(The Center Square) – A third major Texas Energy Fund loan agreement has been reached to increase natural gas development in Texas.
NRG Energy, Inc., has signed a Texas Energy Fund loan agreement with the state to build a 721 megawatt (MW) natural gas power plant at its Cedar Bayou Generating Station in Chambers County.
The Baytown area outside of Houston is already a natural gas generating powerhouse in Texas and along the Gulf of America.
The new unit is currently under construction, and is estimated to begin generating power by summer 2028. It will serve Texas’s electric grid, the Electric Reliability Council of Texas (ERCOT).
As the Houston region and energy capital of the United States continues to lead Texas in population growth and migration trends, demand for energy is also increasing.
“This 721 MW investment in the Texas grid will ensure the state continues to meet and provide for this incredible growth with a robust, reliable supply of energy to power Texas homes and businesses,” Gov. Greg Abbott said in a statement.
Building the new unit at NRG’s Cedar Bayou power plant “will generate significant construction jobs, and once online in 2028 will provide additional permanent jobs, enhanced grid stability and regional economic growth,” Executive Vice President, President of NRG Business and Wholesale Operations, Robert Gaudette, said.
This is the second TEF loan agreement the state reached with NRG this year. The first was announced in August to fund an NRG 456-megawatt natural gas power plant in Houston, The Center Square reported. Both NRG projects will interconnect in the ERCOT Houston Load Zone, one of the largest electricity demand centers in Texas. It covers Houston, Pasadena and The Woodlands, the fifth largest metropolitan area in the United States.
The first TEF loan agreement was announced in July with the Kerrville Public Utility Board to build a new 122 MW natural gas power plant it’s developing in Colorado County, Texas, The Center Square reported.
The first three loan agreements represent a combined 1,299 MW of new dispatchable generation for the ERCOT grid powered by natural gas, Public Utility Commission of Texas (PUC) Chairman Thomas Gleeson said. This is “enough electricity to power hundreds of thousands of Texas homes and businesses, with more on the way.”
The PUC administers the TEF, which provides low-interest loans for projects that add new, dispatchable power to the ERCOT region. It also oversees the regulatory agency managing Texas’ grid.
In 2023, the Texas legislature created the Texas Energy Fund Loan Program and allocated $5 billion to it. Voters overwhelmingly approved a constitutional amendment in a November 2023 election to support the fund, including supporting “the construction, maintenance, modernization, and operation of electric generating facilities.” This included authorizing grants and low-interest loans administered by the PUC financed through the fund.
This year, the legislature appropriated $5 billion to fund the TEF for fiscal years 2025-2026 and an additional $4 billion for fiscal years 2027-2028.
According to the loan agreement, total project costs are an estimated $936 million. The PUC is providing a 20-year TEF loan of $562 million, or 60% of the total project cost, at a 3% interest rate. The loan term runs from Sept. 26, 2025, through Sept. 25, 2045. The facility must also meet minimum performance standards outlined in the loan program rules.
There are currently 14 TEF applications being considered in a due diligence review process, the PUC said. Combined, they represent an additional 7,671 MW of proposed new dispatchable generation for the ERCOT grid.
