Texas voters have approved a ballot measure to finance the construction of up to 10GW of natural gas-fired and other generating capacity through a new program intended to prevent a repeat of the widespread power outages in February 2021.
Voters approved Proposition 7, which will amend the state's constitution to create the "Texas Energy Fund," by a 65-35 margin in Tuesday's elections. The Texas legislature this summer enacted a law providing $10bn for the fund but made the measure contingent on passage of the constitutional amendment.
The Texas Public Utility Commission will administer the program, which will offer up to $7.2bn in low-cost loans and grants for new power generating capacity built in the state's main electric grid that is administered by the Electric Reliability Council of Texas (ERCOT). The program will offer 3pc interest rate loans exclusively to "dispatchable" plants that increase net generation by 100MW.
Under the program, newly built power plants that are connected to the grid before 1 June 2026 will be eligible for grants of up to $120,000/MW, or up to $80,000/MW before 1 June 2029. That would mean a 200MW peaking gas plant placed into service in ERCOT in early 2026 would be eligible for a completion bonus of up to $240mn.
The Texas Energy Fund does not explicitly restrict the loans and grants to gas-fired power plants, but experts say there are few other viable projects that will qualify, particularly because of a prohibition on financing energy storage projects. Environmentalists opposed Proposition 7, which they say will subsidize the build-out of fossil fuel power plants that will operate for decades and might not even improve short-term reliability of the electric grid.
Gas-fired power plants accounted for 58pc of the generation outages in Texas and nearby states during extreme cold weather in February 2021, the US Federal Energy Regulatory Commission (FERC) said in a report that year. The report attributed those gas plant outages primarily to natural gas supply issues, which FERC this year found continues to be a problem.
The Texas Energy Fund also includes up to $1.8bn in grants for behind-the-meter backup power generation for health and safety facilities such as hospitals. Another $1bn in grants will go to projects outside of the ERCOT grid, such as weatherization and modernization projects for power plants and electric transmission facilities.
The legislature had previously considered funding a 10GW reserve fleet of gas-fired plants as a way to improve grid reliability but shelved the idea in response to concerns it would upend ERCOT's competitive market.