Over the past few months, the Texas legislature has proposed multiple bills that could hinder the development and investment in renewable energy projects in the state. These proposed laws could lead to increased costs for consumers and may not have a significant impact on grid reliability. Here are some of the important policy decisions that are relevant to Leyline and the developers we work with, following the end of the 88th Texas Regular Legislative Session on May 29, 2023.
Texas Tax Abatements
Texas' previous economic development plan, known as Chapter 313, expired in 2022. The new law, House Bill 5, replaces it. Like its predecessor, House Bill 5 gives businesses and corporations discounts on school property tax as an incentive to come to the Lone Star State. Only certain types of industries, including manufacturing, technology, and oil refining are eligible for the new incentive package. Unfortunately, renewable energy projects are not included.
PCM cost-cap
The Performance Credit Mechanism (PCM) was a capacity market plan proposed to replace the existing market construct that had failed post-Winter Storm Uri. It would have rewarded existing gas and coal plants for simply being available, costing Texans billions of dollars per year. Despite intense lobbying from stakeholders who stood to benefit from the plan, the Legislature limited the proposal to a capped net cost of $1 billion, which is a significant victory for consumers. The previously proposed cap was effectively no cap at all: $9 billion per year. A diverse coalition, including the Sierra Club, the Texas Oil and Gas Association, AARP, and the Texas Chemical Council, supported the low cap. The future of the Performance Credit Mechanism is uncertain, but if it does come to fruition, it must come with consumer protections rather than a blank check for generators as previously proposed.
Low-cost loans for new gas plants
SB 2627 and SJR 93 provide billions of dollars in low-interest loans to support the development of up to 10,000 megawatts of new methane gas power plants. Lawmakers approved this bill, which allocates $5 billion to $10 billion of taxpayer money for low-interest loans and completion bonuses for new gas plants. Voters can participate in decision-making through a constitutional amendment embedded in Senate Joint Resolution 93 this November.
Additional "firming" requirements for solar and wind
HB 1500, known as the 'PUC Sunset' bill, will require certain renewable energy projects to pay higher transmission fees. Additionally, starting in 2027, all renewable energy projects will need to secure expensive backup capacity through "firming" requirements. To comply with the bill, the PUC will develop a dispatchable reliability reserve service (DRRS) and firming requirements for new generators. Fortunately, energy storage can fulfill this need. A firming requirement is typically applied to renewable power sources, and it may involve a renewable generator contracting for on-site gas generation or battery storage capacity to produce energy when its main unit is unable to. Although renewable generators are opposed to this proposal due to the added cost, state legislators and those concerned about the rapidly growing footprint of renewables in the state see it as a way to level the playing field with more costly thermal generation plants. Governor Greg Abbott is expected to sign the bill into law.
Permitting Legislation
Two bills, House Bill 3707 and Senate Bill 624, were being considered to modify the permitting requirements for solar and wind projects in Texas. The new regulations would have required permit applicants to provide an environmental impact statement from the Texas Parks and Wildlife Department and assign an environmental impact score to each project. These regulations would apply to all current and future state wind and solar energy projects. Fortunately, the proposed permitting legislation was rejected by the Legislature.
Recommended readings
• "Is the Texas Power Grid Fixed Yet?", Doug Lewin
• "Texas Legislature subsidizes gas power plants, avoids worst attacks on renewable energy", Environment America
• "Texas plan to provide generators with incentives worth up to $1B annually heads to Gov. Abbott", Utility Dive
• "ERCOT ‘Firming Requirement’ Advances Out of House Committee With Performance Credit Mechanism Language", The Texan
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