Texas Approves First State-Backed Gas Plant
Texas officials gave the green light to the first new natural gas plant to be built through a state-backed low-interest loan program, a milestone in the state government’s attempt to build more fossil fuel infrastructure.
The Texas Public Utilities Commission approved funding for the Rock Island Generation Project located about 80 miles west of Houston. The 122-megawatt power plant will generate enough electricity to power about 30,500 homes on the Electric Reliability Council of Texas (ERCOT) grid and will sit adjacent to the Houston load zone, one of the state’s largest demand centers.
Funding for the plant comes through the Texas Energy Fund, a $10 billion program designed to incentivize developers to build new sources of dispatchable power at a time when renewable energy is flooding the market. The state is awarding a 20-year loan of up to $105 million at a 3 percent interest rate to the Kerrville Public Utility Board to build the Rock Island project. The project is scheduled to begin operations by 2027.
“The goal of the Texas Energy Fund has always been clear: secure reliable, affordable power that will serve the state for decades to come,” Thomas Gleeson, chair of the Texas PUC, said in a statement. “Today, we achieved a major milestone in that effort and are one step closer to bringing new power online. This new facility will benefit every Texan by helping us ensure continued electric reliability and support Texas’ incredible economic growth.”
When the PUC launched the Texas Energy Fund last year, it said it saw $39 billion worth of demand for the $5 million pool of loans for gas plant developers in the ERCOT market. There are currently 18 additional applications moving through the review process that represent more than 9,000 MW total of new generation.
A spokesperson for the PUC said there is no timeline for when additional loans may be approved.
The state government has put its weight behind new natural gas plants as a solution to Texas' power woes in the aftermath of the deadly Winter Storm Uri in 2021. Although all sources of power failed during the frigid temperatures, leading to widespread blackouts, government officials and some Republican lawmakers have blamed wind and solar power for not holding up.
In the years since, the share of renewable energy on the ERCOT grid has skyrocketed, with the state emerging as the largest producer of wind and solar power. At the same time, the state continues to set demand records — especially on hot summer evenings — and ERCOT forecasts that peak demand could grow to 218 gigawatts by 2031, up from 85 GW in 2024.
Despite the state support, the loan program has also seen a number of high-profile exits, with seven of the original 17 projects under consideration either being ruled ineligible or withdrawing from consideration for the loans amid grumblings about the program’s timeline requirements. Broadly, a limited supply chain is driving up the cost and time to build gas plants.
Still, a booming population and a rise in data centers in Texas are pushing plans to massively build out the state’s gas fleet. A recent report by the Environmental Integrity Project noted that 130 gas-fired energy projects are under review with state regulators, with 108 of those being new plants.
If those are all built, the report found, they could generate as much as 115 million metric tons of greenhouse gases a year, as much pollution as California slashed between 2004 and 2022.