Yes, Texas Prop. 7 Subsidizes Natural Gas Generation, and That's a Good Thing

The Montgomery County Power Station in Texas

[Note: This story is also published at The Telegraph]

Voters in Texas this past week resoundingly approved Proposition 7, a plan voted out by the Texas legislature in May that will provide low-cost loans and early completion bonuses to power generators who install natural gas-fired generation facilities in the coming years. The decade-long shortage of dispatchable thermal generation has been a chronic issue for grid operators at the Electric Reliability Council of Texas (ERCOT), as the state’s power generators have largely refused to build new gas-fired capacity, often citing a lack of market signals as the reason.

Critics of the plan responded with snarky taunts condemning a Republican-majority legislature for failing to keep their campaign promises to “let the market work.” It is a criticism with which I would normally agree, and which would have some validity if only some decisions related to the building of generation capacity of any form on the Texas grid were dictated by the free market these days. Unfortunately, that is not the case and hasn’t been for a long time now.