Texas Moves Forward with $5.38B in Loans for 10 GW of New Dispatchable Power Projects

The Public Utility Commission of Texas (PUCT) has shortlisted 17 gas-fired “dispatchable” generation projects—a combined 9,781 MW—that will advance to receive $5.38 billion in loaned funds under the Texas Energy Fund (TEF) In-ERCOT Loan Program.

The 17 proposed new projects in the PUCT’s loan portfolio, chosen from 72 applications, now proceed to a “due diligence” phase in which the TEF administrator “will evaluate whether each applicant can sufficiently support the material assertions in its application,” the PUCT said in a memo on Aug. 29.  After the diligence phase, which is scheduled to span between four to eight months, the commission will enter into a loan agreement with successful applicants. First initial loan disbursements could be awarded by Dec. 31, 2025, the regulatory body said.

A Loan Program Established to Boost Dispatchable Capacity

The PUCT’s selections mark a significant step for the TEF In-ERCOT Loan Program, which was established under the Powering Texas Forward Act following a constitutional amendment approved by Texas voters on November 7, 2023. The PUCT authority stems from SB 2627, which Texas enacted in June 2023 as part of its efforts to shore up the state’s power sector in the wake of the Winter Storm Uri, the deadly February 2021 storm that prompted an average 34 GW of unplanned generation outages across the Electric Reliability Council of Texas (ERCOT) grid for more than two consecutive days.

SB 2627 establishes a low-interest loan and grant program of up to $7.2 billion (of a legislated total of $10 billion) for “dispatchable” generation. The term under Texas law refers to power sources whose “output can be controlled primarily by forces under human control,” (for example, natural gas, coal, and nuclear), as opposed to variable resources that depend on natural forces (for example, wind and solar). Notably, the law explicitly deems electric energy storage facility ineligible for loans. 

The TEF loans, which must have a term of 20 years with an interest rate of 3%, may be used to either finance upgrades to existing dispatchable generation facilities that increase capacity by at least 100 MW or fund the construction of new dispatchable generation projects with a minimum capacity of 100 MW. Eligible new projects, notably, also qualify for a completion bonus grant of up to $120,000 per MW if interconnected by June 1, 2026, or up to $80,000 per MW if interconnected before June 1, 2029.

Seventeen New Gas-Fired Projects

The PUCT on Thursday noted it received 72 applications—requests to finance a combined 38.4 GW—for loans totaling $24.41 billion. “The projects selected to advance today would provide dispatchable power generation and reliability benefits to multiple regions of the state,” the PUCT said.

Loan applications were evaluated based on the “applicant’s experience and strength of financing as well as the proposed project’s technical and financial attributes,” it said. In addition, “commissioners identified five priorities for developing a portfolio of projects to advance to the next phase of the review process: diversity among applicant types, diversity in siting location, speed to market, ability to relieve transmission constraints, and diversity of generation resource type.”

The majority of the 17 projects are simple cycle, followed by internal combustion engines, and then combined cycle gas turbines. Among the largest selected projects is CPV Basin Ranch, a 1,350-MW power plant proposed by Massachusetts-based Competitive Power Ventures (CPV) and GE Vernova near Barstow in Reeves County. NextEra and Aegle Power have separately proposed a 1,292-MW combined cycle generating facility, the Aegle Power Generation Station located in Harlingen, Texas. 

Table: The Public Utility Commission of Texas selected 17 projects representing a total of 9,781 MW of proposed new dispatchable power generation projects and a total requested loan amount of $5.38 billion.

Hull Street Energy, through wholly owned subsidiary MPH Bastrop Peakers, LLC, has proposed a 1,080-MW peaking facility at the existing Bastrop Energy Center site in Cedar Creek to provide “reliable merchant power to the ERCOT grid.” Houston-based EmberClear Management and investor partner Jupiter Island Captial had submitted two loan applications, each for a 900-MW fast-response gas plant: one in Austin County and the other in Wharton County, but it is unclear which one the PUCT picked.

ENGIE Flexible Generation filed for the 483-MW Spenser peaking power generation facility in Denton County. ENGIE said it anticipates the plant can be transitioned to hydrogen as the market matures. Rayburn Electric Coop filed for a 570-MW peaking generating facility in Sherman, Texas, a facility it said would be “necessary to meet the expanding energy needs of its member cooperatives while also improving power grid reliability in North Texas.”

WattBridge Energy, an independent power producer, filed for the 600-MW Longleaf Generating Station in Angelina County. Calpine has proposed the Freestone Peaking Energy Center, a 430-MW peaking facility in Freestone County.  Meanwhile, LS Power Equity Advisors had filed for the 527-MW Jack County Generation 3, though the PUCT’s loan is for a 490-MW facility.

While NRG Energy sought loans for three shovel-ready facilities—the 721-MW Cedar Bayou 5 in Baytown, the 455-MW Greens Bayou 6 in Houston, and the 456-MW THW GT facility in Houston—the PUCT selected only the THW, a peaking facility. “We note the THW GT project is shovel-ready as NRG has the necessary ERCOT interconnection studies, environmental permits, and water rights to commence construction immediately. This plant will improve power grid reliability and provide an advantage for prospective businesses considering expansions or relocations in Texas,” NRG said.

The PUCT also selected one of Vistra’s two 440-MW projects proposed for the Permian Basin. Permian Power I will be built adjacent to the company’s 325-MW Monahans gas-fired plant.

Constellation filed for an additional 300 MW of generation to its 1.1-GW Wolf Hollow combined cycle site in Granbury. The peaking project, named Wolf Hollow III, comprises eight new gas units. “If Constellation’s application for participation in Texas Energy Fund is successful, the new units would be prohibited from directly serving industrial load during the 20-year term. Additionally, there are no current plans to expand bitcoin operations in Hood County or at the Wolf Hollow site,” the company noted on Aug. 6.

Howard Midstream Partners has proposed the 326-MW Javelina Power Plant, which would be fueled primarily by residue gas from the nearby HEP Javelina gas processing plant. The balance of the fuel will “come from natural gas pipelines currently serving this heavy industrial economic zone,” the company explained. “The anticipated dispatchable capacity of 271 MW will be well-situated to serve this high consumption, heavy industrial economic zone. An additional 55 MW expected to be supplied to HEP Javelina through a [private use network] will further reduce the burden on the grid.”

Frontier Group/Lone Star Industrial Park proposed two units, a combined 156 MW at minimum, that are set to be operational before the second quarter of 2028. The units will be built at the site of a former 40-MW gas-fired power plant in Morris County, which the developer says is “an excellent prospective site for a variety of economic development uses including energy production, value-added metals, digital currency/data processing, and transportation logistics-related companies.”

ERCOT Faces Surging Load Growth and Grid Challenges

The PUCT’s selections arrive as ERCOT is managing soaring demand amid a relatively moderate summer. On Aug. 20, the Texas grid operator recorded a new summer peak demand of 85,559 MW, surpassing the previous high of 85,508 MW set on August 10, 2023. “The heat dome that we experienced for the better part of the 2023 summer was not in place this year, and so that’s been a big driving change from one year to the next,” said ERCOT CEO Pablo Vegas.

“In addition, we’ve also seen the resource mix continue to evolve over the last year. We’ve seen significant additions of energy storage resources, solar resources, and wind resources, with a few additions also on the thermal side, the gas side. All of that has helped to contribute to more consistent, I’d say less scarcity conditions during the peak period of the summer, like we experienced last year,” he said.

Vegas in April underscored the grid’s dire need to adapt and plan differently to meet future electricity demand on the grid, unveiling what he called a “New Era of Planning.” The measure, he said, was necessary, given that ERCOT estimates an additional 40 GW of load growth by 2030 (over the next five years) compared to last year’s forecast. The load growth will be driven by large industrial projects, increased electrification, and the rapid expansion of data centers and cryptocurrency mining operations, he said. 

On Aug. 20, during ERCOT’s last board of directors meeting, David Maggio, ERCOT’s principal of Market Design & Analytics, emphasized the need for more dispatchable generation in Texas. ERCOT has seen “some incremental increase in the amount of gas technologies” in the market, but the “focus has continued to be on renewables and storage,” he said. And while storage and renewables remain “important” to the fuel mix, the system “can experience renewable generation ‘droughts’ for extended periods of time, making dispatchable thermal generation critical,” he noted. The discussion about balancing the grid’s energy mix with reliable, dispatchable resources essentially targets developing a framework that ensures a stable investment and a supply of power to meet the growing demand, he said.

“One of the interesting facts is that it does appear that some of the [loan application projects] are starting to show up in the [interconnection queue],” Maggio said. “But I think key, looking at this just from the amount of numbers [of applicants], is clearly there’s interest and this is attractive for at least a subset of folks who are looking to invest in generation resources in the ERCOT region.” 

On Thursday, PUCT Chairman Thomas Gleeson called the selection of potential projects “an enormous step forward in our ongoing work to meet the fast-growing demand for electricity in our state.” He emphasized that “each application was closely analyzed,” and the chosen projects “will have the greatest impact in meeting the needs of the ERCOT grid and ensuring long-term electric reliability in Texas.”

—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).

Updated (Aug. 30): Adds details and a graphic from ERCOT about recent historical and projected future growth.