Texas Outpaces California in Energy Production

Texas leads the country in energy production, but analysts warn that the state could repeat policy mistakes that led to California’s higher costs and fragile grid.

According to federal data cited in a recent Daily Economy report, Texas generated 512 terawatt-hours of electricity in 2023, which is more than one-quarter of U.S. output. On the other hand, California, the most populous state in the U.S., produced 194 terawatt-hours. Moreover, residential electricity rates averaged 15.5 cents per kilowatt-hour in Texas compared to California’s 31.8 cents.

U.S. Energy Secretary Chris Wright affirmed this year that the federal government is shifting its approach, noting that it will emphasize expansion over restriction.

“We are unabashedly pursuing a policy of more American energy production and infrastructure, not less,” Secretary Wright said earlier this year at the 43^rd annual CERAWeek by S&P Global.

California obtains 57% of its power from renewable sources compared to 31% in Texas. Analysts argue that California’s reliance on intermittent wind and solar energy has contributed to rolling blackouts. In contrast, while Texas produces more power at lower prices, the state has also expanded renewable output, which has been supported by decades of state and federal subsidies.

Despite this, Texas produces more output for less money, but the policy gap is heading in the wrong direction according to some analysts.

This is because of state programs like the Texas Energy Fund, which was approved by voters in 2023, and which provides $5 billion in low-interest loans for natural gas plants. Lawmakers have also approved new subsidies for dispatchable output and are considering incentives for nuclear power.

Critics believe that shifting subsidies from one fuel to another mirrors California’s interventionist approach. On the other hand, supporters argue that the new funds are needed to bolster grid reliability after Texas’ Winter Storm Uri in 2021 exposed weaknesses in their grid.

Analysts further warn that if subsidies continue to drive investment decisions, Texas could face the same challenges that have made California’s electricity more costly and less reliable.