Proposed Texas Legislation Takes Aim at Renewable Generation

Although Texas leads the nation in the construction of renewable energy generation projects, installing 9,166 megawatts of new solar and wind generation in 2022,¹ several bills making their way through the Texas Legislature are taking aim at renewable generation with the possibility for substantial changes to the regulatory and economic environment for such resources.  In large part, these bills are part of the state’s ongoing efforts to respond to the failures of the Texas electricity market during Winter Storm Uri in 2021 and to implement many state leaders’ desire to provide economic incentives to “dispatchable,” namely natural gas-fired, generators.

Senate Bill 2015 (SB 2015), if enacted, would require that 50% of new generating capacity installed after January 1, 2024 in the Electric Reliability Council of Texas (ERCOT) power region come from “dispatchable generation” projects.  The bill would also create an energy credit trading program to monitor and assess the 50% dispatchable generation standard.  Any power generation companies or utilities that do not meet the 50% dispatchability requirement will be required to purchase dispatchable generation credits to offset the difference between their portfolio and the 50% ERCOT requirement.  Dispatchable generation projects are typically powered by natural gas or other fossil fuels, although it is possible that nuclear generation could also qualify under the proposed law.  The Texas Senate passed SB 2015 in early April, and it now awaits action by the state House.

Senate Bill 2014 (SB 2014) proposes to remove certain regulatory programs and state incentives that are designed to benefit renewable generation projects.  One such provision is the repeal of Section 39.904 of the Texas Utilities Code, which would eliminate tax credit subsidies for renewable generation facilities and would abolish regulations designed to promote the expansion of transmission infrastructure to facilitate renewable energy capacity.  SB 2014 was passed by the Senate in early April and awaits action by the House.

In addition to impacts on the ERCOT energy market, some bills have been proposed to subject renewable generation to more permitting and regulatory scrutiny.  As filed, Senate Bill 624 (SB 624) would impose extensive permitting requirements on wind and solar generation facilities.  The proposal would ban construction or operation of renewable facilities unless they receive a permit from the Public Utility Commission of Texas (PUCT) or a PUCT order approving the construction of the project.  Additionally, SB 624 would require renewable energy applicants to provide an environmental impact statement from the Texas Parks and Wildlife Department in order to obtain such PUCT approvals.  There is no similar requirement under the bill for new fossil fuel generation facilities (although “dispatchable” generators are subject to environmental regulation currently).  At an April 13^th Senate committee hearing on the bill, it was reported that stakeholders were working with the bill author to make it less onerous on existing renewable generators and project sponsors.  The bill remains pending in committee.

SB 624 as-filed would also create additional financial and regulatory incentives for natural gas generation facilities.  

Renewable energy industry participants and stakeholders should keep apprised as the legislative process unfolds and the terms of these bills evolve.² This session of the Texas Legislature will end May 29, 2023, unless the Governor calls a special session.
 

¹ Clean Power Quarterly Market Report -Q4 2022, American Clean Power Association (February 22, 2023).

² The latest activity on each bill can be accessed using Texas Legislature Online, available at https://capitol.texas.gov/.