88th LegislatureEnergyStatewide NewsDispatchable Generation Mandate, Subsidy Funds Filed in Texas Legislature

State Sen. Charles Perry (R-Lubbock) and state Rep. Matt Shaheen (R-Plano) have filed similar but not identical bills to create an Electric Generating Facility Fund that would subsidize the construction of dispatchable generators on the ERCOT grid.

“Dispatchable” generally entails thermal sources of electricity — natural gas, coal, and nuclear — but also includes battery storage and hydroelectric generation. Texas is amidst an influx of renewable generation development driven primarily by the negligible fuel costs for wind and solar generators along with the plethora of government subsidies that provide a competitive advantage.

The most acute example is the federal Production Tax Credit, a grant available to renewable generators per kilowatt-hour produced; Congress extended the credit for 10 years in 2022’s Inflation Reduction Act and expanded it to solar generation.

The influx means that the state’s generation portfolio is becoming more reliant on renewable generation by the year — sources dependent on constantly changing weather. State lawmakers and bureaucrats have keyed in on, if not reversing, the incentive imbalance, leveling the playing field so that thermal generator companies will take on the financial risk and invest in long-term projects.

Lt. Gov. Dan Patrick has emphasized the importance of this item for the Legislature, stating that it’s a must-finish for the 88th regular session. Adding new natural gas plants is the sixth bill on his 2023 Senate priority slate, a bill for which actual language has yet to be released.

Gov. Greg Abbott has remarked on the need for additional development, saying a couple of weeks ago, “We’re not going to end this session without passing strategies to ensure we have enough power for the people of this state for the next 40 years.”

At a Tuesday event with the National Federation of Independent Business, House Calendars Committee Chairman Dustin Burrows (R-Lubbock) also stated the issue’s importance for this session.

And with the state’s $32.7 billion treasury surplus, with expected savings account funds almost to match, there is a lot of capital to disburse if the Legislature so chooses.

And because of the state’s spending cap — tentatively set at $12.5 billion more than the current biennium — lawmakers must “get creative,” in Patrick’s words, to appropriate as much as they hope.

That creativity has generally come in the form of new funds that exist outside the state’s general fund, thus avoiding the spending cap. It seems likely that option is used for a massive tranche of property tax reductions and compression. Perry has proposed a similar route for a fund to build water supply sources and repair leaky pipe systems for small and mid-sized towns.

Perry’s redux for the power grid — Senate Bill 857 — specifically itemizes the money allocated to the Electric Generating Facility Fund for natural gas, clean coal, nuclear, and hydroelectric projects along with transmission expansion. Shaheen’s House Bill (HB) 2286 does the same, but only for a facility that “uses a source of heat to generate electricity.”

Both have accompanying joint resolutions that’d amend the constitution and trigger a statewide ballot proposition, a requirement to create a new fund outside the general revenue pot.

The other more direct bill filed this week is HB 2288 by state Rep. Jared Patterson (R-Frisco).

Patterson’s bill would prohibit the sale of renewable-generated electricity on the ERCOT market — which encompasses about 90 percent, but not the entirety of the state.

It would also strip the state’s current renewable portfolio requirement — a provision mandating a certain amount of wind and solar generation in the state — that is currently set at 10,000 megawatts by 2025.

The state is already well past that amount and is only set to grow further, but this bill would eliminate the statutorily-mandated floor.

The Public Utility Commission has identified the Performance Credit Mechanism — a system of financial rewards for generators that produce during times of grid stress — as its preferred market reform. But some lawmakers see it as  a counter-incentive, not an elimination of the problem at the root of the issue. Patterson’s bill aims to wipe the slate of renewable generation in ERCOT, a proposal sure to upset the lobby apple cart among certain corners of the energy industry.

Exactly what legislators decide on this issue remains to be seen. Over three months remain in the current session, and if nothing accomplished is considered adequate by state leaders, the issue is ripe for a special session.