Wind and Solar Developers Say Their Projects Are Viable Without Subsidies: Cancellations Say Otherwise.

Guest Post from the Institute for Energy Research.

Renewable energy and battery storage companies are canceling their Texas projects at rates not seen since the height of the COVID-19 lockdowns. In the last two months, four gigawatts of battery storage systems, 3.5 gigawatts of solar farms, and nearly two gigawatts of natural gas power plants have been canceled, according to a recent analysis of Electric Reliability Council of Texas (ERCOT) data.

Battery storage projects are especially vulnerable to cancellation because nearly all battery cells used in those systems come from China, which is being heavily tariffed. The cancellations are occurring despite Texas expecting to see an unprecedented increase in electricity demand as data centers and other large electricity users move into the state. According to ERCOT, the organization operating the power grid that serves 90% of electricity demand across Texas, its electricity demand could surge 70% by 2031.

It’s baseload energy that keeps the lights on and subsidized unreliables (wind and solar) are the problem!

President Trump’s tariffs are causing issues for the renewable energy industry, increasing the cost of solar panel imports, which are mostly produced by China — a main target of the Trump administration’s tariffs. Further, Trump’s “big, beautiful bill” is causing uncertainty because it guts subsidies for wind and solar power. The massive subsidies for wind and solar power were passed during the Biden administration solely by Democrats in the Inflation Reduction Act of 2022 (IRA).

Much of Texas’s renewable energy industry had paused its projects in April to wait for more clarity on the extent and timing of the tariffs and to see if the federal “clean” energy tax credits would survive the House and Senate bills. The Solar Energy Industries Association, a solar and energy storage trade group, estimated that Texas would lose out on $50 billion in new solar investment over the next decade if federal incentives were repealed, the most of any state. Even smaller developers are starting to cancel projects since they are likely to be the most sensitive to uncertainty.

Bills in the Texas Legislature that clean energy companies called “industry killers” would have also added to the risk of developing a project, however, they failed to pass. Instead, the legislature increased the size of the Texas Energy Fund, created in 2023, by $5 billion to attract developers that want to build new natural gas power plants. The purpose of the low-interest loan program is to build up a power supply with 10 gigawatts of new gas-fired power generation that can ramp up output to the grid when needed, including when renewable production falls.

The Texas Public Policy Foundation issued a report that estimated that clean energy plants are costing the state an additional $2 billion a year because of their volatility. When the wind is not blowing and the sun is not shining, fossil fuel power plants have to ramp up and down to fill in the gaps, or operators must use expensive battery backup that relies on being charged by excess power generation, both of which raise the cost of electricity.

Despite the cancellation of projects in May, the growth of energy on the ERCOT grid has not stopped as companies are still requesting to build more megawatts of new power plants and battery. For example, recently, Energy Vault and Jupiter Power announced plans to add a 100-megawatt battery storage project in the ERCOT region, as increasing electricity demand is creating a need for more batteries to back up solar and wind plants. Nonetheless, it was the worst month for new project development in the region since 2021, signaling that the renewable energy boom in Texas may be slowing.

In May, four gigawatts of energy projects were deemed inactive, the largest amount since 2019, and in April, 4.5 gigawatts of projects were canceled. Developers are typically reluctant to cancel projects, instead leaving them pending in ERCOT’s development pipeline for years, even if they are not viable, which makes the high number of projects that have been canceled or deemed inactive even more noticeable. Texas, the state with the most renewable energy, may be an early indicator of renewable cancellations that could arise in the rest of the country, as ERCOT has the most up-to-date data on projects in the development pipeline.

Natural gas power plant cancellations in the ERCOT region are also on the rise due to difficulty in securing gas turbines needed for the projects. The lack of gas turbines to supply reliable power could result in increasing electricity prices for consumers as wind and solar power plants are intermittent sources needing adequate backup power from natural gas plants or batteries.

Conclusion

Texas is seeing a spike in the cancellation of renewable energy projects and batteries over the past two months due to Trump’s tariffs and uncertainty regarding the future of the IRA tax credits, passed during the Biden administration.

Trump’s “big, beautiful bill” has essentially gutted the credits. Despite wind and solar developers saying their facilities are economically viable without the subsidies, reality seems to indicate the opposite.

Those industries have been around for decades and should no longer need subsidies that are intended to get new industries off the ground. Texans and all Americans would benefit from the removal of the subsidies, as wind and solar have added to the 25% increase in residential electricity prices during Biden’s term in office.

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