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Released September 16, 2024 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Plans to build or refurbish gas-fired electric power generation in Texas are just getting started, but a controversy already has felled one of the largest projects that was being considered. Separately, given the overwhelming response to solicitations by the Texas Energy Fund and the sharp projected need for new generating capacity in the Lone Star State, Governor Greg Abbott wants to double the loan fund to $10 billion.
This summer, 72 gas-fired generation projects applied for low-interest loans under the In-ERCOT Loan Program provision of the Texas Energy Fund (TEF). In all, the developers applied for $39 billion in loan funds to build about 38,000 megawatts (MW) of new dispatchable generation capacity. The TEF was established by the Texas legislature in the waning days of the 2023 legislative session. For more on that, see June 9, 2023, article - Texas Legislation Would Give $10 Billion Boost for New Dispatchable Generation.
Subsequently, Texans voted in November 2023 to add the TEF to the state's constitution by adopting Senate Joint Resolution 93.
Before the TEF loan-application window could open this summer, the Electric Reliability Council of Texas (ERCOT) (Austin), the state's grid manager, said the state's electric demand could nearly double by 2030, to about 152,000 MW from about 86,000 MW currently. The sharp increase, far greater than prior ERCOT projections, was driven mainly by projections about oil and gas operations and artificial intelligence (AI)-equipped data centers. For more on that, see April 25, 2024, article - Data Centers, Oil & Gas Industry to Drive Surge in Texas Electricity Demand. ERCOT is the grid manager for about 90% of Texas.
In a separate update after that April projection, ERCOT said there was a 12% probability that Texas would suffer rolling blackouts during the summer of 2024, most likely in August. Happily, those power emergencies were never called. For more on that, see June 18, 2024, article - Was $10 Billion Enough? Texans Face Another White-Knuckled Summer.
Given the alarming warnings from ERCOT and others, it's perhaps not surprising that the TEF loan fund was wildly over-subscribed. On July 1, Governor Abbot issued a statement recognizing that demand for loans was eight times the allocated funding, and that "we will seek to expand the (loan) program to $10 billion to build more new plants as soon as possible."
After reviewing the 72 TEF loan applications, the staff of the Public Utility Commission of Texas (PUCT) (Austin) on August 29 recommended the commission vote to advance the applications of 17 projects, moving those projects into the next stage of due diligence. Those 17 projects, representing about 9,781 MW of new generation, sought a total of $5.38 billion in low-cost TEF loans, more than the fund had available. The commission approved the staff recommendation to move those 17 projects into the next stage of due diligence. For more on that, see September 5, 2024, article - No Summer Power Emergencies for Texans, More Gas Generation on the Way.
Less than a week later, on September 4, the PUCT rejected one of the largest of the 17 projects that had been selected for further due diligence: a 1,292-MW power plant that had been proposed by Aegle Power and NextEra Energy Resources, a unit of NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida).
That left 16 projects, totaling 8,489 MW, undergoing due diligence for a low-interest TEF loan. The interest rate for those loans has been reported at about 3%.
The PUCT's action followed NextEra's notification to the regulators that it was not, in fact, part of this project.
In a September 3 letter to the PUCT, NextEra's Executive Vice President and General Counsel Mitchell S. Ross wrote: "NextEra's name was submitted in the Aegle application without NextEra's knowledge or consent. NextEra is not seeking funding as part of the TEF Program, is not participating in the project for which NextEra was named, and hereby requests that NextEra be immediately removed from PUCT records as a sponsor for the Aegle Power project."
It gets worse: Kathleen Smith, currently managing partner and chief executive of TEF applicant Aegle Power, pled guilty in 2017 to embezzling "a significant amount of money" from her then-employer, Chase Power Development, according to a statement from the U.S. Attorney for the Southern District of Texas.
Texas lawmakers have indicated they will investigate how Aegle's application advanced, according to a report in the trade publication Utility Dive. In a joint post on X, formerly known as Twitter, State Sen. Charles Schwertner and State Rep. David Spiller, Republican co-chairs of the Texas Energy Fund Advisory Committee, said they will hold a hearing October 8 to investigate the issue.
The PUCT and Deloitte "advanced a problematic and unqualified application by an energy executive who was publicly convicted of fraud in our state," the lawmakers said in their statement. "The protection and stewardship of taxpayer money must be the highest priority."
That left 16 proposed projects undergoing due diligence, which could take up to eight months to complete, the regulatory said. The due diligence underway with PUCT staff, along with consultants Deloitte (London, England), will verify each project's details--including, but not limited to, participating companies, financial viability, construction plans, interconnection capabilities, ability to complete the project, and ability to pay back the loan.
The 16 remaining proposed projects range from 122 to 1,350 MW. They will be assessed according to four equally weighted criteria, according to PUCT: project technical and regional attributes; project financial attributes; application sponsor history; and application sponsor financial characteristics.
"We're still a long way from selecting any company to receive a Texas Energy Fund loan," PUCT Executive Director Connie Corona said in a statement September 4. "Proposed projects that have reached this stage have only met the initial requirements for applications. We have a multi-stage application and verification process that gets more rigorous at every step to ensure only financially sound applicants with viable projects receive these loans."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
This summer, 72 gas-fired generation projects applied for low-interest loans under the In-ERCOT Loan Program provision of the Texas Energy Fund (TEF). In all, the developers applied for $39 billion in loan funds to build about 38,000 megawatts (MW) of new dispatchable generation capacity. The TEF was established by the Texas legislature in the waning days of the 2023 legislative session. For more on that, see June 9, 2023, article - Texas Legislation Would Give $10 Billion Boost for New Dispatchable Generation.
Subsequently, Texans voted in November 2023 to add the TEF to the state's constitution by adopting Senate Joint Resolution 93.
Before the TEF loan-application window could open this summer, the Electric Reliability Council of Texas (ERCOT) (Austin), the state's grid manager, said the state's electric demand could nearly double by 2030, to about 152,000 MW from about 86,000 MW currently. The sharp increase, far greater than prior ERCOT projections, was driven mainly by projections about oil and gas operations and artificial intelligence (AI)-equipped data centers. For more on that, see April 25, 2024, article - Data Centers, Oil & Gas Industry to Drive Surge in Texas Electricity Demand. ERCOT is the grid manager for about 90% of Texas.
In a separate update after that April projection, ERCOT said there was a 12% probability that Texas would suffer rolling blackouts during the summer of 2024, most likely in August. Happily, those power emergencies were never called. For more on that, see June 18, 2024, article - Was $10 Billion Enough? Texans Face Another White-Knuckled Summer.
Given the alarming warnings from ERCOT and others, it's perhaps not surprising that the TEF loan fund was wildly over-subscribed. On July 1, Governor Abbot issued a statement recognizing that demand for loans was eight times the allocated funding, and that "we will seek to expand the (loan) program to $10 billion to build more new plants as soon as possible."
After reviewing the 72 TEF loan applications, the staff of the Public Utility Commission of Texas (PUCT) (Austin) on August 29 recommended the commission vote to advance the applications of 17 projects, moving those projects into the next stage of due diligence. Those 17 projects, representing about 9,781 MW of new generation, sought a total of $5.38 billion in low-cost TEF loans, more than the fund had available. The commission approved the staff recommendation to move those 17 projects into the next stage of due diligence. For more on that, see September 5, 2024, article - No Summer Power Emergencies for Texans, More Gas Generation on the Way.
Less than a week later, on September 4, the PUCT rejected one of the largest of the 17 projects that had been selected for further due diligence: a 1,292-MW power plant that had been proposed by Aegle Power and NextEra Energy Resources, a unit of NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida).
That left 16 projects, totaling 8,489 MW, undergoing due diligence for a low-interest TEF loan. The interest rate for those loans has been reported at about 3%.
The PUCT's action followed NextEra's notification to the regulators that it was not, in fact, part of this project.
In a September 3 letter to the PUCT, NextEra's Executive Vice President and General Counsel Mitchell S. Ross wrote: "NextEra's name was submitted in the Aegle application without NextEra's knowledge or consent. NextEra is not seeking funding as part of the TEF Program, is not participating in the project for which NextEra was named, and hereby requests that NextEra be immediately removed from PUCT records as a sponsor for the Aegle Power project."
It gets worse: Kathleen Smith, currently managing partner and chief executive of TEF applicant Aegle Power, pled guilty in 2017 to embezzling "a significant amount of money" from her then-employer, Chase Power Development, according to a statement from the U.S. Attorney for the Southern District of Texas.
Texas lawmakers have indicated they will investigate how Aegle's application advanced, according to a report in the trade publication Utility Dive. In a joint post on X, formerly known as Twitter, State Sen. Charles Schwertner and State Rep. David Spiller, Republican co-chairs of the Texas Energy Fund Advisory Committee, said they will hold a hearing October 8 to investigate the issue.
The PUCT and Deloitte "advanced a problematic and unqualified application by an energy executive who was publicly convicted of fraud in our state," the lawmakers said in their statement. "The protection and stewardship of taxpayer money must be the highest priority."
That left 16 proposed projects undergoing due diligence, which could take up to eight months to complete, the regulatory said. The due diligence underway with PUCT staff, along with consultants Deloitte (London, England), will verify each project's details--including, but not limited to, participating companies, financial viability, construction plans, interconnection capabilities, ability to complete the project, and ability to pay back the loan.
The 16 remaining proposed projects range from 122 to 1,350 MW. They will be assessed according to four equally weighted criteria, according to PUCT: project technical and regional attributes; project financial attributes; application sponsor history; and application sponsor financial characteristics.
"We're still a long way from selecting any company to receive a Texas Energy Fund loan," PUCT Executive Director Connie Corona said in a statement September 4. "Proposed projects that have reached this stage have only met the initial requirements for applications. We have a multi-stage application and verification process that gets more rigorous at every step to ensure only financially sound applicants with viable projects receive these loans."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
