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How the Texas energy grid could be impacting your retirement plan

We are all paying more for our electricity. Last year’s winter storm cost Texas billions. Money to fix the grid comes from investors.

AUSTIN, Texas — Texas requires at least half of all electricity generated to come from natural gas. And, last year, lawmakers passed a bill to boycott any investment company who refuses to invest in the oil and gas industry.

“Send an appropriate message that if you don’t want to do business with Texas companies, we won't do business with them,” said Brent Bennett, Ph.D., the policy director for Texas Public Policy Foundation, in a legislative hearing last year.

It’s not that simple. Texas needs to build more reliability into the power grid.

The state uses two main sources of energy for electricity. Natural gas and wind make up more than three-quarters of our energy mix. Both industries play a role around the nation.

Texas is the largest natural gas exporter in the U.S., and Texas exports more wind-generated energy than any other state.

“We have to encourage the expansion of renewables because they’re cheaper. That's changing the way we do business, changing the way we allow people or companies to invest,” said Craig Nazor, conservation chair with the Sierra Club, Lone Star Chapter.

Renewables need more investment dollars for storage.

“But the thing is, it takes money upfront,” Nazor said.

The reliability isn’t there without storage.

The state’s grid manager, the Electric Reliability Council of Texas (ERCOT), shows Texas had 469 megawatts of installed battery storage in September 2021.

One megawatt could power about 200 homes in peak demand, ERCOT’s Fact Sheet shows. It wouldn’t cover all of Round Rock, let alone the state.

“The thing is, it could be done with our grid on a larger scale, but you're going to have to change a bit the way things are done,” Nazor said.

“Whether you live in the middle of the oil patch or not, oil and gas has a positive influence on the lives of all Texans,” said Todd Staples, Texas Oil and Gas Association president.

Staples said investments should focus on fossil fuels.

“Some of our nation’s biggest investment funds are heavily invested in oil and natural gas” Staples said.

Staples lobbies for the oil and gas industry and points to another return on investment — the Economic Stabilization Fund (ESF), also known as the “rainy day fund.” It’s oil and gas tax dollars.

“Retired teachers have been a big beneficiary. Our state's water planning, even county roads have received funding out of that fund,” Staples said.

In the 87th Texas Legislative Regular Session, lawmakers heard oil and gas producers say they couldn’t get loans to build out operations.

A Federal Reserve Bank of Dallas report shows banks label oil and gas investments as “too risky” 

Senate Bill 13 was signed into law last year. It mandates all state pension funds go to investment companies which do not boycott fossil fuels.

Teachers must give more than 7.5% of their income to the state’s pension system. Other state employees are required to give 9.5% of what they make.

Why the focus on retirement? Retirement accounts make up the largest American-owned investments.

A 2020 Tax Policy Center report shows 30% of the stock market is in an investment account.

In 2021, the U.S. Department of the Treasury published a report showing how the climate can impact financial risks. A recent proposal from the federal Office of the Comptroller of the Currency shows “the effects of climate change” as “emerging risks to banks.” 

Private investment groups invest billions into renewable energy.

“Energy is big money and renewables are big money, just like oil and gas are. So the amount of money attracted to Texas to build wind and solar farms is incredible,” said Michael Webber, PhD., Josey Centennial Professorship in Energy Resources at the University of Texas at Austin.

It leaves Texas oil and gas at war for retirement dollars.

“The resources in Texas that are particularly attractive and getting most of the investment and attention right now are solar, batteries and wind – almost in that order,” Webber said. 

“Some of the best growth this past year has been in the oil and gas communities,” Staples added.

Last year, companies tied to natural gas made billions of dollars for the state’s pension system, companies’ 401(k) plans and individual retirement accounts.

Teachers Retirement Systems of Texas showed how the new state law banning green-energy-only investments could directly harm teachers’ savings.

TRS investments do not go directly to energy companies. Instead, they rely on companies tied to commodities.

Texas law shows state pensions divestments would have a fiduciary exception. 

“You want to reduce your emissions and clean up air quality, which I think most of us who breathe want to do and a lot of investors certainly want to do is putting pressure on companies to clean up. So we have decisions about the future mix and what the role of gas will be,” Webber said.

“Oil and gas companies are participating in the development of a wide variety and it has to be economically feasible. It has to be competitive,” Staples said.

Natural gas company Energy Transfer made billions off last February’s winter storm. In the third-quarter earnings call, company leaders said they added wind and solar to its mix last year.

“We're certainly investing in our commitment to purchase what we see as very inexpensive power. So we are supporting renewables in that way or that manner, but we'll continue to pursue those that make sense,” said Mackie McCrea, co-CEO.

“You can build a wind farm or solar farm more cheaply, more quickly and more profitably in Texas than just about anywhere in the world. And that makes us very desirable,” Webber said. 

“I think it's very important to think about the health of these funds and how it benefits Texans and Americans,” Staples said.

“We have a lot of options and we have room to grow,” Webber said.

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