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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Texas State Legislature passed, and Governor Greg Abbott (R) is expected to sign, legislation creating a $10 billion fund to support construction of new dispatchable electric generation capacity in the Lone Star State. The law does not require that the new capacity be gas-fired, though most observers were able to connect the dots.
On Sunday, May 28, the day before Memorial Day and at the very end of the legislative season, the Texas Senate voted 30-1 to approve Senate Bill 2627. On the same day, by a vote of 114-20, with two members not voting, the Texas House approved the companion measure. The governor is expected to sign the bill in the coming days.
On May 28, following passage of SB 2627 by both houses of the state legislature, Texas Lieutenant Governor Dan Patrick, also a Republican, issued this statement: "After Winter Storm Uri, it was clear for all to see that Texas needed more reliable, dispatchable power because renewable energy sources failed to keep the lights on for millions of Texans. ... SB 2627 will make sure that our grid is more resilient and levels the playing field between dispatchable and renewable energy sources."
Interestingly, the bill was supported by environmental groups and energy producers. News reports said environmental groups supported the measure in order to evade potentially more onerous legislation, including a proposal that would have made it more expensive for rural renewable projects to connect to the electric grid.
The $10 billion boost to support the "construction, maintenance, modernization and operation" of dispatchable generation could transform the economics of power production in the Lone Star State. Texas has built tens of billions of dollars of renewable generation over the prior decade, and the pipeline of renewable projects remains well stocked: Industrial Info is tracking about 193 renewable energy projects in Texas, valued at approximately $59.50 billion, that are scheduled to begin construction between January 2023 and December 2024.
According to the U.S. Energy Information Administration (EIA) (Washington, D.C.), roughly 50% of Texas' electricity was generated from natural gas in 2021. Renewable resources, mainly wind, generated about 25% of the state's electricity in that year. Coal and nuclear accounted for the rest.
The EIA noted that the growth of renewable electric generation, coupled with the retirement of almost 6,000 megawatts (MW) of coal-fired generating capacity, reduced coal's share of the electric fuel market to 18% in 2021, down from a 36% share in 2011.
Texas has been a national leader in the construction of renewable electric generation over the last decade. But as renewables garnered an ever-rising share of the electric generation market, another force--Winter Storm Uri in February 2021--caused elected officials, electric utilities, the Texas grid operator and the fossil fuel community to fret publicly about whether Texas' electricity supply was sufficiently reliable.
In the immediate aftermath of Winter Storm Uri, forces aligned with traditional dispatchable generation asserted that the loss of generation from renewables created that cascading crisis that led to hundreds of deaths and tens of billions of dollars of property damage in the state. In fact, those initial assertions were quickly debunked: subsequent studies showed that it was frozen gas pipelines and electric generation units that were not sufficiently weatherized to operate in cold temperatures, that led to cascading blackouts and other calamities. For more on the effects of Winter Storm Uri, see February 17, 2021, article - UPDATED LIST: Texas Wrestles with Continued Power Outages as Generators Struggle with Demand and February 19, 2021, article - UPDATES: Lights Back On in Texas, but Winter Storm Fallout Could Long Linger.
In fact, one expert who follows the power-generation sector estimated that about two-thirds of the outages occurred at thermal power plants, mainly coal, gas and nuclear plants, while renewables accounted for only about one-third of the outages during that historic winter storm.
Separately, as Texas flirted with rolling blackouts during recent seasonal peak periods, the Electric Reliability Council for Texas (ERCOT) (Austin, Texas) began to publicly state its concerns about the Texas grid's disappearing dispatchable generation, mostly due to retirements of coal- and gas-fired generation. For more on that, see May 11, 2023, article - Texans May Face 'Extreme' Power Conditions this Summer, January 3, 2022, article - Will the Lights Go Out in Texas this Winter? Under Extreme Conditions, Probably and July 14, 2022, article - Lone Star Heat Wave Stresses ERCOT to the Max.
Earlier this year, when ERCOT released its summer 2023 outlook, local news outlets quoted the group's chief executive officer, Pablo Vegas, as saying the agency expects the grid to be reliable, but the high reliance on non-dispatchable renewable resources like wind and solar means consumers and businesses, to some degree, are at the mercy of the weather.
"Our models estimate that this summer's peak could be about 6,000 megawatts (MW) greater than last summer's," he said. "However, we're only expecting a nominal increase of about 850 MW of thermal capacity since last summer."
Peter Lake, chairman of the Public Utility Commission of Texas (PUCT) (Austin, Texas), also spoke to the media after ERCOT released its summer 2023 resource assessment. "On the hottest days of summer," he said, "there is no longer enough on-demand dispatchable power generation to meet demand in the ERCOT system. ... Data shows for the first time that the peak demand for electricity this summer will exceed the amount we can generate from on demand dispatchable power."
While Texas has seen a surge in renewable energy development in recent years, dispatchable generation has only risen by a reported 1.5% between 2008 and 2020, while the population has grown by about 24% over that time, according to news reports.
During the recently concluded Texas legislative session, Charles Schwertner, a state senator, drafted S.B. 2627, known as the "Powering Texas Forward Act." It created a state fund of $10 billion to support the "construction, maintenance, modernization and operation" of gas-fired power plants, to ensure there is sufficient dispatchable generation to keep the lights on. The $10 billion is broken down as follows:
The law in designed to spur near-term construction. Initial disbursement of loan funds must take place by the end of 2025.
The law also provides for a "completion bonus grant" for the construction of dispatchable electric generating facilities in the ERCOT power region. As it does elsewhere in the legislative language, generating units eligible for these bonus grants must be dispatchable: "For the purposes of this section, a generating facility is considered to be dispatchable if the facility's output can be controlled primarily by forces under human control."
"Completion bonus grants" are capped at $120,000 per MW of capacity for those facilities that are interconnected in the ERCOT power region before June 1, 2026. Facilities interconnecting with the ERCOT grid between June 1, 2026 and June 1, 2029, are eligible for grants of up to $80,000 per MW. Facilities interconnecting with the state's power grid after June 1, 2029, are not eligible for these bonus grants.
Energy storage systems are not eligible for either the low-cost loans or the completion grants. Power plants seeking loans or grants under this law must be greater than 100 MW in generating capacity.
Electric generating facilities built or modernized for the primary use of an industrial load or private network are not eligible for grant or loan funding. Nor can the funds be disbursed to support construction of a natural gas pipeline.
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) 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 over 200,000 current and future projects worth $17.8 Trillion (USD).
On Sunday, May 28, the day before Memorial Day and at the very end of the legislative season, the Texas Senate voted 30-1 to approve Senate Bill 2627. On the same day, by a vote of 114-20, with two members not voting, the Texas House approved the companion measure. The governor is expected to sign the bill in the coming days.
On May 28, following passage of SB 2627 by both houses of the state legislature, Texas Lieutenant Governor Dan Patrick, also a Republican, issued this statement: "After Winter Storm Uri, it was clear for all to see that Texas needed more reliable, dispatchable power because renewable energy sources failed to keep the lights on for millions of Texans. ... SB 2627 will make sure that our grid is more resilient and levels the playing field between dispatchable and renewable energy sources."
Interestingly, the bill was supported by environmental groups and energy producers. News reports said environmental groups supported the measure in order to evade potentially more onerous legislation, including a proposal that would have made it more expensive for rural renewable projects to connect to the electric grid.
The $10 billion boost to support the "construction, maintenance, modernization and operation" of dispatchable generation could transform the economics of power production in the Lone Star State. Texas has built tens of billions of dollars of renewable generation over the prior decade, and the pipeline of renewable projects remains well stocked: Industrial Info is tracking about 193 renewable energy projects in Texas, valued at approximately $59.50 billion, that are scheduled to begin construction between January 2023 and December 2024.
According to the U.S. Energy Information Administration (EIA) (Washington, D.C.), roughly 50% of Texas' electricity was generated from natural gas in 2021. Renewable resources, mainly wind, generated about 25% of the state's electricity in that year. Coal and nuclear accounted for the rest.
The EIA noted that the growth of renewable electric generation, coupled with the retirement of almost 6,000 megawatts (MW) of coal-fired generating capacity, reduced coal's share of the electric fuel market to 18% in 2021, down from a 36% share in 2011.
Texas has been a national leader in the construction of renewable electric generation over the last decade. But as renewables garnered an ever-rising share of the electric generation market, another force--Winter Storm Uri in February 2021--caused elected officials, electric utilities, the Texas grid operator and the fossil fuel community to fret publicly about whether Texas' electricity supply was sufficiently reliable.
In the immediate aftermath of Winter Storm Uri, forces aligned with traditional dispatchable generation asserted that the loss of generation from renewables created that cascading crisis that led to hundreds of deaths and tens of billions of dollars of property damage in the state. In fact, those initial assertions were quickly debunked: subsequent studies showed that it was frozen gas pipelines and electric generation units that were not sufficiently weatherized to operate in cold temperatures, that led to cascading blackouts and other calamities. For more on the effects of Winter Storm Uri, see February 17, 2021, article - UPDATED LIST: Texas Wrestles with Continued Power Outages as Generators Struggle with Demand and February 19, 2021, article - UPDATES: Lights Back On in Texas, but Winter Storm Fallout Could Long Linger.
In fact, one expert who follows the power-generation sector estimated that about two-thirds of the outages occurred at thermal power plants, mainly coal, gas and nuclear plants, while renewables accounted for only about one-third of the outages during that historic winter storm.
Separately, as Texas flirted with rolling blackouts during recent seasonal peak periods, the Electric Reliability Council for Texas (ERCOT) (Austin, Texas) began to publicly state its concerns about the Texas grid's disappearing dispatchable generation, mostly due to retirements of coal- and gas-fired generation. For more on that, see May 11, 2023, article - Texans May Face 'Extreme' Power Conditions this Summer, January 3, 2022, article - Will the Lights Go Out in Texas this Winter? Under Extreme Conditions, Probably and July 14, 2022, article - Lone Star Heat Wave Stresses ERCOT to the Max.
Earlier this year, when ERCOT released its summer 2023 outlook, local news outlets quoted the group's chief executive officer, Pablo Vegas, as saying the agency expects the grid to be reliable, but the high reliance on non-dispatchable renewable resources like wind and solar means consumers and businesses, to some degree, are at the mercy of the weather.
"Our models estimate that this summer's peak could be about 6,000 megawatts (MW) greater than last summer's," he said. "However, we're only expecting a nominal increase of about 850 MW of thermal capacity since last summer."
Peter Lake, chairman of the Public Utility Commission of Texas (PUCT) (Austin, Texas), also spoke to the media after ERCOT released its summer 2023 resource assessment. "On the hottest days of summer," he said, "there is no longer enough on-demand dispatchable power generation to meet demand in the ERCOT system. ... Data shows for the first time that the peak demand for electricity this summer will exceed the amount we can generate from on demand dispatchable power."
While Texas has seen a surge in renewable energy development in recent years, dispatchable generation has only risen by a reported 1.5% between 2008 and 2020, while the population has grown by about 24% over that time, according to news reports.
During the recently concluded Texas legislative session, Charles Schwertner, a state senator, drafted S.B. 2627, known as the "Powering Texas Forward Act." It created a state fund of $10 billion to support the "construction, maintenance, modernization and operation" of gas-fired power plants, to ensure there is sufficient dispatchable generation to keep the lights on. The $10 billion is broken down as follows:
- $7.2 billion in low-interest loans to build up to 10,000 MW of dispatchable power generation
- $1.8 billion for backup power generation for critical infrastructure and
- $1 billion to support non-ERCOT resiliency.
The law in designed to spur near-term construction. Initial disbursement of loan funds must take place by the end of 2025.
The law also provides for a "completion bonus grant" for the construction of dispatchable electric generating facilities in the ERCOT power region. As it does elsewhere in the legislative language, generating units eligible for these bonus grants must be dispatchable: "For the purposes of this section, a generating facility is considered to be dispatchable if the facility's output can be controlled primarily by forces under human control."
"Completion bonus grants" are capped at $120,000 per MW of capacity for those facilities that are interconnected in the ERCOT power region before June 1, 2026. Facilities interconnecting with the ERCOT grid between June 1, 2026 and June 1, 2029, are eligible for grants of up to $80,000 per MW. Facilities interconnecting with the state's power grid after June 1, 2029, are not eligible for these bonus grants.
Energy storage systems are not eligible for either the low-cost loans or the completion grants. Power plants seeking loans or grants under this law must be greater than 100 MW in generating capacity.
Electric generating facilities built or modernized for the primary use of an industrial load or private network are not eligible for grant or loan funding. Nor can the funds be disbursed to support construction of a natural gas pipeline.
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) 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 over 200,000 current and future projects worth $17.8 Trillion (USD).
