Dive Brief:

• The Texas Senate on Wednesday passed a bill to create a new “dispatchable” power credits trading program that would effectively require utilities, generation companies and electric cooperatives in Electric Reliability Council of Texas territory to offset new renewables and battery capacity — with an equal amount of new dispatchable capacity beginning as early as next year. 
• The bill’s definition of “dispatchable” excludes batteries while also exempting power generation companies that exclusively operate battery energy storage systems from the dispatchable power generation requirement. 
• The bill is “the most heavy-handed, anti-market kind of legislation … [that] would bring economic growth in Texas to a screeching halt” amid supply chain issues that have pushed gas turbine deliveries out to 2030 or beyond, Texas-based power-sector analyst Doug Lewin wrote earlier this week.

Dive Insight:

S.B. 388 updates a 25-year-old section of the Texas Utilities Code to reflect “the intent of the legislature that 50 percent of the megawatts of generating capacity installed in the ERCOT power region after January 1, 2026, be sourced from dispatchable generation other than battery energy storage.”

A separate section of the Texas Utilities Code defines “non-dispatchable” generation facilities as those whose output “is controlled primarily by forces outside of human control.”

S.B. 388 requires the Texas Public Utilities Commission to establish a program through which covered utilities and power generation companies would buy dispatchable power credits to cover any deficit in dispatchable generation capacity under the companies’ ownership or control. Each megawatt of qualifying dispatchable capacity would qualify for one credit, the bill says.

The PUC must activate the credit trading program if it “determines that dispatchable generation may provide less than 55 percent of all new generating capacity installed in the ERCOT power region after January 1, 2026,” the bill says.

The Texas Senate passed S.B. 388 by an 18-13 vote margin, largely along partisan lines. Seventeen of 20 Republicans voted in favor, while 10 of 11 Democrats voted against. The bill has three Republican and no Democratic sponsors.

S.B. 388 now heads to the Texas House of Representatives for consideration. The Texas Legislature’s 2025 session ends on June 2.

Gov. Greg Abbott, R, has not publicly commented on S.B. 388, but in December touted his state’s “all of the above” approach to energy production while nodding to its status as the national leader in wind power generation and utility-scale solar capacity. 

If enacted, S.B. 388 would dramatically reduce Texas’s ability to add new power generation this decade, slashing capacity additions from 35% over the last four years to less than 10% over the next four, Lewin said in a Wednesday newsletter.

“Supply chain issues are making it historically difficult to build gas plants … we should all agree that the state needs to bulk up on renewables and storage at least long enough for the gas-turbine supply chain to get replenished,” he said.

If it doesn’t, Texas — and the United States as a whole — is in grave danger of falling behind China in the quest for human-level artificial intelligence, he added.

“American ingenuity and Texas energy give us a chance to win the AI race. Only the Texas Legislature can screw it up, and they just might,” Lewin said.