Headline: “Two more natural gas power plant projects denied loans from $5 billion Texas Energy Fund program” By Claire Hao, Staff writer
“More than 12 gigawatts of natural gas power plant projects have been advanced to due diligence review process. But more than 40% of capacity has dropped out of the program or been denied funding.”
Two more natural gas power plant projects denied loans from $5 billion Texas Energy Fund program
By Claire Hao, Staff writerApril 16, 2025
Two more natural gas power plant projects have been denied loans from Texas’ $5 billion program meant to attract more electricity supply for the state’s primary power grid.
Including these two denials, almost five gigawatts of power plant projects have been denied funding or voluntarily withdrawn from the taxpayer-backed Texas Energy Fund, or enough capacity to power approximately 1.2 million homes. That’s nearly half of the loan program’s goal of incentivizing 10 gigawatts of new gas-fired power generation.
SALE: 25¢ for 3 months! Be informed. Stay connected.
What's going on with the $5 billion Texas Energy Fund?
More than 12 gigawatts of natural gas power plant projects have been advanced to the due diligence review process. But more than 40% of that capacity has dropped out of the program or been denied funding.
This is a table showing Texas Energy Fund applications that have been advanced to the due diligence process. Five projects have withdrawn from consideration, and one was denied funding due to fraud allegations. Two more were denied for failure to meet due diligence requirements.
Table with 3 columns and 22 rows. Sorted descending by column "Capacity (MW)"Sponsoring CompanyCapacity (MW)NotesCompetitive Power Ventures, GE Vernova1,350NextEra and Aegle Power1,292Denied, fraud allegationsHull Street Energy, through wholly owned subsidiary MPH Bastrop Peakers LLC1,080Engie Flexible Generation North America LLC930Withdrawn, supply chain constraintsEmberClear Management, Jupiter Island Capital900Denied, PUC cited failure to meet due diligence requirementsNRG Energy721Added to backfillWattBridge Energy IPP Holdings LLC600Withdrawn, lower than anticipated returnsRayburn County Electric Cooperative Inc., Rayburn Energy Station LLC570WattBridge Energy IPP Holdings LLC510Added to backfill; withdrawn, lower than anticipated returnsLS Power Equity Advisors LLC490Calpine Corp.460NRG Energy456NRG Energy455Added to backfillVistra Corp.440Vistra Corp.440Added to backfillRockland Power Partners IV LP342Added to backfillConstellation Energy Generation LLC300Withdrawn, TCEQ permit uncertaintyHoward Power Generation LLC271Withdrawn, supply chain constraintsMercuria Investments U.S. Inc., Reliability Design and Development LLC226Frontier Group of Companies (Lonestar Industrial 162 Park LLC)162Denied, failure to meet due diligence requirementsHunt Energy Network LLC, John Hancock Life Insurance Company (U.S.A.), Manualife Infrastructure III AIV Holdings B LP132Kerrville Public Utility Board Public Facility Corporation, Kerrville Public Utility Board122
Table: Claire Hao / Houston Chronicle Source: Public Utility Commission of Texas
Analysts from the investment bank Citigroup wrote that the Texas Energy Fund was “falling apart” in a research note two weeks ago. Now, as lawmakers contemplate setting aside billions more of taxpayer dollars for the fund, the most recent denials add even more data points to concerns that the program is flawed.
ADVERTISEMENT
Article continues below this ad
One person who says the Texas Energy Fund has “a lot of room for improvement” is Jorge Castellanos, chief power officer for the Frontier Group of Companies. The company’s application was one of the two proposals denied Tuesday by the Public Utility Commission of Texas for “fail(ing) to meet due diligence requirements.”
Castellanos said the program was attractive because it offered low interest rates, but the requirements were ultimately too “constraining” and “onerous” for the Frontier Group of Companies’ plans to build a 162-megawatt power plant near Tyler.
“If you compare the term sheet that you get from a Bank of America or from Frost Bank to get a loan for a power project, it was more difficult to have that from the (Texas Energy Fund) than from Bank of America. It made no sense,” he said in an interview.
The other company denied funding was EmberClear Management, which proposed building a 900-megawatt power plant near Houston. Its executives wrote a letter to the PUC Wednesday afternoon urging the agency to reconsider its Tuesday order, which rejected the company’s application with no ability for rehearing or appeal.
ADVERTISEMENT
Article continues below this ad
EmberClear met all required milestones and deadlines of the program, and “at no time” received a notice of deficiency, executives said in their letter.
“If deficiencies have been identified, allow us the opportunity to cure so that we may comply with all program requirements,” EmberClear’s executives pleaded with the PUC.
BACKGROUND: Texas is giving out $5B in loans to build natural gas power plants. Some companies say no thanks.
In an email statement, PUC spokesperson Ellie Breed declined to comment on specific applications because they contain “sensitive business information.”
Fourteen applications totaling approximately 7.3 gigawatts of capacity continue in the Texas Energy Fund’s due diligence review process. Additional applications are under consideration to replace those no longer in the program, Breed wrote.
“The PUCT continues to pursue the objectives of all four TEF programs while ensuring a high level of security for taxpayer funds,” she wrote.
In addition to the loan program, the Texas Energy Fund is also supposed to support completion bonuses for new natural gas power plants, power grid infrastructure upgrades, and backup power resources that can kick on during outages.
‘Constructive criticism’
Several of the Texas Energy Fund’s terms made the program too difficult for Frontier Group of Companies, even though the PUC and its contractor Deloitte were “excellent” to work with, Castellanos said.
For one, Frontier Group of Companies couldn’t comply with the PUC’s requirement that the company post a $100 million letter of credit to build a transmission line for its power plant.
Castellanos offered other points of “constructive criticism”: The program required the company to fund 40% of its project with equity financing, rather than 25% as is typical. The company also wouldn’t have been able to distribute a portion of its profits to investors until the whole loan was paid off, he said.
Castellanos' comments add to the list of reasons given by four other companies that have withdrawn from the Texas Energy Fund.
Two said the program’s various deadlines to supply power to the Electric Reliability Council of Texas grid were too challenging, given supply chain constraints. Another cited uncertainty over its air permit application, after community opposition to its project.
ERCOT’s CEO has also weighed in with his concerns that Texas' electricity market doesn’t adequately support long-term gas-fired power plant investment, in part because renewable energy resources have depressed wholesale power prices.
Bringing more power to Texas
Texas lawmakers have proposed a number of bills to address the Texas Energy Fund's issues and to incentivize more gas-fired generation they say is needed to counterbalance the influx of solar farms. One would allow the PUC to extend the program’s deadlines, if applicants need that flexibility.
Others — to loud outcry from some corners of the industry — would constrainrenewable energy development, limiting new electricity supply even though ERCOT recently said peak power demand in its jurisdiction could increase 70% in the next six years.
Frontier Group of Companies was planning to develop the power plant near Tyler for the ERCOT grid, which serves most Texans and has little ability to import electricity from the rest of the country in times of crisis.
But with the loan denial, the company will most likely pursue building its power plant for the Southwest Power Pool market, where electricity prices are less volatile and modeled returns are better anyway, Castellanos said.
“Texas needs the power; it’s urgently needed,” he said. “So we think, if we stay in SPP area, which is still Texas but not in ERCOT, we still give Texas a hand.”
April 16, 2025
ENERGY & POWER GRID REPORTER
Claire Hao is a reporter at the Houston Chronicle covering the Texas power grid, the clean energy transition and other electricity-related topics. Claire previously spent a year on the climate and environment team of the San Francisco Chronicle. She has written for the news desks of Bloomberg Law and the Chicago Tribune as well as for the editorial board of the Washington Post. Claire graduated from the University of Michigan.
BOTTOMLINE: “Texas lawmakers have proposed a number of bills to address the Texas Energy Fund's issues and to incentivize more gas-fired generation they say is needed to counterbalance the influx of solar farms.”