Texas Gov. Greg Abbott announced June 24 that the eighth loan had been finalized under the Texas Energy Fund, the state’s pool of money for building new power generation, backing 860 megawatts (MW) of new natural gas generation in Ward County. The power is expected to serve about 215,000 homes and begin feeding the Electric Reliability Council of Texas (ERCOT) grid in 2028.
Vistra is building the project, which consists of two new units at its existing Permian Basin Power Plant. The expansion, according to the release, would push the plant’s output to more than three times its current level.
The loan was made through the fund’s In-ERCOT Generation Loan Program, one of four programs the fund uses to channel money to power projects. This particular program is dedicated to low-interest loans for new power generation inside the main state grid.
The In-ERCOT Generation Loan Program lends money on terms that run 20 years at a fixed 3% interest rate and can cover up to 60% of a project’s total cost. To qualify, a project must add at least 100 MW of dispatchable capacity, which is power able to be delivered to the grid when needed. Across all its loans combined, the program is capped at financing no more than 10,000 MW of new power generation.
The Texas Energy Fund was created by the 88th Legislature and ratified by voters in 2023. The legislature appropriated $5 billion for fiscal year (FY) 2024-25, along with an additional $4 billion for FY 2026-27. The Public Utility Commission of Texas (PUCT), the state agency that regulates Texas utilities, administers the fund and distributes the money across its four programs.
While the loan program hands developers money up front, the PUCT’s Completion Bonus Grant Program runs differently. It pays after the fact, rewarding power plants that come online quickly and keep performing. A project qualifies if it adds at least 100 MW of new capacity to the ERCOT grid, while also connecting the service before June 1, 2029.
The size of the reward depends on timing. Projects that are connected before June 1, 2026, earn $120,000 per megawatt, while those connecting on or after that date earn $80,000 per megawatt. The payments are spread over a period of 10 years, with each annual payment dependent on the plant’s performance. ERCOT measures the plant’s performance during an annual test period and compares it against a reference group of other generators.
To be eligible, a project must meet the program’s planning requirements, add the qualifying amount of new power capacity and file its application within 180 days of connecting to the grid.
The program has been making progress with several awards already handed out. On June 23, the PUCT signed its fifth completion bonus grant with Tejas Power Generation for a 146-MW expansion at the Friendswood Energy Center, a natural gas combustion turbine site in southwest Houston. Under the agreement, the company can earn up to $17.52 million, paid in annual installments of up to $1.75 million over 10 years.
The fund’s remaining two programs reach parts of the state the main loan program does not. The Outside ERCOT Grant Program, for example, funds modernization, weatherization, reliability, resiliency work and vegetation management for utilities serving the regions of Texas outside the main ERCOT grid.
The Texas Backup Power Package Program, the newest of the four, funds standalone backup power systems for facilities that have to stay running when the grid goes down, such as hospitals and nursing homes.
As for the loan program, eight agreements are now signed with five applications remaining under consideration in the pipeline, representing a total of 2,356 MW of new power generation.
The loan program stopped accepting applications in July 2024, so that pipeline is largely fixed. The fund’s grant programs, however, have stayed active, with the PUCT signing its most recent grant in June. State officials have cast the fund as a response to rising electricity demand in a fast-growing state.
Photo by Siarhei Nester from Pexels
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