Texans on Tuesday cast ballots on a slate of constitutional amendments, with Proposition 7, which supplies state funds to add natural gas-fired power plants, resoundingly approved.
Proposition 7, a constitutional amendment to create the Texas Energy Fund, passed with about 65% of the popular vote. With its passage, the Public Utilities Commission of Texas (PUCT) would have authority to issue low interest loans to power plant operators seeking to add generation capacity.
Loans could be up to $7.2 billion for a single facility within the Electric Reliability Council of Texas (ERCOT) grid territory, according to state Senate Bill (SB) 2627. The bill determined how state funds would be managed under the program. Power plant operators could also capture completion bonus grants for projects completed by summer 2029.
Rice University’s Ken Medlock, senior director for the Baker Institute’s Energy Studies Center, told NGI last month that Proposition 7 and SB 2627 culminated from increasing reliability concerns from ERCOT and PUCT. “Reliability is the issue, so sufficient dispatchable capacity is important. You can liken this to an insurance policy” for the electric grid, he said at the time.
Initial Reactions
Leading up to the election, opponents of the amendment argued that state funding for gas-fired generation would hinder the progress made by renewable capacity additions.
Texas Oil & Gas Association President Todd Staples said the amendment would “strengthen the reliability of our electric grid by ensuring it performs no matter the weather as well as increase the supply of electricity by encouraging additional generation.”
Speaking to two amendments that created the Texas Water Fund and statewide broadband infrastructure fund, as well as Proposition 7, Staples said, “With an estimated 1,000 people a day moving to the Lone Star State, growing infrastructure is essential to the success of every Texan.”
State Sen. Charles Schwertner, who authored SB 2627, on Tuesday posted on X, formerly Twitter, that the amendment “will strengthen electric generation facilities by modernizing and enhancing their resilience to continue operations, even in the face of extreme weather conditions.”
Research scientist Joshua Rhodes of the University of Texas at Austin’s Webber Energy Group, discussed the election with NGI.
“We may see some new generation. A 3% loan right now sounds great in just about any respect. But I do think we’ll see a lot of older thermal power plants retire,” Rhodes said. However, the “real success of this program will depend on how it integrates with the PCM, the performance credit mechanism, because that is designed, or is trying to alleviate…scarcity pricing.
“The idea behind the PCM is it offers some level of capacity payments for power plants that were available during high scarcity times.”
Meanwhile, in a note to clients Wednesday, ClearView Energy Partners LLC analysts said they were “skeptical” the Texas Energy Fund “would materially hinder Texas’ current position as the largest market of new solar and wind deployment in the U.S.”
Changing Generation Mix
The amendment’s passage comes after ERCOT earlier this month increased the level of energy supplies needed to maintain reliability during emergency conditions. The reliability margin for declaring an energy emergency alert (EEA) increased by 70-250 MW across the three EEA levels.
“The generation resource mix that powers the grid has changed, and how we operate the grid has evolved with it,” said ERCOT COO Woody Rickerson. “By increasing the minimum reserve levels for the different EEA levels, we are better representing system requirements during emergency conditions.”
According to ERCOT, combined-cycle natural gas-fired generation comprises 37% of the resource mix in 2023, followed by wind (24%), coal (14%), nuclear (9%), other gas-fired generation (9%) and solar (7%). A decade ago, ERCOT, which covers 90% of the state’s electric load, sourced nearly all of its generation from fossil fuels.
