contributing to the issue, Texans have started to look for solutions to high energy prices. With the amount of sunshine that Texas gets all year-round, solar energy is an effective solution that more and more residents are turning to.
Solar gives you stability and control over your energy bills
A Solar Powered System gives you control and stability while offsetting energy costs.
- Lower electric bills
Texas residents that switch to a Solar Powered System typically see a reduction in their energy bills of about 30%-50%. Using energy during a sweltering summer day through your air conditioning system demands more energy from the grid. By generating your own power by using your Solar Powered System during the day, you are able to hold off on using any energy from your utility company until nightfall, causing a significant decrease in the amount of electricity you need from them.
- Control over how you use your energy
The ability to have control over your own energy usage is a very big benefit to having a Solar Powered System. During the day, you can use your solar panels to power your home. At night, you can either switch to the power grid or use power stored in batteries if you have those installed as well. Overall, the more you have invested in your Solar Powered System in the form of panels, batteries, and a generac® generator, the less you have to rely on paying for power from your utility company. You can also set timers for your Solar Powered System that will determine when you are using the energy from your panels and when you are using energy from your utility provider.
- Stability in the face of power outages
Going solar does more than just keep your lights on during the day – it can also help you keep the power on if there is ever a power outage. As we have written before, power outages can also cause spikes in energy prices. By switching to solar, you gain the stability that comes with having your own energy source. Backup batteries and Generac® generators keep your power on in the event of an outage and, by extension, keep you from having to deal with price spikes from your utility company once the power has been restored.
- Federal tax credits were increased
Now that the Inflation Reduction Act has been passed, the federal tax credit has increased from 26% to 30%, meaning that you now might get even more out of investing in a Solar Powered System.
- Reduce before you produce
Once you begin saving money with a Solar Powered System, you can save even more money beyond that by reducing your power consumption before producing energy. Doing things like replacing your light bulbs with LED lights, turning off lights during the day and in rooms that aren’t being used, using shades to block windows, and turning your thermostat to 78 degrees can reduce power consumption. Additionally, you can also check the air filter for your air conditioner in your home to make sure there is a healthy amount of air flow. Old or dirty filters cause your air conditioner to work harder, resulting in higher power usage and may even cause your ac’s coil to freeze up, which could keep it from cooling your home.
Overall, Solar Power is a tried-and-true way to offset energy prices for Texas residents. While energy prices rise, IES Texas Solar is there for Texans to make sure the sun sets on their power pricing woes.
If you are considering switching to solar for your home or business, reach out to us by going to our website, iestxsolar.com, or by giving us a call at (855) 447-6527.
Sources:
https://www.star-telegram.com/news/ local/fort-worth/article264137346.html
https://www.houstonpublicmedia.org/ articles/news/texas/2022/08/11/430516/why-are-texans-electricity-bills-so-high-right-now/
https://www.ecowatch.com/ electricity/rates/tx/why-are-texas-electric-rates-high
