A Texas experiment to fund new natural gas-burning power plants with $5 billion in public loans is faltering as several of the proposed facilities drop out, threatening the state’s efforts to meet growing electricity demand.
Together, the projects that have left the program could have generated 4.6 gigawatts of electricity — enough for about a million Texas homes. Developers say that even with low-interest loans from the state, their projects no longer pencil out due to cost uncertainties and problems procuring equipment. Some have also faulted the program’s strict deadlines and terms.
The fund was touted by lawmakers as a way to jumpstart gas-plant development at a time when cheap solar and wind power have cut into the state’s wholesale electricity prices, reducing the potential profits for new plants.
“When you have zero or negative prices for power, it’s really hard to build,” said Jim Burke, chief executive officer of Vistra Corp., at a conference held by the Electric Power Supply Association on Wednesday in Washington, DC. Two Vistra projects are under consideration for Texas loans.
It’s an unexpected setback for the Texas Energy Fund, a closely watched effort to meet fast-rising power demand with natural gas. State lawmakers established the fund with voter backing in 2023, as a growing population and economy pushed electricity demands to new records and strained supplies. A wave of planned data centers — some of them needing as much power as a small city — promised even faster growth to come. Although Texas prides itself on an “all of the above” approach to energy, not officially favoring one source over another, the fund’s backers said gas was needed to generate large amounts of power around the clock, without the variability of solar and wind.
The effort initially drew 72 project applications, far more than could have been funded. From that pool, regulators with the Public Utility Commission of Texas picked 17 projects — capable of generating 9.8 gigawatts total — to move forward into due diligence. Days later, however, they rejected one of the biggest — a 1.3-gigawatt project from Aegle Power — because the company named utility giant NextEra Energy Inc. as a sponsor without NextEra’s knowledge or consent, according to a filing.
The program suffered a dual blow last week when Constellation Energy Corp., the largest US independent power producer based on market value, and WattBridge Energy, a leading private developer of gas generation in Texas, withdrew almost 2 gigawatts of projects from consideration. Constellation said its 300-megawatt plant southwest of Dallas was facing too much cost uncertainty around a pending air permit. WattBridge said the loan program itself was adding risks and costs.
The PUC has replaced some of the projects only to see more pull out. There are now 16 proposals being actively reviewed for nearly $4.5 billion in loans, PUC spokeswoman Ellie Breed said in an email. Of the original pool of project applications, 12% have been withdrawn or rejected. Of those invited into due diligence, nearly a third have fallen out.
