Texas leaders double state energy fund to help meet growing electricity demand

Posted on July 02, 2024 by Kim Riley

As energy demand continues to grow at unprecedented rates, Texas will double from $5 billion to $10 billion a new state fund that provides low-interest loans to companies developing new gas-fired power plants, state leaders announced Monday.

The newly revealed plan follows testimony last month before the Senate Business and Commerce Committee by Electric Reliability Council of Texas (ERCOT) President and CEO Pablo Vegas, who said Texas could need 150,000 megawatts (MW) of electricity to power the grid by 2030.

“That will be just six years away. Currently, Texas has approximately 85,000 megawatts of available energy, including wind, solar, coal, nuclear and natural gas,” Texas Gov. Greg Abbott and Lt. Gov. Dan Patrick said in a joint statement released July 1.

“If the new estimate is correct, the updated figures provided by Mr. Vegas call for an immediate review of all policies regarding the network,” they said.

The Texas Energy Fund, which is currently planning a $5 billion low-interest loan program to spur construction of more dispatchable natural gas-fired power plants, has already received an overload of requests for notices of intent from many companies seeking to apply for a total of $39 billion in loans.

That means the program is nearly eight times oversubscribed, state leaders say.

“With the new projections for 2030, we will seek to expand the program to $10 billion to build more new plants as soon as possible,” Abbott and Patrick said.

They noted that it will take an average of three to four years to build a power plant, while new transmission lines will take three to six years.

“Texas is currently the fastest state to approve and build new power plants and transmission lines because of our low regulation and business-friendly policies, but we must act quickly,” they added.

The biggest power users

The surge in NOIs is coming primarily from large users like data centers, oil and gas companies and hydrogen production facilities, all of which are electrifying their operations, Abbott and Patrick say.

“Cryptocurrency miners and data centers will account for over 50% of the additional growth. We need to take a hard look at both of these industries,” Lt. Gov. Patrick tweeted on X, formerly Twitter, after last month’s committee hearing.

“They create very few jobs relative to the enormous demands they put on our grid,” he said. “Cryptomining could actually generate more money by selling electricity to the grid than they do from their cryptomining operations.”

Patrick said he is more interested in building the state’s power grid to serve customers in their homes, apartments and normal businesses and keeping costs low for them rather than for niche industries that have huge demands for electricity and produce few jobs.

“We want data centers, but it can’t be the Wild West of data centers and crypto miners crashing our network and turning off the lights,” he tweeted on June 12.

More people = more demand

At the same time, the state’s population continues to grow, according to Vargas, who testified in mid-June that ERCOT, the state’s main grid operator, expects Texas’ electricity demand to double over the next six years.

“All of this paints a picture of very significant and different demand growth that requires us to really rethink how we approach planning to make sure we can meet those needs and continue to meet the expectations of all Texans,” Vegas told committee members.

According to ERCOT, demand could reach about 150 gigawatts by 2030, and more than a third of that growth is expected to come from the Permian Basin, where oil and gas operators are converting their gas- or diesel-powered operations to electricity.

“With the increase in significant loads expected to shift to Texas, substantial new transmission infrastructure is required to accommodate the projected load growth,” according to ERCOT’s recently released Reliability Needs Analysis for the Permian Basin region.

“To ensure that the reliability needs of this projected load growth can be met, TSPs (transmission service providers) will need to invest in local upgrades in the Permian Basin region, as well as build multiple pathways to import electricity into the region,” the analysis says.

To meet projected load growth needs in 2030, ERCOT estimates that $9.1 billion in investment will be required, and as load continues to grow in the region, additional transmission will be needed by 2038 to meet demand.

ERCOT also says that because the Permian Basin does not have enough local conventional generation to reliably meet 24-hour demand, more transmission lines will be needed to import electricity into the region.

According to ERCOT’s analysis, extra-high voltage (EHV) transmission lines could help Texas meet projected load growth needs in 2038.

“ERCOT is considering new EHV transmission lines as an alternative to adding only an additional 345 kilovolts (kV) in the 2024 Regional Transmission Plan and adding a dual-circuit of 500 kV or 765 kV for reliability and to efficiently facilitate large power transfers across the system,” the analysis said.