Texas's $5 billion bet on dispatchable power

The two biggest power markets in America are pursuing the same goal — a reliable grid through a period of explosive demand growth — in almost opposite ways. California reaches its grid through mandates — it requires utilities to procure clean energy on a schedule. Texas doesn't believe in mandates. It believes in money and markets. And in 2023 its voters approved one of the largest direct state interventions in grid history: a multibillion-dollar fund that lends money, cheaply, to anyone who will build new dispatchable power in the state.

01What the state's Texas Energy Fund is

The state's Texas Energy Fund (TxEF) was created by Senate Bill 2627 — the Powering Texas Forward Act — signed in June 2023, and funded after Texas voters approved Proposition 7 in November 2023. The legislature appropriated $5 billion for the 2025–26 biennium and another $4 billion for 2027–28. Its purpose is blunt: get more dispatchable generation built on the ERCOT grid, fast, by removing the financing obstacle.

The context is a demand boom unlike anything the grid has handled before. ERCOT projects its peak demand could rise more than 65% by 2031, driven by data centers, electrification, industrial growth, and the broader Texas economy. Texas's policymakers concluded that the energy-only market, left alone, wasn't building new firm capacity fast enough to stay ahead of that curve — so rather than impose a mandate, they offered capital on terms no private lender would match.

California closes its reliability gap by telling utilities what they must buy. Texas closes its gap by making it irresistibly cheap to build. Same problem, opposite instrument.

02How the loan program works

The centerpiece is the In-ERCOT Generation Loan Program, administered by the Public Utility Commission of Texas. It provides 20-year loans at a fixed 3% interest rate to companies building new — or expanding existing — dispatchable generating facilities in the ERCOT region, for qualifying projects that add at least 100 MW of dispatchable capacity. A 3% fixed rate over two decades is dramatically below market for merchant power projects, and it's the entire point: it lowers the cost of capital enough to tip projects from "maybe" to "build."

Alongside the loans sit completion bonus grants, which pay per megawatt for projects that actually interconnect on time — structured to reward speed. Projects energizing before June 2026 were eligible for $120,000 per MW; those coming online later, through 2029, qualify for $80,000 per MW. The declining schedule is a deliberate nudge to build now, while the grid's need is most acute.

03What it has financed so far

The response was, in the PUCT's own framing, overwhelming — applications far exceeded the available funds. The program's first loan agreement was signed in June 2025. So far the fund has allocated roughly $2.3 billion toward loans supporting about 3,109 MW of new generation across ten selected projects, with a further dozen applications representing nearly 5,861 MW of proposed dispatchable capacity in due-diligence review. Its first performance-based grant went to a Lower Colorado River Authority 188-MW reciprocating-engine (RICE) peaker — the kind of fast-start gas unit the program is built to encourage.

There's a clock attached. The last day for the PUCT to make initial disbursements on approved In-ERCOT loans is December 31, 2026, which is part of why the pipeline is moving quickly. For a state program, the TxEF has gone from ballot measure to signed loans to steel in a remarkably short time.

04The dispatchable-only design

Here's the defining feature, and the controversy: the fund's generation loans are for dispatchable resources — in practice, mostly natural gas — and explicitly not for solar and wind. The logic Texas policymakers offered is that the grid already gets plenty of renewables from the market on its own (it does — Texas leads the nation in wind and is a top builder of solar and storage), and that what the market underbuilds is the firm, on-demand capacity that's there regardless of weather. The fund, in this view, fills the gap the market leaves rather than subsidizing what the market already delivers.

Critics counter that "dispatchable" has been written in a way that favors gas over equally firm clean options, and that modern storage can provide much of the same on-demand reliability without the emissions. That debate is live and worth watching, because the definition of what counts as "firm" or "dispatchable" is exactly where clean technology is advancing fastest. The fund's design reflects a 2023 view of which resources can be counted on at 7 PM on a still, hot evening — a view that storage and hybrid systems are steadily challenging.

The fund is a bet that firmness is what the market underbuilds. It's right about the need — the open question is whether "firm" has to mean "gas," or whether clean, firm power can do the same job.

05What it means for clean, firm power

For a developer of clean and firm resources, the state's Texas Energy Fund is both a signal and a challenge. The signal is unmistakable and encouraging: the second-largest power market in America has decided that firmness — capacity available on demand, through scarcity and stress — is the single most valuable thing it can buy, valuable enough to back with billions in public capital. That's a strong validation of the thesis behind our hybrid model, which exists precisely to deliver firm output rather than weather-dependent energy.

The challenge is that the fund itself, as written, channels its loans toward conventional dispatchable generation rather than clean-firm alternatives. We don't need the fund's loans to build — but its very existence tells us what the Texas grid will pay a premium for, and it's exactly the attribute our solar-plus-storage-plus-firm campuses are engineered to provide. As storage and hybrid systems keep proving they can deliver firmness cleanly, the definition of what deserves this kind of support tends to follow. Texas has told the market, in the loudest way a state can, that it wants firm power. We build firm power that happens to be clean.