On Friday, the independent power producer Wattbridge pulled four natural gas projects from consideration for the Texas Energy Fund, a $5-billion program that offers low-interest loans for new or expanded dispatchable generation. And just hours later, Constellation Energy followed suit, removing a project of its own.
The Wattbridge projects would have totaled 1.62 gigawatts of generation, according to a letter from president Michael Alvarado, addressed to the Texas Public Utilities Commission. The reason for their withdrawal: the math just doesn’t add up, despite the TEF’s improved financing terms.
“Unfortunately, the terms offered through the TEF program introduce risk and costs that result in lower than anticipated returns with elevated risks,” Alvarado wrote in the letter, which was shared on LinkedIn by Doug Lewin, who writes the Texas Energy and Power newsletter and hosts the Energy Capital podcast.
The four projects in question are Elmax (600 megawatts), Longleaf (510 MW), Imperial (408 MW), and Remy Jade III (102 MW). All would have been located in the Houston Hub region of Texas other than Elmax, which would have been in the North Hub. While just two of these were finalists for the TEF, the fact that all four have been withdrawn means that the PUC cannot backfill the pipeline with other Wattbridge projects.
Meanwhile, Constellation Energy withdrew its plans to add an additional 300 MW of capacity to its 1.1-GW Wolf Hollow III project, citing permitting delays rather than finances. That project, according to Lewin, has experienced a lot of local opposition.
Lawmakers created the Texas Energy Fund, which voters approved in 2023, to support the natural gas industry in the state. A key part of the political narrative was providing grid reliability in the state; between 2021 and 2024, the state’s power demand climbed 17%, and much of that demand is being met with solar and energy storage.
But nationwide, gas is in a complicated position. On the one hand, demand is higher than ever. Especially for new facilities that require large amounts of reliable, dispatchable energy — such as manufacturing facilities and data centers — gas turbines are the technology of choice for many developers. Equipment giant GE Vernova, for instance, is the biggest turbine manufacturer in the United States; a company spokesperson told the Upstate Business Journal in January that demand is greater than it has been in decades, so much so that it is expanding production.
But in many markets, the process of actually getting a new gas plant built involves grappling with equipment delays (especially for transformers) and labor challenges. NextEra CEO John Ketchum said on an earnings call in January that new gas-fired generation to meet load growth “won’t be available at scale until 2030,” while “renewables are here today.” As Lewin pointed out to Latitude Media in an interview last month, batteries are already serving much the same purpose as new gas generation in Texas, and are comparably “a lot more straightforward” to deploy.
Interest in the TEF was initially strong, with developers sending in applications for dozens of projects. Last August, the program chose 17 finalists. However, in the months since, Engie pulled its own 930-megawatt peaker plant from the group of finalists, citing “equipment procurement constraints.” And like Wattbridge, Engie pulled a second, non-finalist plant from consideration as well.
According to Lewin, 35% of the TEF’s capacity has either dropped out or been rejected so far.
According to the letter, Wattbridge has built 2.4 GW of new gas generation into the ERCOT market since 2019. Alvarado maintained that the company remains “committed” to the market, and “will continue to evaluate further development of these and other projects through alternative financing approaches.”
Editor’s note: This story was updated on March 31 to add details about the Constellation Energy project that also withdrew from TEF. The title was changed to reflect the fact that five, not four, plants were pulled.
