Dive Summary:
- The Texas Senate on Wednesday approved a package of energy reforms, including a $10 billion “energy insurance program” aimed at boosting grid reliability by developing a fleet of new gas-fired power plants capable of delivering 10,000 megawatts.
- SB 6 passed 22-9, but it faced widespread opposition from the power sector and conservation for changes to the state’s electricity market and environmental impacts. Uncertainty over the plan’s cost could threaten the measure’s chances in the Texas House of Representatives.
- Berkshire Hathaway supports the energy law and experts say the company is a leading contender to win contracts to build backup generation. But for smaller generators, SB6 could make Texas a less attractive investment.
Dive Insights:
Gas-fired generator Watbridge Texas is spending billions to build the power plant, but officials say if this round of investment ends, the company could end up with the state.
“Once we complete our facilities currently under construction … we do not anticipate any further investment in the Electric Reliability Council in the Texas market,” Watbridge President Mike Alvarado told Texas senators at a March 23 hearing on SB 6.
“Current market conditions simply do not allow for this. And the legislation proposed by the Senate makes the current market much more challenging for our business and provides additional credence to our decision to stop our current investment program in ERCOT and begin looking at other markets,” said Alvarado.
SB 6 would establish the Texas Energy Insurance Program outside of the competitive market, while another bill passed by the Senate, SB 7, would create a new ancillary service for dispatchable generators while imposing new fees.
“The Senate’s grid reform package levels the playing field between dispatchable and renewable energy sources to put ratepayers first,” Texas Lt. Gov. Dan Patrick said in a statement. SB 6 also creates a low-interest loan program to maintain older dispatchable generation plants, he added. .
The bill’s sponsor, Sen. Charles swordsmanR, said the new capacity will not cause problems for the state’s sole energy market because 10,000 MW will not run until grid conditions require it.
Plants can earn a regulated rate of return of up to 10%, Bloomberg reported.
Michelle Richmond, executive director of Texas Competitive Power Advocates, said the bill is “a fundamental U-turn away from a competitive electric market.”
“This represents an expensive tax on consumers that does not improve reliability or make the market for dispatchable resources – new or existing – economic,” he said.
Julia Rathgeber, who represented Berkshire Hathaway Energy in support of the bill, called the legislation an “investment opportunity in Texas.”
Parts of SB 6 are similar to a measure Berkshire Hathaway Energy supported last legislative session to create emergency generation, Rathberger said, but the new iteration is “broader in scope” and includes maintenance of older generation.
“SB6 could also work with other market reforms, such as the performance credit mechanism,” Rathberger said.
The Public Utilities Commission of Texas approved a new performance credit process in January as part of an overhaul of the state’s energy market. It still must be implemented by lawmakers, and critics say it could cost consumers up to $5.7 billion annually with uncertain improvements in reliability.
Rising energy costs are a major concern in Texas. A Lower Colorado River Authority slide deck obtained by Austin NPR station KUT 90.5 estimates that the SB 6 energy insurance program could cost $18 billion.
“These bills are part of a package of legislation that could halt the development of renewable energy in Texas,” Environment Texas Executive Director Luke Metzger said in a statement. “This means more air pollution threatening our health and higher electricity costs. Any one of these bills alone would hurt renewables, but together they could bring the entire industry to its knees. We are counting on the State House to reject these.”