Second Texas Energy Fund loan agreement announced for natural gas development

Another major Texas Energy Fund loan agreement has been reached to increase natural gas development in Texas.

The second TEF In-ERCOT Generation Loan Program agreement announced this year will fund a 456-megawatt natural gas power plant in Houston built by NRG Energy Inc.

NRG is constructing the plant at its existing TH Wharton Generating Station in Houston. It’s currently under construction and slated to become operational next summer.

The completed project will interconnect in the ERCOT Houston Load Zone, one of the largest electricity demand centers in Texas. It covers Houston, Pasadena and The Woodlands, the fifth largest metropolitan area in the United States.

“Texas is the top energy producer in the nation – fueling growth and innovation across our state and around the world,” Gov. Greg Abbott. “This 456-megawatt investment in the Texas grid will help bear the load of the largest electricity demand area in the state, further ensuring reliable and affordable power for countless homes and businesses in the greater Houston area. By investing in reliable, dispatchable energy, we will build a stronger, more powerful Texas for generations to come.”

“This new power plant marks another major investment in Texas and in the ERCOT grid, helping prepare our state’s power supply to meet the demands of the future,” Public Utility Commission of Texas Chairman Thomas Gleeson said. “The Texas Energy Fund is accomplishing exactly what the Governor and the Texas Legislature envisioned – securing reliable, on-demand power to fuel Texas’ rapid growth and continued success.”

The first agreement was announced last month with the Kerrville Public Utility Board to build a new 122 megawatt natural gas power plant it’s developing in Colorado County, Texas, The Center Square reported.

The first two approved loan agreements represent a combined 578 MW of new dispatchable generation for the ERCOT grid powered by natural gas.

The PUC administers the TEF, which provides low-interest loans for projects that add new, dispatchable power to the ERCOT region.

In 2023, the Texas legislature created the Texas Energy Fund Loan Program and allocated $5 billion to it. Voters overwhelmingly approved a constitutional amendment in a November 2023 election to support the fund, including supporting “the construction, maintenance, modernization, and operation of electric generating facilities.” This included authorizing grants and low-interest loans administered by the Public Utility Commission of Texas (PUC) financed through the fund. The PUC oversees TEF and the regulatory agency managing Texas’ grid, ERCOT.

This year, the legislature appropriated $5 billion to fund the TEF for fiscal years 2025-2026 and an additional $4 billion for fiscal years 2027-2028.

“The development of our new units at TH Wharton is already providing significant construction jobs, and once online next year will provide additional permanent jobs, enhanced grid stability, and regional economic growth,” Executive Vice President, President of NRG Business and Wholesale Operations Robert Gaudette said.

Under the loan agreement, total project costs are estimated to be less than $360 million. The PUC is providing a 20-year TEF loan for up to $216 million, or 60% of the total cost, at a 3% interest rate. The loan term runs from July 31, 2025, through July 30, 2045, the governor’s office said.

The loan agreement also requires the facility to meet minimum performance standards, according to program rules.

There are currently 15 applications to the TEF In-ERCOT Generation Loan Program that are active and moving through a due diligence review process, the governor’s office said.

Combined, they represent an additional 8,392 MW of proposed, new dispatchable generation for the ERCOT grid.