Dive Brief:
- On Wednesday, the Texas Senate approved a bill aimed at establishing a new trading program for “dispatchable” power credits. This would require utilities and power companies in the Electric Reliability Council of Texas (ERCOT) area to balance new renewable energy and battery installations with an amount of new dispatchable power starting next year.
- The definition of “dispatchable” in this bill does not include batteries, meaning companies focused solely on battery storage systems won’t need to meet this new requirement.
- Some analysts, like Doug Lewin, argue that the legislation is overly restrictive and could harm economic progress in Texas, especially in light of existing supply chain challenges that have delayed the delivery of gas turbines.
Dive Insight:
The new bill, S.B. 388, updates parts of the Texas Utilities Code dating back 25 years. It mandates that 50% of the new generating capacity added to ERCOT after January 1, 2026, should come from dispatchable sources other than batteries.
Another section of the code defines “non-dispatchable” generation as systems whose output is mostly subject to natural factors beyond human control.
Under S.B. 388, the Texas Public Utilities Commission will have to create a program where utilities and power generators can purchase dispatchable power credits to make up for any shortfalls in their dispatchable generation capacity, with each megawatt of qualifying capacity earning one credit.
The program will kick in if the Public Utilities Commission concludes that dispatchable power may account for less than 55% of all new generation capacity installed in ERCOT after the specified date.
The Senate passed S.B. 388 by a narrow margin of 18-13, predominantly following party lines, with 17 Republicans in favor and 10 Democrats opposing it. The bill is sponsored by three Republicans with no Democratic sponsorship.
Next, S.B. 388 will move on to the Texas House of Representatives for further discussion. The legislative session ends on June 2, 2025.
Governor Greg Abbott has not yet made a public statement about the bill, but he has previously spoken about the importance of a diverse energy strategy, highlighting Texas’s leadership in wind and solar energy production.
If passed, S.B. 388 could significantly limit Texas’s capacity to add new power generation over the coming years, reducing forecasts from 35% in the last four years to under 10% in the next four, according to analysts.
Lewin pointed out that ongoing supply chain disruptions make it particularly challenging to construct new gas plants, emphasizing the need for additional renewables and storage solutions during this period.
He warned that without proper investments and policies, Texas—and the United States in general—may lag behind China in the development of advanced technologies like artificial intelligence.
Lewin stressed that the innovative spirit of America and the energy resources of Texas could play a crucial role in this race, but cautioned that legislative decisions might undermine these advantages.