Supply chain constraints and higher cost have forced energy companies to withdraw eight projects to build gas-fired power plants in Texas under a $5-billion state loan program, the Financial Times reported on Tuesday.
The Public Utility Commission of Texas (PUCT) is currently reviewing the extension of $5.38 billion worth of low-interest loans to companies planning nearly 10 gigawatts (GW) of new natural gas-fired capacity in a bid to boost generation capacity for ERCOT.
The Texas Energy Fund was established in 2023 by the Texas Legislature through Senate Bill 2627, the Powering Texas Forward Act, to provide grants and loans to finance the construction, maintenance, modernization, and operation of electric facilities in Texas.
Last year, ERCOT forecast that electricity demand in the Lone Star State could double in six years, necessitating the urgent addition of more generation capacity.
However, eight of the projects initially proposed have already been withdrawn or canceled, while Texas regulators have also denied state funding due to applicants failing to meet due diligence requirements.
Engie Flexible Generation North America, a unit of France’s energy giant Engie, and Howard Power Generation have withdrawn their applications citing “supply chain constraints”, according to PUCT’s recent actions cited in a Houston Chronicle review.
Constellation Energy Generation withdrew its application citing TCEQ permit uncertainty regarding environmental impacts, while WattBridge Energy withdrew its plans because of “lower than anticipated returns”.
The development highlights the difficulties energy firms face in planning and building new gas-fired capacity even in the state of Texas, even under pro-fossil fuel President Donald Trump.
The Texas Energy Fund and its program to back new gas powered generation are “falling apart”, Citigroup said earlier this year.
The need for new capacity in Texas is urgent to meet growing power demand and keep electricity supply reliable, following the collapse of the ERCOT grid during a winter storm in 2021 and several close calls in peak summer since then.
By Tsvetana Paraskova for Oilprice.com
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