The power grid, sometimes referred to as "the grid," is an interconnected network for electricity delivery from electricity producers to electricity customers. The grid is made up of:

- electricity generators - facilities that generate power
- electrical substations - translates voltage from high to low (or vice versa), depending on grid needs
- electric power transmission - interconnected power lines that transport electricity across long distances
- electric power distribution - carries electricity from the transmission system to individual power users, such as your house or business

Broadly speaking, the United States electricity grid is divided into three primary electricity interconnections, or geographic areas where utilities are electrically bound together during normal system operations:
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1. The Western Interconnection (pictured in red) covers most of the western United States, and the Canadian provinces of British Columbia, and Alberta.
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2. The Eastern Interconnection (pictured in blue) covers most of the eastern United States, and the Canadian provinces of Saskatchewan, Manitoba, Ontario, New Brunswick, Prince Edward Island, and Nova Scotia
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3. The Electric Reliability Council of Texas (ERCOT) (pictured in green) covers most of Texas with the exclusion of some areas in the west, northwest, and east of the state.

Image source: North American Electricity Reliability Council (NERC)

ERCOT, or the Electricity Reliability Council of Texas, is the grid operator that covers most of Texas. ERCOT is regulated the Public Utility Commission of Texas and has four main responsibilities:
- to maintain system reliability
- to facilitate a competitive wholesale electricity market
- to facilitate a competitive retail electricity market
- to ensure open access to transmission

(don't worry, we'll get into that more below!)

Source: ERCOT

ERCOT delivers electricity to 90% of the state of Texas. The map below shows the area that the ERCOT grid covers. As you'll see, it excludes several larger communities in Texas, such as El Paso, Beaumont, Texarkana, and Amarillo.

Source: ERCOT

The ERCOT grid is unique because unlike the Western and Eastern Interconnections, ERCOT does not cross state lines - ERCOT is located only within the state of Texas and its operation only impacts Texans. ERCOT is not connected to any other state's electricity grid.

It’s important to understand that ERCOT doesn’t generate electricity itself. Its primary role is to monitor all the moving parts that keep electricity flowing in the state and to keep the markets that provide electricity throughout Texas running smoothly. The actual generation, distribution, and regulation of the Texas energy market involves multiple entities, which is described in detail below. 

In 1883, Galveston became the first city in Texas to install electric lights. Power plants popped up in other Texas towns and cities, providing energy for lights, appliances, elevators, pumps, and industrial machinery. Small power companies began to form to power the refrigeration of ice plants and other industrial activities. As power companies and utilities began to grow in the United States and more households began to gain access to electricity, Congress passed the Federal Power Act in 1935, which gave the federal government the authority to regulate the transfer of electricity between the states. To avoid the new federal regulations in the Federal Power Act, utility companies in Texas decided that they would agree not to send any power outside of the state.

At the start of World War II, the power generators formed the Texas Interconnected Systems (TIS) in response to a significant demand for electricity along the Gulf Coast supporting the war effort. TIS helped the state to better integrate hydroelectric dams better along Texas rivers and more reliably transport electricity to the Gulf. These actions made Texas separate from the other two major interconnections in North America.

Sources: Texas Comptroller of Public Accounts, KXAN

In 1965, the United States experienced the largest power outage in its history. Although the independent structure of the TIS meant that its service area was not impacted, the outage created a push for further regulations to help make the grid more reliable. New regulations were passed at the federal level, and in 1970 the Texas Interconnected System shifted to form the Electric Reliability Council of Texas, or ERCOT.

Sources: Texas Comptroller of Public Accounts, KXAN

In 1996, ERCOT was designated to manage the power flows between utilities, making it the country's first independent system operator. Three years later, in an effort to bring electricity prices down in much of ERCOT's service area, the Texas Legislature created the competitive energy market (CEM). Retail electricity competition allows customers to choose which electricity provider they want to use. According to ERCOT, about 75% of its total power load represents customers in these “competitive” areas. The remaining 25% of power in ERCOT is used in areas without retail competition, like cities with municipality owned utilities or areas with electric cooperatives.

ERCOT remains outside of the jurisdiction of the Federal Energy Regulatory Commission (FERC), which succeeded the Federal Power Commission and regulates interstate electric transmission. Power companies in the ERCOT service area are not subject to the same regulations as those in other parts of the country.

Sources: Texas Comptroller of Public Accounts, KXAN

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Texas produces and uses more electricity than any other state, and is the only state that operates an independent electricity grid. Much of this electricity use can be attributed to the state’s large industrial plants, including those in the oil and gas industry. As of November 2021, the fuel makeup of electricity generation in Texas is:
- natural gas (45.5%)
- wind (22.8%)
- coal (17.9%)
- nuclear (10.9%)
- other - including solar, hydroelectricity, and biomass (2.9%)

Source: ERCOT Fact Sheet November 2021

When electricity is generated at a power plant, such as a natural gas plant or wind farm, it is sold on the wholesale market. For the power to be transported from where it's made to your house, it has to first cross larger transmission lines, which are operated by transmission service providers (TSPs). TSPs are publicly-regulated, privately-owned companies that own and operate transmission lines.

The electricity then travels across distribution lines, which are more local power lines that are operated by your local distribution service provider (DSPs). Your DSP may be your local municipally-owned utility, an electric cooperative, or a private company, depending on where you live.

The way you receive electricity from the Distribution Service Providers (DSP) depends on where your house is located in the state. In 75% of ERCOT, customers can choose who they would like to buy electricity from on the Competitive Energy Market (CEM). The electricity providers in the CEM are called Retail Electric Providers, or REPs. You can click here to see if you live in the CEM. 
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REPs buy electricity from DSPs and sell the electricity to customers like you. Although all REPs in an area buy electricity from the same DSP, each REP typically offers a different pricing plan or unique option for paying your bill to make the market more competitive. The remaining 25% of Texans buy their electricity from a municipally-operated utility (munis) or a rural electric co-op (co-ops). Munis and co-ops are the only option for electricity purchase for those who live in their service area.
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While all that may seem complicated, this market structure is important to understand because it impacts how solar projects can be built out in Texas. If you live in the CEM, there may be additional challenges bringing the benefits of solar to your community. More on that in section 5 below!

ERCOT covers only a portion of the state, excluding areas like El Paso and Texarkana. Within ERCOT, different geographic areas are served by different utilities. A portion of the state falls within the Competitive Energy Market (CEM), meaning that different electricity customers can choose which electric provider they would like to use. Your access to the CEM depends on what part of the state you live in. There are three types of electricity providers that deliver electricity to customers:

- municipally-operated utilities (munis) - normally serve a specific city or area and are owned by the city government
- electric co-ops (co-ops) - are owned by their customers, and profits are either reinvested or distributed among electricity consumers. Co-ops are often found in rural parts of the state.
- retail electric providers (REPs) - sells electricity to retail customers in the areas of Texas where the sale of electricity is open to retail competition (the CEM). Often investor owned.

The Texas Competitive Energy Market (CEM) covers only a portion of the state. Unless you are served by a municipal utility or an electricity cooperative, your home is likely in the CEM. The map below details the areas of the state covered by the CEM. The different colors represent the respective transmission and distribution service utility (TDSU) that serve those geographic regions. The companies listed below may not necessarily be who you pay for your electricity if you live in one of these regions, but rather the company that has built out the wires connected to your home or business.

To find out if you are located in the Texas CEM, enter your address in the Consult section of the VEIC. For a more detailed version of the Texas CEM Map, please visit the Texas Competitive Electric Market Location Explorer.

Image courtesy of Houston Advanced Research Center (HARC).

For electricity customers served by munis and co-ops, electricity can only be purchased from the muni or co-op that serves their area. For example, if you live in San Marcos, your only option is to purchase electricity from the city's municipally-owned utility, San Marcos Electric Utility. If you live in an area like Bryan, you're served by Bryan Texas Utilities (BTU).

For those who live in the Texas CEM, you choose which retail electric providers (REP) you'd like to purchase electricity from. For instance, if you live in Houston, you might choose to purchase electricity from companies like Reliant and TXU.

REPs, or retail electric provers, are companies that have been approved by the Texas Public Utility Commission (PUCT) to sell electric services. REPs use the transmission and distribution network that is operated by your local transmission and distribution service utility (TDSU).

REPs have different plans and contracts that they can sell to customers. The different plans and contract lengths that REPs offer have different prices and benefits to compete for your business, meaning that the price you pay depends on which plan you choose.

Your local utility company (transmission and distribution service utility or TDSU) is responsible for delivering your power and for operating and maintaining the electric transmission and distribution lines in your area. This is who you call if you experience a power outage. There is only one TDSU in your area, so there's only one set of electric wires that has to run to your home or business.

Retail electric providers (REPs) manage your electricity rates, billing, bill payment, and general customer service. If you live in the CEM, there are many REPs in your area.

The use of solar power generation is growing across the state. As of September 2021, there was 6,143 megawatts (MW) of solar generation capacity in the ERCOT service area. Nevertheless, solar only represents 3.8% of the electricity generation capacity in ERCOT's area.

Solar energy generation generally takes on several forms in Texas:

1. Residential solar - solar panels that are placed on the rooftops or nearby ground area of residential electricity users.
2. Commercial solar - solar panels placed on the roofs or nearby ground areas of commercial power users, like stores or warehouses
3. Utility-scale solar - large-scale solar installations that generate power on the electric grid.

Source: ERCOT

There are many benefits that solar energy can provide to you and your community:

- Access to clean energy and reduced carbon footprint - generating electricity with solar panels does not increase emissions. This aspect is particularly important for communities that have ben impacted by pollution from other energy sources.

- Lower electricity bills - solar panels have become cost-competitive with other sources of electricity generation. Depending on your unique situation, you may be able to achieve cost savings through solar energy.

- Lock in electricity costs - solar power does not require fuel, so the electricity price does not fluctuate like oil and gas prices. By investing in solar panels, you may be able to more easily lock in the electricity rate you pay in the long run.

- Greater control over electricity - using solar panels means you know where your electricity comes from. With traditional REPs, you are forced to use one of their pre-prescribed plans.

- Resilience - in the event of a power outage in your area, nearby solar panels may be able to provide you with power, especially if paired with a battery. This benefit can be important during extreme weather events or grid failures.

While the price of solar panels and other related equipment has decreased over the years, the cost of installing and operating solar panels struggles to compete with the relatively low cost of electricity in the Texas CEM. Some larger power users, such as warehouses and other commercial entities, are able to negotiate low power rates with their REPs. Despite the lowering cost of solar panels, traditional sources of energy continue to be cheaper.

Every home or business has an electricity meter installed by your utility that monitors the amount of electricity you use. It helps them to determine how much electricity you've used during a given billing period.

The relative 'placement' of a solar installation affects how much it costs for you to use and how many regulations that it's subject to. In general, solar projects can be installed 'in front of the meter' or 'behind the meter'.

'In front of the meter' - solar projects that are connected to the electric grid and use the local transmission and distribution service utility (TDSU) to deliver electricity to the power users. These projects are subject to state and local regulations.

'Behind the meter' - solar projects that are behind the meter are constructed on the site where the electricity is consumed. A common example of a 'behind the meter' solar installation are residential rooftop solar panels. These solar panels deliver electricity to the power user without using the power grid and without going through a REP for billing. Solar projects that are 'behind the meter' are still connected to the grid, and any excess electricity that is generated by behind the meter solar panels is returned to the grid for other power users to use. In some areas, 'net metering' allows solar panel owners to receive money back on their power bill for the excess electricity they return to the grid. This function is not available in all parts of the state, however. You will need to contact your local REP and utility to see if net metering is available to you.

If you’re not familiar with solar, you might think that the only way for you to benefit from solar energy is to put solar on your roof and call it a day. In reality, there are a number of different ways that you and your community can benefit from solar energy in the Texas CEM. Each of these methods for accessing solar is referred to in the VEIC as a solar model.

There are a variety of solar model options in Texas, each with its own set of benefits and challenges. Because the VEIC tool is focused on bringing benefits of solar to a community group, we will not be providing information about traditional rooftop solar on individual households.

The following sections document some of the solar models available in Texas and highlight how these models function in practice, how they might benefit you, and what their challenges may be.

In this model, a large commercial power user contracts to have a solar installation built that is cost-competitive with the electricity rates they currently pay. The power user pays for the electricity through a power purchase agreement (PPA). Any savings that the large commercial power user achieves is passed on to a target group of electricity users or a community-based organization in the form of an electricity stipend.

For more in-depth information on this model, please visit the Model 1 Overview in the Toolkit section.

HirschServoAG, CC BY-SA 4.0 , via Wikimedia Commons

In this model, a group of electricity users work together to collectively purchase a large number of solar panels for rooftop solar installation. By purchasing as a group, they can save money with bulk discounting, combine installation costs, and share maintenance responsibilities. This model can also work for a single large power user interested in purchasing a larger solar power array, as they can also achieve bulk discounting.

For more in-depth information on this model, please visit the Model 2 Overview in the Toolkit section.

In this model, a large, utility-scale solar installation is built near a selected low-to-moderate-income (LMI) community. Community members sign up to either own part of the solar installation or pay a monthly electricity bill to receive electricity from the solar installation as they would from a traditional power provider.

For more in-depth information on this model, please visit the Model 3 Overview in the Toolkit section.

In this model, a retail electric provider (REP) is created to purchase wholesale energy from solar and wind energy producers. The REP then sells this electricity to a target group of electricity users, providing 100% renewable energy at a low cost.

For more in-depth information on this model, please visit the Model 4 Overview in the Toolkit section.

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Energy equity, in particular, refers to "committing to equity in clean energy programs, policies, and investments [to] improve and expand clean energy services and technologies for marginalized groups while creating more just processes, outcomes, and systems. Many groups have historically been underserved by energy efficiency and clean energy programs, including Black communities, Indigenous communities, people of color, low-income individuals, youth, older adults, recently arrived immigrants, those with limited English proficiency, and people with disabilities." (ACEEE)

Energy equity necessitates including impacted communities in the decision-making process, by ensuring that the benefits and burdens of the energy sector are evenly distributed, and by grappling with the unjust legacies of the past to create a more equitable future.

Sources: PolicyLink, ACEEE, SEEA

Energy equity is important because it recognizes that disadvantaged communities have been historically marginalized and overburdened by pollution, underinvestment in clean energy infrastructure, and lack of access to energy efficient housing and transportation, and it aims to reverse these negative impacts.

As the United States transitions away from an energy supply dominated by fossil fuels to a more diverse fuel base, it is critical to ensure that this transition is “just” and that all communities have equitable access to affordable, clean energy. Past energy transitions have too often maintained exploitative social dynamics and have ensured that low-income communities and communities of color continue to be placed at social, economic, and health disadvantages. If equity is not centered in the current transition to clean energy, there is potential to continue the exploitative practices of the past.

Sources: SEEA, TEPRI, PNNL

Historically, the majority of solar installations have been concentrated in neighborhoods with mostly upper and middle-income households. Lower-income and historically underserved communities have not been able to benefit from clean solar power. They also often face higher energy burdens. With energy equity as a driving force, solar projects can help to even out the existing disparities in clean energy deployment and alleviate some of the high energy costs faced by historically underserved communities.

Source: U.S. Department of Energy

The VEIC was designed with energy equity as its primary long-term objective. It is designed for community-oriented individuals, groups, and businesses who are interested in bringing the benefits of clean solar energy to their community. Energy equity is the central focus for ensuring that the benefits of clean, solar energy can be brought to communities that have historically not been offered access to renewable sources of electricity generation. The VEIC was designed with energy equity as its primary long-term objective.

When looking at your power bill, there are line items that might seem confusing or unclear. Here are a few tips that might help you to better understand what's on your billing statement:

1. See what rate plan you're on - some energy companies offer different rate plan structures that might affect what you pay for electricity each month. If you're not sure, contact your electricity company.

2. Understand how much electricity you use - you can use this number to help you identify the amount of solar power you'll need.

3. Understand why your bill might be different every month - depending on your electricity plan, your electricity bills might vary somewhat significantly from month to month. There are a number factors that go in your individual electricity use, including appliance usage, changes in behavior, and seasonal weather changes. In Texas, electricity use is typically highest in summer months when homes use more electricity for cooling. In some parts of the state, colder winter weather also leads to higher electricity usage for heating.

4. Look at how many days are in your billing cycle - sometimes the number of days in a billing cycle will vary. A bill that only includes 28 days will likely be less than a bill that includes 32 days.

5. Look at the other fees that make up your bill's final price - there are several charges that go into your energy bill. Your payment is not only for the electricity you consume, but also for helping the utility maintain the grid and pay the salaries of its workers. Look for charges related to supply, delivery, taxes, and fees on your bills. In the Texas CEM, the taxes and utility fees are generally standard across all REP rate plans, but energy use charges and monthly service or base charges differ between plans and REPs. If you live in the Texas CEM, you may be able to shop around for another REP that can provide you with the power you need at a more competitive price. Using solar may also help you to reduce or avoid some of these monthly charges.

6. Calculate your average monthly charge - this number will help you to understand how solar might help to reduce your electricity charges.

For more information on understanding line items, check out the example power bill below!

This is an example of the type of a residential power bill that customers receive in the Texas CEM. This power bill is from Reliant Energy, one of the largest REPs in Texas. Each area of the bill is explained below using the corresponding numbers listed on the bill.

Please note that your electricity bill may look different than what is displayed here. This example is only to explain some of the common charges and information found on electricity bills in Texas. If you are a commercial power user, your bill information may have different components.

1. Account information - this area typically includes information specific to you, such as your name, contact information, account number, and the number of the invoice.
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2. Account Summary - this area gives you an overview of your current account charges. It displays any outstanding or unpaid charges, your current charges, the billing period (the period for which you're being charged), and when your bill is due.
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3. Electricity Usage Summary - this area gives you an overview of the electricity you used during your billing period. It includes the number of days in the billing period, the amount of electricity used in kilowatt-hours (kWh), and average daily usage in kWh.
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4. Customer Service - this area provides important contact information for your electricity company.
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5. Region - this area explains what electricity service region you are located in.
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6. Community Assistance - on some electricity bills, companies provide the option to provide a donation for community assistance or other charitable causes.
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7. Service Address - the address at which you receive electricity service
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8. ESI ID - your Electric Service Identifier, or ESI ID, is a unique number that corresponds to your electricity service address in Texas.
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9. Current Electricity Charges Detail - this area outlines the amount of electricity you use, the rates per kilowatt-hour (kWh) you pay for electricity, and any additional fees your service provider may charge. In this example, the customer paid around $0.055 for their first 500 kWh, around $0.081 for the next 500 kWh they consumed, and around $0.062 for the remaining 41 kWh they consumed during the billing cycle. Depending on how much electricity you use, you may be charged at different price tiers. As you can also see, Reliant charged this customer $91.74 for the fuel needed to generate their electricity.

Other bills may include additional fees, not limited to but including:
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Base charges - a monthly charge assessed for maintaining an account with the REP
Energy delivery/transmission distribution charges - the costs associated with delivering electricity to your home
Meter charges - costs that may be incurred from meter maintenance or repair

The fees you pay depend on your service area and what REP you receive electricity from.
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10. Electric Usage Detail - this area details the number read on your meter at the end of your billing cycle, the number read at the end of the previous billing cycle, and the difference between the two. The difference is the amount of electricity you consumed during the most recent billing cycle, which in this example is 1,041 kWh.

Source: Reliant Energy

If you are a commercial power user, you may also experience demand charges. The demand charge represents the maximum power the commercial user requires in a 15-minute period, and it is assessed by your local transmission and distribution provider (TDSP) for the delivery of electricity to your business. Like all TDSP charges, the demand charge is set by the Public Utility Commission of Texas (PUCT) and is combined with other TDSP charges.

Depending on your power usage, you may also be eligible for different electricity plans with different electricity rates.

Source: Reliant Energy

There are many components that go into your individual power bill. What REP you use, how much electricity you consume, what electricity plan you are on, what you pay per kWh, and the monthly fees you pay all make up your unique electricity use situation. These factors help to determine whether installing solar may help you to reduce your electricity costs or, at the very least, be cost-competitive with the electricity you currently purchase from your REP.

The cost of solar panels, installation, and other related equipment has gone down significantly over the last decade. Since 2010 there has been a 64% reduction in the cost of residential solar systems nationwide. Commercial solar costs have decreased nearly 70% in the same time period. For larger, utility-scale solar systems, the cost of solar has gone down by 82%! Solar energy has become much more cost-competitive with traditional sources of energy generation, such as coal and natural gas.

For you, solar may be able to provide you energy savings in a number of ways:

1. Cost competition - if installed at a large enough scale, solar may be able to produce energy at a lower cost compared to what you can purchase from REPs.
2. Avoiding fees and charges - depending on what electricity plan you have, you may be incurring regular monthly maintenance, use, and demand fees and charges. Solar installations, particularly those behind the meter, can help you to avoid having to pay these fees to your REP.
3. Net metering - If your solar installation ends up producing more than you need, you might be able to sell the extra power your generate back to your energy provider. This process is called net metering, meaning your electricity consumption and production can be metered in both directions. In Texas, there is no statewide policy regulating net metering, so the ability to benefit from net metering differs between utilities and REPs.

Source: NREL

If you'd like more information on how to understand your power bill and electricity usage, check out the Electricity Bill Analysis Toolbox from the Houston Advanced Research Center (HARC).