6 OPPORTUNITY ZONE MAGAZINE | ISSUE 2 • VOLUME 2
gas to be displaced by carbon intensive coal for use in electric generation . According to the EIA ( U . S . Energy Information Administration ), U . S . coal use is set to increase by 10 % from 2020 levels and will increase by over 15 % for 2022 . Coal is the most damaging traditional fuel in common use in the U . S . with respect to harmful pollution and carbon dioxide emissions . This retrograde market response to ESG pressures has occurred as shortages and price increases manifest themselves as the result of policies that have failed to recognize physical realities . Underinvestment in oil and gas results in more CO2 emissions from coal that cannot be offset by intermittent wind and solar sources at scale .
IEA Graph Showing King Coal ’ s Rise : Source : International Energy Agency
STACKED TAX INCENTIVES
Texas produces more wind energy than any other state and more than any other country in the world except China , Germany and India .
sharply at night . The supply of wind can change a lot too , depending on how much the wind is blowing . So , in the middle of the night , if the wind is strong , wind power can dominate . On March 29 at 2:12 a . m ., for example , wind accounted for about 40 % of the state ’ s electricity production . Unlike natural gas or coal , there is no fuel cost . Once a turbine is up and running , the wind is free . But wind operators have another advantage over generators that use coal or natural gas : a federal production tax credit of up to 2.3 cents per kilowatt-hour that applies to every kilowatt of power produced depending on when it was installed . And that means that even if wind operators give the power away or offer the system money to take it , they still receive a tax credit equal to $ 23 per megawatt-hour . Those tax credits have a monetary value — either to the wind-farm owner or to a third party that might want to buy them .
As a result , in periods of slack overall demand and high wind production , it makes all the economic sense in the world for wind-farm owners to offer to sell power into the system at negative prices .
This is a map of real-time Texas wholesale electric prices on the evening of October 18 , 2021 :
Oil-and-gas assets have additional unique tax benefits such as the ability to shield 15 % of gross production income from taxation in most circumstances ( statutory depletion ); and the availability of the immediate deductibility of intangible drilling costs ( IDC ’ s ), which represent a significant portion of the cost of drilling operations neither of which is subject to recapture upon exit . Both of these tax provisions allow ordinary income to be partially shielded from taxation to further improve the asset to maximize the tax free exit value .
Source : ERCOT - Electric Reliability Council of Texas http :// www . ercot . com / content / cdr / contours / rtmLmp . html
OTHER ENERGY INVESTMENTS IN OZS – NEGATIVE PRICING
Texas produces more wind energy than any other state and more than any other country in the world except China , Germany and India . The majority of this installed wind capacity is located in or near rural Texas OZs , most of which also have oil-and-gas production . All of this wind energy goes into the ERCOT electrical grid which offers some of the lowest interruptible electricity pricing in the world .
Demand for electricity varies a great deal over the course of the day — it rises as people wake up , turn on the lights , and go to work ; peaks in the late afternoon ; and then falls off
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