A turbine order placed today likely would not arrive before 2029, and only if a company were willing to pay a premium to get it quickly, said Doug Lewin, author of the Texas Energy and Power Newsletter.
At the same time, the Electric Reliability Council of Texas, the state’s power grid operator, is predicting energy demand in the state will double by 2030. The increase is driven by oil and gas operators in the Permian Basin transitioning operations to run on electricity rather than gas or diesel, as well as Texas’ own AI and data center boom.
The state is on course to meet those electricity demands, but largely through advancements in solar technology and battery storage, which are significantly cheaper than natural gas power plants to install. In Texas’ deregulated energy market, which gives preference to the least-expensive power, this takes away the forecast market share available to companies hoping to profit from a new natural gas power plant, meaning the plants cost more to install and are likely to make less money over time, said Dennis Wamsted, an energy analyst with the nonprofit Institute for Energy Economics and Financial Analysis.
“Markets speak loud and clear if you listen to what they’re saying,” Wamsted said. “The market in Texas is saying loud and clear that gas is not going to be built any time soon.”
Legislators this spring have responded by extending the deadline for spending the $5 billion they approved in 2023. Under the original legislation creating the fund, the PUC had until the end of this year to distribute the money earmarked for power plant construction loans. Senate Bill 2268 by state Sen. Charles Schwertner, R-Georgetown, gave the PUC authority to extend that deadline if “market factors necessitate.”
“What we didn’t know two years ago is that various market influences would affect the TEF application process, such that supply chain disruptions … would impact the timeline for several otherwise well-qualified projects,” Schwertner said in an April committee hearing about the bill.
PUC says interest remains high for loans
The PUC said in a statement that demand for the natural gas plant loan program has been high, citing the 15 applications that have reached the due diligence review stage. The agency said it is focusing on reaching loan agreements for those 15 applicants before deciding if an extension on the disbursement deadline is necessary.
State Rep. Rafael Anchía, D-Dallas, said he believes those who have applied for loans were planning to build a natural gas plant without the state energy fund and are now asking taxpayers to help cover the cost.
“If taxpayers are subsidizing a lower interest rate than what they could get in the market, of course [energy companies] will take a free ride,” Anchía said.
Anchía voted against SB 2268, calling the loan program a “big government” approach to influencing the energy market. He did vote for the additional $5 billion in money for the fund, citing the fund’s two other programs supporting backup power generation for critical infrastructure and modernization incentives for natural gas units.
Members of the Legislature’s Texas Energy Fund Advisory Committee have not met since October but plan to in the coming months as part of a regular review of the effectiveness of the fund’s policies, said Rep. Ana Hernandez, D-Houston, and a member of the committee.
Rep. David Spiller, R-Jacksboro and cochair of the advisory committee, said he believes the fund’s effectiveness is worth studying because the Legislature’s original intention was to bring these gas plants online quickly.
“We know that over a period of time we will get to where we need to be,” Spiller said. “My concern is over the next five or six years, bridging that gap. I think sooner rather than later, we need to look at that and maybe review what we have in place and tweak it some.”
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