So you want a new gas power plant?
Better start waiting. As an ongoing policy experiment in Texas shows, even a helping hand from the state can’t get steel in the ground ahead of schedule.
Last year, Texas officials announced that the developers of 17 energy projects would be eligible to receive low-interest, state-backed loans to add enough new gas plants to the state’s main electric grid to power nearly 2.5 million homes. But since then, seven have withdrawn or been ruled ineligible for the so-called Texas Energy Fund, as has a replacement project, with reasons ranging from financing to supply chain trouble.
With the Trump administration eager to get new fossil fuel plants online in order to meet growing electricity demand and fuel an artificial intelligence boom, the troubles in Texas offer a sobering warning: The market is not ready to build new plants as quickly as regulators want.
The Texas Energy Fund was created by state legislators and approved by voters in 2023 as part of a push to install more dispatchable generation — the type that can be turned on or off — at a time when low prices and regulatory ease meant renewable energy — power that isn’t always available — was flooding the market. The state set aside $5 billion to give low-interest loans to gas plant developers and saw $39 billion worth of demand.
But the realities of construction put a dent in the program’s promise. Last week, the Texas Public Utility Commission denied the loans for a 162-megawatt plant sponsored by Frontier Group of Companies and a 900-megawatt project from EmberClear Management. The PUC did not cite a reason for the denials.
In a statement, Frontier said it would continue to pursue opportunities and “we remain confident in the strategic value of our project to support Texas’ long-term reliability goals.”
Several other projects have withdrawn, with some critics noting that deadlines could be hard to meet or that the constraints on financing were not competitive. A letter from developer WattBridge said that the program’s terms “introduce risk and costs that result in lower than anticipated returns with elevated risks.” Notably, French developer ENGIE told the PUC in February that it was withdrawing a 930-megawatt project, saying that “equipment procurement constraints” meant they would not be able to meet state deadlines.
At the same time, lawmakers are considering a bill that would require that 50 percent of new generation on the main Texas grid be gas-powered, with warnings that the state won’t be able to support data centers and manufacturing without it.
Doug Lewin, founder of Stoic Energy Consulting, said legislation like that would restrict the state’s growth for reasons outside of anyone’s control.
“You’re tying the growth of the Texas economy to the availability of gas turbines,” Lewin said. “So if you can’t get gas turbines, you’d be artificially capping the economy.”
‘Standing start’
The situation in Texas is a microcosm of the reality across the power sector. After years of declining demand for gas power, skyrocketing demand fueled by the tech industry has grid operators and utilities suddenly desperate for new fossil fuel plants. But the supply chain had already adapted to lower demand, meaning parts are now years away.
According to data from Rystad Energy, planned natural gas generation capacity is up to 28.5 gigawatts, the highest level since the first half of 2022 and a near doubling from forecasts in June 2024.
Major gas turbine companies are “witnessing a significant uptick in orders from North America, signaling strong market anticipation of further gas capacity needs,” said Marina Domingues, head of U.S. new energy at Rystad, in an email. “However, this demand surge coincides with record backlogs across these suppliers, creating bottlenecks with potential waiting times extending up to five years for new turbine installations.”
Some tech companies are even directly competing, willing to build gas plants on site rather than wait to connect to the grid, further driving up competition for limited parts. And that’s on top of labor shortages, which are also slowing down construction, and the significant cost of equipment.
According to investment bank Jefferies, the cost of a new gas turbine is about 50 percent higher than just 10 months ago.
Siemens Energy, one of the largest domestic manufacturers, said in an email that “persistently high demand” means that manufacturing slots are shrinking and that slots are “selling faster than they can increase manufacturing capacity.”
“With the gas turbine sales and reservations that we’ve transacted over the past six months alone, we will add dozens of gas turbines to our operating fleet in North America,” said a Siemens spokesperson. “This spike in gas turbine sales is also fueled by sales connected to the emerging data center segment, for which our gas turbines have been secured to support projects totaling nearly 6 GW of new generation.”
GE Vernova has also likewise seen demand increase and is expanding capacity at a gas turbine factory in South Carolina to increase production 35 percent by next year. Speaking to the Barclays conference in February, CEO Scott Strazik said the company is back to a “really healthy demand cycle for services.”
Strazik noted that the company is especially seeing more demand for smaller F-class gas turbines that can be used in peaker plants, a reflection he said that gas is “supporting a system that’s becoming much more vulnerable as more electrons are needed and more dependency of those electrons are coming from intermittent sources of power.”
It also comes as the Trump administration says fossil fuel power is necessary to keep the lights on and power the growing economy. Energy Secretary Chris Wright has discussed the potential of using the Cold War-era Defense Production Act to spur turbine manufacturing. The Department of Energy did not respond to a question about whether it would invoke that law or other policy solutions.
House Republican Rep. Julie Fedorchak of North Dakota has also said she is working on a “legislative framework” to address the turbine shortage and launch more gas power.
Utilities and developers are also trying to strike deals to get their hands on gas infrastructure as quickly as possible. NextEra Energy, for example, announced a framework agreement with GE Vernova to support multiple gigawatts of new gas for large customers, part of its $120 billion investments over the next four years.
CEO John Ketchum said on a call with analysts that the deal was necessary to get gas plants but that the near-term future was still in renewable energy.
“With gas-fired generation,” he said, “the country is starting from a standing start.” Between finding sites and procuring supplies, he said, “when is gas really going to be able to contribute at scale? We’re looking at 2030.”
What’s next for Texas?
With the Texas grid forecast to see summer peak demand grow by 80 percent by 2035, the energy research firm Ideasmiths found in a report released last week that the state needs an “energy abundance strategy” that leverages all fuel sources. Even with a grid heavy in renewable energy — which report authors said was the cheapest way to meet demand — the report envisions doubling gas-fired generation capacity by 2035 to meet peak demand and provide backup when renewable energy is low.
Regulators aren’t slowing down their gas push. A PUCT spokesperson said that the body is still reviewing 14 applications for the Texas Energy Fund, totaling 8,100 MW of new generation on the grid. Additional loan applications are also under consideration to backfill those no longer in the program.
“The PUCT remains focused on ensuring the appropriate use of all taxpayer funds while meeting the objectives” of the TEF programs, said spokesperson Ellie Breed.
POLITICO’s E&E News reached out to the sponsors of all projects still under consideration and each responded that they anticipated continuing with the program. Many said they were still on pace to complete projects before 2029, which would make them eligible for a completion bonus.
NRG spokesperson Ann Duhon, whose company has three projects under consideration totaling more than 1,600 MW, said there were no supply chain concerns for the Houston-based company.
“NRG began the process of securing equipment to potentially build new generation more than five years ago, which has positioned the company to meet growing energy demand,” said Duhon. “We’ve partnered well in advance with manufacturers and built a team of experts to bring new generation projects to life.”
Texas lawmakers are exploring legislation that could add even more money to the energy fund or could relax some of its deadlines and requirements to make it easier to comply.
But another bill could bring an even bigger change to the grid — and potentially expose the challenges of relying on gas. The state Senate last month passed SB 388 from GOP state Sen. Phil King that would require half of all generation on the grid to be dispatchable, a designation referring to gas, nuclear and coal. Suppliers that can’t match renewable energy with equivalent value of dispatchable generation would have to purchase credits to make up the difference.
Luke Metzger, executive director of Environment Texas, said that the legislation — along with other bills that would impose new permitting requirements and costs on renewable energy — reflect politicians’ meddling in a market where wind and solar are playing an increasingly large role on the grid.
“What’s frustrating for us is that state leaders are betting the house on gas that clearly can’t be built fast enough and are also working to stop new renewable energy,” Metzger said. “They’re kind of wish casting that gas will come and meet all of our energy needs, but clearly it can’t.”
