A Lone Star Showdown: What Was Decided By the 88th Legislative Session, and What It Means for Texas' Advanced Energy Sector

Posted by Matthew Boms and Micalah Spenrath on May 30, 2023 11:01:21 AM

Texas Blog Post Legislative Session_May 2023

The 88th Texas Legislative Session featured a clash of two forces struggling to influence the future of Texas energy—one side looking to reverse the Texas energy miracle, characterized by rapid development of large-scale wind and solar power generation, and the other side staunchly defending the competitive market, a hallmark of the state's energy system.  

A barrage of bills introduced early in the session was designed to cripple the renewable energy sector; proposals ranged from discriminatory cost shifting onto renewable energy providers and punitive permitting requirements to market exclusion and a full moratorium on renewable energy development. A marathon of hot debates, late-night deals, and closed-door negotiations resulted in a ‘market redesign’ package that was a key legislative priority for both Governor Greg Abbott and Lieutenant Governor Dan Patrick heading into the session. 

Anti-renewable bills flooded the early days of the 88th Legislative Session 

Texas has struggled through a series of winter storms like Uri, Elliot, and Mara that caused power outages throughout the state, exposing vulnerabilities in the Texas grid. To ‘fix’ the grid and improve reliability, the Public Utility Commission of Texas proposed the Performance Credit Mechanism (PCM), borne out of a study conducted by Energy and Environmental Economics, Inc. (E3), that would reward dispatchable resources for being available during times of greatest grid constraint. Experts raised alarms about the significant risk of the proposal, its high cost, lack of regulatory clarity, and the ineligibility of advanced energy technologies to participate. Because wind and solar resources are not considered dispatchable, they won’t be able to tap into the economic value of the PCM.  

The Texas Legislature upped the ante by introducing numerous bills designed to bolster dispatchable resources while undercutting renewable energy. Taken together, this constituted a comprehensive assault on renewables and advanced energy businesses by manipulating their business economics and limiting opportunities for them in Texas.  

Advanced Energy United defends advanced energy interests in the state 

Advanced Energy United, through its state chapter – the Texas Advanced Energy Business Alliance (TAEBA) – deeply engaged with legislators throughout the session and championed the voices of its members. Launching its advocacy with Texas Lobby Day on March 2nd, it connected members like Apex Clean Energy, Enchanted Rock, Enel Green Power, Highland Fleets and Schneider Electric with key legislators on the Senate Business and Commerce Committee and the House State Affairs Committee to make the case for advanced energy in Texas.

TAEBA advocated for the benefits of electric school buses and electric vehicles, energy efficiency and demand response, renewable energy, and distributed energy resources. It also testified against bills that would increase costs, limit market access and opportunities, and stifle investment, including market redesign bills, permitting, and utility control of distributed energy resources. Alternatively, TAEBA strongly supported measures to expand energy efficiency and demand response, and lower barriers to electric school bus adoption.

Over time, many harmful Senate bills were stopped in the Texas House of Representatives or amended to be less objectionable. However, all of the original Senate bills returned at the eleventh hour in the form of Senate amendments to HB 1500 – a bill that the Legislature is required to pass to keep the Public Utility Commission of Texas (PUCT) in existence, according to the Texas Sunset Act. 

In response, Advanced Energy United ramped up its communications advocacy campaigns to mobilize Texans against the worst Senate proposals.

Key threats to advanced energy were defeated or minimized. 

  • The worst of the market redesign proposals were successfully defeated. Advocacy work quashed efforts to artificially increase costs for advanced energy businesses and bar them from full market participation.  
  • Permitting requirements for wind and solar were thwarted. We halted the effort to establish an onerous permitting regime, featuring discriminatory setback requirements on wind and solar businesses. 
  • Energy efficiency and demand response bills advanced further than in any previous legislative session. This has been applauded by many observers, because it demonstrates changing legislative attitudes towards load-management solutions. 
  • Geothermal energy received positive signals from the Legislature. With the passage of SB 785, SB 786 and SB 1210, the geothermal industry is setting the stage for future expansion in the state.

The bills that passed: A comprehensive review 

Several bills are currently awaiting Governor Abbott's signature in order to become law. The Governor has until June 18th to either sign or veto these bills.

The PUCT Sunset Bill (HB 1500): 

  • Caps the cost of the PCM at $1 billion. Renewables are excluded but battery storage should be able to participate. 
  • Mandates the “firming” of renewables at the portfolio level by 2027; includes battery storage as an acceptable firming method. 
  • Mandates the PUCT to conduct a study of cost allocation of ancillary services by 2026. 
  • Requires the PUCT to establish a reasonable allowance for transmission-owning utility costs associated with interconnection. 
  • Mandates the PUCT to implement a Dispatchable Reliability Reserve Service (DRRS) by the end of 2024. 
  • Establishes a termination date for the Renewable Generation Requirement – known in other states as the Renewable Portfolio Standard (RPS) – on September 1st, 2025. 

Low-interest loans for thermal generation (SB 2627) allocate $10 billion to provide low-interest loans, with interest rates up to 3%, for new thermal energy projects with a capacity up to 10 GW. Texans will vote on this bill in a referendum in November. 

Enhanced ERCOT Market Surveillance (SB 2010) mandates the ERCOT market monitor to identify and report potential market manipulations or violations, with an annual legislative report detailing these instances and any subsequent investigations. 

New penalties for utility violations (SB 2011) empower the PUCT to impose penalties up to $1,000,000 for violations of voluntary mitigation plans or specific provisions, with the plans subject to biennial public interest reviews and potential modifications or termination. 

Grid security measures (SB 2013) mandate businesses to comply with new security protocols, implement rigorous background checks on employees, and closely regulate transactions with foreign-owned companies. 

DER aggregation (SB 1699) formally allows retail electric providers (REPs) to aggregate distributed energy resources (DERs) in the ERCOT market. 

Property tax abatements (HB 5) extend the exemptions formerly known as "Chapter 313" but exclude renewable energy projects and battery storage from eligibility. 

EV registration fees (SB 505) set a two-year registration fee of $400 for electric vehicles, with a subsequent annual renewal fee of $200. 

What to expect for the 89th Texas Legislative Session?  

The Advanced Energy United team in Texas, through its advocacy and coalition-building, effectively defeated numerous risky legislative proposals related to advanced energy during this session. However, it is expected that similar efforts will resurface in the future, specifically concerning renewable energy permitting, increases in electric vehicle registration fees, and additional government interventions in the competitive market. 

United remains committed to protecting and advocating for Texas' advanced energy industry, and it will continue to work towards favorable policy outcomes for our members. We encourage you to join Advanced Energy United, especially the Central Working Group and Texas Sub-Working Group, where you can contribute to shaping the future of advanced energy in Texas.

Topics: State Policy, Texas



Advanced Energy Perspectives is Advanced Energy United's blog presenting news, analysis, and commentary on creating an advanced energy economy. Join the conversation!

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