(Bloomberg) — A Texas experiment to fund new natural gas-burning power plants with $5 billion in public loans is faltering as several of the proposed facilities drop out, threatening the state’s efforts to meet growing electricity demand.
Most Read from Bloomberg
Together, the projects that have left the program could have generated 4.6 gigawatts of electricity — enough for about a million Texas homes. Developers say that even with low-interest loans from the state, their projects no longer pencil out due to cost uncertainties and problems procuring equipment. Some have also faulted the program’s strict deadlines and terms.
The fund was touted by lawmakers as a way to jumpstart gas-plant development at a time when cheap solar and wind power have cut into the state’s wholesale electricity prices, reducing the potential profits for new plants.
“When you have zero or negative prices for power, it’s really hard to build,” said Jim Burke, chief executive officer of Vistra Corp., at a conference held by the Electric Power Supply Association on Wednesday in Washington, DC. Two Vistra projects are under consideration for Texas loans.
It’s an unexpected setback for the Texas Energy Fund, a closely watched effort to meet fast-rising power demand with natural gas. State lawmakers established the fund with voter backing in 2023, as a growing population and economy pushed electricity demands to new records and strained supplies. A wave of planned data centers — some of them needing as much power as a small city — promised even faster growth to come. Although Texas prides itself on an “all of the above” approach to energy, not officially favoring one source over another, the fund’s backers said gas was needed to generate large amounts of power around the clock, without the variability of solar and wind.
The effort initially drew 72 project applications, far more than could have been funded. From that pool, regulators with the Public Utility Commission of Texas picked 17 projects — capable of generating 9.8 gigawatts total — to move forward into due diligence. Days later, however, they rejected one of the biggest — a 1.3-gigawatt project from Aegle Power — because the company named utility giant NextEra Energy Inc. as a sponsor without NextEra’s knowledge or consent, according to a filing.
The program suffered a dual blow last week when Constellation Energy Corp., the largest US independent power producer based on market value, and WattBridge Energy, a leading private developer of gas generation in Texas, withdrew almost 2 gigawatts of projects from consideration. Constellation said its 300-megawatt plant southwest of Dallas was facing too much cost uncertainty around a pending air permit. WattBridge said the loan program itself was adding risks and costs.
The PUC has replaced some of the projects only to see more pull out. There are now 16 proposals being actively reviewed for nearly $4.5 billion in loans, PUC spokeswoman Ellie Breed said in an email. Of the original pool of project applications, 12% have been withdrawn or rejected. Of those invited into due diligence, nearly a third have fallen out.
Citigroup Inc. analysts, in a research note this week, said the fund was “falling apart” and questioned whether the state would add much gas generation after all. “We expect several more gas power developers to remove themselves from the TEF,” analysts Ryan Levine and Amber Zhao wrote.
Texas is a microcosm of a debate raging across the country over how best to meet rising demand for electricity, driven by the data center boom and the electrification of cars and factories. Data center developers need access to more electricity than current infrastructure can easily provide, so they’re looking for locations where new supplies can be quickly brought online. “Speed to market is the overriding factor,” said Aaron Tinjum, vice president of energy from the Data Center Coalition trade group, at the Electric Power Supply Association conference.
The Texas Energy Fund was controversial from the start. Critics questioned its focus on natural gas after many of the state’s existing gas plants failed during a severe 2021 winter storm, triggering widespread blackouts. Still, Texas lawmakers are expected to double the fund’s size during their current session.
Incentives won’t necessarily speed up projects. So few gas-fired plants were built in the US in recent years that turbine manufacturers decreased their production capacity, said Andrew Waranch, chief executive officer of battery developer Spearmint Energy. Both Siemens Energy AG and GE Vernova Inc. have warned of multi-year wait times for turbines. “It’s going to take a very long time for the supply chain to catch up,” Waranch said.
–With assistance from Shoko Oda.
Most Read from Bloomberg Businessweek
©2025 Bloomberg L.P.
