How oil-rich Texas became America's net zero capital

Telegraph

7 days ago

Bobby Helmers used to be an oilman.
For years, he worked leasing land for petroleum companies and at one point had as many as nine oil wells on his ranch in West Texas.
But those wells have long been plugged up.
'It's not that I was dissatisfied with the oil,' says Helmers. 'It's just that production was depleting. They became no longer economically feasible.'
Now, instead, the 84-year-old Trump voter has six wind turbines spinning on his ranch.
Standing 300ft high, they make up the north-eastern end of a 76-turbine farm that stretches into the distance and is owned by French utilities company Engie, which pays Helmers handsomely for the privilege.
'If you're talking about bottom-line dollars, the wind turbines make more for the ranch than the cattle do,' says Helmers. 'They're a blessing.'
His shift to renewables may seem surprising, especially given that he lives in the largest oil-producing state in the largest oil-producing country in the world.
But the free-market, Republican region has also now become far and away America's biggest generator of renewable energy, as well as producing nearly 43pc of all US crude.
Last year, the state generated 124,934 gigawatt hours of wind energy, enough to power 11.6 million homes and nearly three times the second-largest wind-producing state.
Behind California, it is also America's second-largest producer of solar power, but it is catching up rapidly.
Between 2020 and 2024, California's solar output jumped by 67pc. In Texas, the increase was 338pc.
Its wind and solar output combined is nearly double the Golden State's, and so far this year, nearly half of Texas's electricity was powered by clean energy.
The numbers are testament not to government mandates but to what is the most aggressively competitive electricity market in America.
Texas has its own grid, a granular, location-based pricing system and no utility monopolies.
The result is an abundance of clean, cheap power fuelling strong economic growth in Texas, with many Republicans supportive of the shift away from oil.
However, their backing is now being put to the test as Donald Trump wages war on America's clean energy sector.
After returning to the White House with a promise to 'drill, baby, drill', the US president has dismissed wind farms as 'junk' and referred to them dismissively as 'windmills'.
He is now planning to fund his 'big beautiful bill' by gutting America's green energy industry, stripping away credits to fund a barrage of tax cuts.
Economists predict the move will cost Texas more than $50bn (£37bn) in lost economic growth over a decade, putting the president on a collision course with some of his core supporters.
'Renewable energy is so important to rural Texas,' says John Davis, another rancher and a former member of the Texas House of Representatives.
'And these are Republican voters. They're alienating their own base. They're going against their very own voters.'
Free-market power
Visiting Texas's latest solar farm means driving through the Permian Basin, America's largest oilfield.
For miles, on either side of the road north of a town called Big Spring, hundreds of oil pump-jacks are visible across vast fields of mesquite trees.
Their pickaxe-shaped heads dip slowly up and down as they extract crude oil from underground wells. Located among them, as far as the eye can see, are hundreds of wind turbines.
While oil and gas production is still dominant in Texas, the Hornet Solar Farm, which became fully operational in April, is emblematic of the state's renewable energy boom.
Hornet consists of 1.3m solar panels that, in 12,000 rows, span an acreage 11 times the size of London's Hyde Park. They produce 600 megawatts of electricity – nearly double the output of the largest solar farm in the UK.
The farm is so large that its owner, Vesper Energy, has installed a herd of 2,140 sheep that can be seen trotting beneath the panels, tasked with keeping vegetation at bay.
This is in addition to five people employed as full-time mowers. And Vesper is already working on plans to expand the farm further.
'Texas, in general and especially this area of West Texas, has all the elements you look for in a perfect solar project,' says Zach Wald, Vesper's vice president of engineering, procurement and construction.
It is not just about the amount of sun, but the quality of the transmission system, the speed of the planning system, and the openness among locals to this kind of development, says Wald: 'There's a community that's positive and wants it.'
As well as boasting sun and wind, Texas also has a growing population that requires power.
But another driving factor in attracting renewable energy companies is the free market.
'In Texas, there is no push for renewable energy,' says Nick Chaset, the chief executive of Octopus Energy US, the American arm of Britain's largest energy supplier, which launched in the US five years ago in Houston. 'It's purely markets, may the cheapest resource win.'
Politically, Texas and California couldn't be further apart, especially on net zero. However, both states have embraced clean power, albeit for different reasons.
'Texas and California have diametrically opposed political rhetoric,' says Chaset. 'California is very much net zero or nothing. It's about trying to construct a perfect world, [which means] it becomes extremely expensive.
'That dynamic mimics the UK a bit. It's very high-minded, but actually not necessarily delivering the desired outcome.'
The challenge facing California is that its energy costs are some of the highest in the country, despite boasting plenty of solar power and battery storage.
By contrast, Texas has lower costs because of its agnostic, free-market approach to net zero, as well as a dearth of regulation.
'You just have to fulfil your energy obligations to your consumers, and because you're competing, you're trying to do it at the least cost,' says Chaset.
A kilowatt hour of power for a Texas homeowner in April cost 15.55 cents (12p), according to the US Energy Information Administration (EIA), compared with 31.55 cents in California.
Another key aspect that sets Texas apart is that it has its own grid, run by the Electric Reliability Council of Texas (Ercot).
Crucially, unlike other states that also have their own grids such as California, Texas is not tied to the Eastern or Western interconnectors.
This means the Federal Energy Regulatory Commission (Ferc) has no role in Texas's transmission market, meaning local officials are free to set the state's power policies as they wish.
'The benefit of that is agility,' says Pablo Vegas, the Ercot chief executive.
This means that decisions can be made without federal consent, taking years off the approval process.
'We operate probably the most pure competitive electric market in the United States,' says Vegas.
While in Britain, the grid has one price nationally, Ercot has 17,000 'nodes'.
'That is effectively 17,000 different mini-markets across the state,' says Guy Newey, the chief executive of the Energy Systems Catapult in the UK.
While other parts of the US operate capacity markets, which means operators are paid for providing capacity to meet peak demand, Texas operates an 'energy-only' market. This means operators are only paid for the electricity they provide to the grid.
Every five minutes, in every node, each power plant in Texas bids a price for the electricity that it can deliver to Ercot. Ercot then dispatches the cheapest energy into the grid first.
As the generators are only paid for what they send into the grid, there is a major incentive to be cheap.
'It set up its markets to be cut-throat,' says Joshua Rhodes, a research scientist at the University of Texas.
By contrast, in many other parts of the US, there is no competition at all, says Rhodes.
'In the south-east US, they're a fully regulated monopoly utility,' he says. 'The same company owns all the generators and the power lines, and they're the ones you pay your bill to at the end of the month.'
Rewards for keeping costs down help the renewables sector, where projects are cheaper and quicker to build than new gas power stations.
'This is all getting built in Texas, not because solar and storage are green, but because it is simply the most cost-effective and fastest,' says Chaset.
Theoretically, this pricing system creates more financial risk for renewable energy companies operating in Texas compared to the UK, where the British Government protects against price volatility with so-called contracts for difference.
This extra risk is more than outweighed, however, by the speed and agility of Texas's planning system, says Newey.
This is aided by the fact that 97pc of the land in Texas is privately owned, meaning landowners can largely sell up to whomever they want.
Renewables-loving Republicans
John Davis was approached three times before he finally agreed to let an energy company build seven turbines on his Stoney Lonesome Ranch – land that has been in his family since 1880.
The first couple of times, Davis turned them down because he did not like the look of wind turbines. 'We thought they were big monstrosities,' he says.
But six years ago, he relented and now takes great pride in the 500ft turbines turning above his herd of Wagyu cows and their calves.
'I think they look majestic,' says Davis. 'It shows we're part of the new clean power that's sustainable and it's great for kids growing up in rural communities to see that you can do renewable power.'
As for what triggered his Damascene conversion, the 65-year-old grins before responding: 'They get a lot prettier when they start paying you money. I can be bought.'
Leasing his land for wind turbines now produces around 40pc of Davis's income, meaning he is far less reliant on the volatility of cattle farming.
'That is significant because I don't have to maintain them,' says the rancher. 'I don't have to water them, or feed them, or castrate them.'
As a result, he has been able to reinvest in the ranch and use some of the money to build a community area in the town that hosts a weekly farmers market. 'People can strike oil, we happened to strike wind,' says Davis.
This flexibility highlights how conservatives in Texas have long favoured the development of a wide range of power sources, regardless of Trump's anti-green agenda.
The seeds of Texas's wind boom began in 1999, when then-governor George W Bush scrapped the state's electricity monopolies and called for more wind power.
This was then followed by a decision in 2005 by Rick Perry, Bush's successor and Trump's energy secretary during his first term, to push through the Texas Utilities Code.
This designated Competitive Renewable Energy Zones (Crez), which enabled transmission lines to be connected to windy areas before contracts were signed with developers.
Davis was serving in the Texas House of Representatives when both bills were passed. 'All the Republicans supported it,' he says.
'Even though we are an oil state, we were all saying, 'We have a lot of sun, we have a lot of wind – that's a good thing.''
However, he insists he is anything but a net zero fanatic.
'We don't like to call it green energy, because that is affiliated with AOC,' Davis adds, referring to Democrat firebrand Alexandria Ocasio-Cortez.
'If you say green energy, people think you're just a tree-hugger. No, it's clean power, it's renewable power, it's economics. I'm not doing it to try to save the Earth.'
Ironically, one key driver of demand in Texas's renewable energy sector is oil and gas, as shale production in the Permian Basin uses vast amounts of electricity.
Yet in Texas's last biannual legislative sessions, which adjourned in June, some Republican lawmakers brought forward a series of bills designed to curb the renewable energy rollout by introducing new regulatory requirements and fees.
'The anti-renewable Right in Texas is starting to look a lot like the California pro-clean energy Left,' says Chaset. 'They both think the government must make all decisions and mandate this and that. In both cases, it's top-down decision making.'
Conservative Texans for Energy Innovation (CTEI), a group formed six years ago to advocate for an 'all of the above' approach to energy, lobbied hard against the measures, alongside many landowners. Davis is himself a member. The Republican House rejected the bills.
CTEI is part of the Conservative Energy Network, a group that spans 25 states in America trying to advance free-market clean energy policies.
The group's polling in March showed 64pc of Republican voters in Texas favour renewable energy, up from 60pc two years earlier. Only 22pc are against.
Opposition to renewable energy generation in Texas is typically based on objections to the appearance of wind and solar farms, as well as concerns that they rely too much on subsidies, says Matt Welsh, CTEI's state director.
Others also point to their intermittency.
Storm Uri, which dumped record amounts of snow on Texas in February 2021 and triggered the worst energy infrastructure crisis in the state's history, leaving 4.5 million people without power, has left a troubled legacy.
At the time, Texas governor Greg Abbott claimed the power blackouts were because 'wind and solar got shut down'.
In reality, wind turbines did freeze, but so did Texas's gas wells and coal power pipes.
Altogether, more fossil fuel power went offline than renewables, but the narrative blaming renewables stuck.
'That has been disproved, yet it got ingrained and started this gradual doubt about the value of wind and solar,' says Welsh.
War on the 'windmills'
As for Trump, he has expressed consistent opposition to renewable energy.
'I don't want windmills destroying our place,' the president said as he prepared to sign his 'big beautiful bill' this month. 'I don't want these solar things where they go for miles and they cover up half a mountain and they're ugly as hell.'
For once, his bite may be worse than his bark.
The bill will claw back more than $500bn in subsidies and tax credits implemented under Joe Biden's Inflation Reduction Act (IRA), according to the Committee for a Responsible Federal Budget.
Within this, the one that matters the most for the renewables sector is the bill's measure to eliminate tax credits for clean electricity production and investment for projects starting after 2027, worth around $250bn over the next decade.
'I HATE 'GREEN TAX CREDITS' IN THE GREAT, BIG, BEAUTIFUL BILL. They are largely a giant SCAM.' Trump wrote on Truth Social in June.
'Windmills, and the rest of this 'JUNK' are the most expensive and inefficient energy in the world.'
Federal subsidies for renewable energy have certainly increased the price advantage that renewable energy producers have selling electricity into Ercot, says Vegas.
Of course, America's fossil fuel industry also gets massive subsidies to the tune of tens of billions per year.
However, these subsidies do not flow directly through to the real-time market price for consumers in the same way that they do for renewables, says Vegas.
Wind farms get production tax credits for every megawatt they produce. 'That is real-time revenue that can be priced into their economic dispatch,' says Vegas.
As a result, the sudden loss of the tax credits means that fewer projects will be built and household energy bills will rise.
According to Dan O'Brien, a senior analyst at Energy Innovation, the bill means Texas will miss out on about 77 gigawatts of new electricity generation capacity over the next decade, compared to the current trajectory. This will mean $52bn in lost GDP growth and a net loss of 94,000 jobs.
It will also add 23pc to consumer energy prices and 54pc to industrial energy prices over the next decade, says O'Brien.
This is after accounting for inflation. By 2030, annual household energy bills in Texas will be $220 higher because of the bill. By 2035, the extra cost will be $480.
'Instead of seeing prices come down as we add renewables, we're seeing prices go up because of the bill,' says O'Brien.
Although it increases subsidies for oil and gas, fossil fuel production cannot be raised quickly enough to fill the hole left by fewer renewables.
'I am actually a proponent of phasing out the tax credits,' says Doug Lewin, the president of Stoic Energy Consulting. 'But actually phasing them out, with a ramp over 20 years as opposed to this cliff.
'Because what is mangled at the bottom of the cliff are consumers in the American economy. And if you're truly conservative from a market perspective, you should be in favour of phasing out oil and gas subsidies too.'
'It's going to raise the cost of building things and it's going to slow down the build-out,' says Aaron Zubaty, chief executive of Eolian, an investor behind several energy projects in Texas. 'Then less stuff will be built.'
Such concerns are being raised amid a radical policy shift in government.
This month, Doug Burgum, Trump's interior secretary, announced that renewable energy projects would only be allowed to progress on public lands if he or his deputy had personally approved them.
'What we have already seen is projects that are really good that we've been developing for a very long time have had their permits denied in the last few weeks, very surprisingly,' says Zubaty.
'We are already seeing multiple projects, tens of millions of dollars of investment, that within the last two weeks we are going to have to walk away from.'
One now mothballed project was a 150-megawatt solar project in Virginia.
Unsurprisingly, Davis is frustrated by the policy shift and the anti-renewables rhetoric.
'Rural Texas doesn't have very much economic development,' he says.
'That's what just doesn't make any sense, and that makes me frustrated as a conservative, as a Republican, as a rancher. My own party, it's like they're turning against us. It's wrong-headed.'
Complaints of this nature are emerging in the wake of horrific flash floods that killed 137 people in Texas this month, sparking outcry over Trump's cuts to the National Weather Service.
However, regardless of grumbles, Trump knows that he can probably still count on Texas for support.
While he disagrees with the president over renewable energy cuts, Davis says in no way will they be enough to stop him from voting Republican.
Even so, he'll keep fighting his case.
'Wind just makes sense,' says Davis. 'For me, I can't think of anything more conservative than to use what God gave us, wind and power.'