Major Wall Street investors including BlackRock, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo have warned the Governor of Texas that plans to impose significant costs on renewable energy projects will undermine investor confidence in the space.
The proposed rule changes would force each renewable electricity generator in Texas to take on the cost of providing crucial ancillary services – a responsibility that is currently borne by electricity consumers. Oil, coal and gas producers will not be covered by the law.
The letter to Greg Abbott and the Texas state legislature comes from the US Partnership for Renewable Energy Finance (PREF) – a coalition of renewable energy investors that also includes Amazon, Google, Credit Suisse and Rabobank.
Gregory Wetstone, CEO of the American Council on Renewable Energy (ACORE), which houses PREF, described the plans as imposing “onerous new cost burdens” on renewable energy companies and compared them to Spain’s high-profile 2013 decision to retroactively change market rules for renewables. The Spanish government axed solar subsidies – including for projects that had already qualified for them – changing the financial characteristics of assets and pulling the rug out from under developers and investors. Spain is only just overcoming investors’ mistrust as a result of the decision.
“Our companies have invested tens of billions of dollars in the state partly because of our confidence in Texas’ historically friendly business environment,” Wetstone told RI.
“Such changes would undercut previous investment decisions and erode confidence that the state will continue to provide the financial stability necessary for future energy investment."
Wetstone added that the changes would neither enhance electric reliability nor lower consumer costs, and that “they appear to be premised on the assumption that renewable energy was disproportionately responsible for the state’s February power outages” – referring to the blackouts suffered by millions of homes in the state following severe storms. Abbott had blamed the outages on frozen wind turbines, a theory which has since been widely discredited.
Wetstone said the language in the proposed legislation was “confusing” and that it was hard to understand what the repercussions could be for renewable energy providers. “I would expect that the result could be ultimately litigation. There’s clearly potential for an immense financial burden.”
Last month, Texas state Senator Brian Birwill introduced a bill that would require state pension plans and investment funds to stop investing in companies that boycott fossil fuels. The funds cited in the bill include the $155.2bn Texas Teacher Retirement System and the $116m Texas Emergency Services Retirement System.