Texas’ Power Play: Diverse Energy Options for Businesses

October 25, 2017 by Midlothian Economic Development


In the world of energy, Texas casts an extra-long shadow – for a variety of reasons.

Electrically speaking, there’s the Eastern Interconnection, the Western Interconnection … and Texas.

You read that right; Texas has its own power grid overseen by the Electric Reliability Council of Texas (ERCOT) which serves roughly 24 million people – minus a few small portions of the state which are served by the Eastern and Western grids.

Texas is not only independent in spirit, but also in electricity, as the state generates and supplies all its own electricity. 

Robust Producer

With a population of just over 27 million, it’s easy to see why Texas leads the nation in energy consumption. In fact, Texans account for nearly 13 percent of energy consumed in the U.S., according to a January 2017 report by the U.S. Energy Information Administration (EIA).  

The report also states that on a per capita basis, Texas is sixth in the nation in energy consumption while its industrial sector accounts for nearly half of the state’s energy use. This fact shouldn’t be surprising given the Lone Star state’s host of energy-intensive industries, including petroleum refining, chemical manufacturing, and more.

According to EIA data, the state is home to more than one-third of U.S. crude oil production, nearly one-third of natural gas production, and more than one-fourth of wind-powered electricity generation. For each of those fuels, Texas is the largest producing state.

Thanks largely due to its fossil fuel production power, Texas is a leading net energy exporter, producing 41 percent more total energy than it consumes. In other words, the Lone Star State has the capacity to generate a lot of power, especially when renewable sources like wind, solar and biomass are factored in.

“Over the last several years, ERCOT has publicly announced that they have sufficient generation to meet summer peak demand,” said Kevin Sills, co-founder of Midlothian-based SK Energy which specializes in residential and commercial electricity contract management. “This year, ERCOT stated they had over 78,000 megawatts (MW) of generation capacity and the 2016 peak demand was only 71,000 MW.”

One MW of electricity can power about 200 Texas homes during periods of peak demand, according to ERCOT.

Lower Rates

Not only does Texas have a lot of power, but its electricity is cheaper, per kilowatt hour (kWh), than the national average. This translates into substantial energy savings across the board for residential and commercial customers.

January 2017 rate data from the EIA reveals an average retail price in Texas of 8.7 cents per kilowatt hour, compared to a national average of 10.4 cents. In the continental U.S., rates vary from the 7-cent range to upwards of 17 cents. Without a doubt, deregulation has been a tremendous driver behind Texas’ affordable rates and competitive marketplace.

Implemented in 2002, deregulation ushered in dynamic change that reorganized the fundamental structure of Texas utilities. Electricity generators and retail providers became deregulated while the distribution and transmission companies remained regulated.

Ultimately, over time, this led to a revamped energy market where competition reigns and consumers have the freedom to choose their electric provider, thereby gaining more control over energy costs.

“Prior to electric deregulation, I was paying over 13 cents per kWh, but over the last few years I have not paid more than 7.5 cents per kWh,” said Sills. “For us, that has meant hundreds of dollars in savings every year.”

Sills went on to say that his company, SK Energy, has been able to obtain rates as low as 4 cents per kWh for its business customers. Companies frustrated by higher-priced, out-of-state markets often point to lower energy rates as part of the reason they ultimately shift their relocation sights to the Texas horizon.

With its dynamic marketplace and wealth of diverse natural reserves, one thing is certain: Texas offers an exciting fusion of conventional and renewable energy sources today for a more resourceful and profitable tomorrow.

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