Legislating new and emerging energy resources in Texas

In recent years, rapid population growth and concerns about grid reliability and environmental impact have driven demand for legislative support of energy innovation in Texas. Both state and federal lawmakers have developed policies regulating and advancing the development of alternative energy sources such as energy storage, advanced nuclear reactors, hydrogen fuel, and geothermal energy. Several bills were considered during the 88th legislative session on the development of new energy sources, and the 89th Legislature also could consider proposals on innovative energy generation. This interim, the Senate Business and Commerce Committee is charged with exploring and recommending policies on these emerging technologies to add new dispatchable power to the grid.

Energy storage

In 2011, Texas legislators classified energy storage facilities as generation assets through SB 943, enabling them to interconnect to the grid and sell energy on the wholesale market. This policy followed the establishment of the New Technology and Implementation Grant (NTIG) program, which provided grants to support energy storage under HB 1796 in 2009.

Energy storage is one of the fastest-growing energy resources in the United States, and Texas ranks second in total battery capacity nationwide. Storage facilities utilize external energy sources to charge a storage system or device such as a battery in times of low demand, which can then be discharged to supply energy to the grid when needed. Advocates of energy storage underscore its capability to reserve intermittent renewable energy resources like wind and solar, rendering them dispatchable at any moment and enhancing their reliability.

During the 88th Legislature, however, storage facilities were excluded from financial incentives for dispatchable generation facilities provided under SB 2627. Critics of storage incentives argue that energy storage resources cannot supply sufficient power during times of high demand due to the current limitations of battery capacity. As a result, critics say that storage facilities would be incapable of adding megawatts to the grid for a sufficient period of time to meet reliability needs.

Advanced nuclear reactors

Next session, lawmakers also could consider proposals on advanced nuclear reactors. On August 16, 2023, Governor Greg Abbott directed the Public Utility Commission of Texas (PUCT) to establish a working group to study and plan for the use of advanced nuclear reactors in the state, including by researching their safety and affordability. The working group is investigating the state’s role in deploying and establishing permitting processes for advanced nuclear reactors, providing financial incentives for construction, and ensuring an appropriate regulatory environment. The governor instructed the group to produce a plan and recommendations by December 1, 2024.

Nuclear power generates approximately ten percent of Texas’ energy through two plants, each with two reactors. Traditional reactors, operating in Texas since 1974, face cost and safety concerns that have prompted interest in the development of advanced nuclear reactors, which are often smaller and may use different moderators, coolants, and types of fuel. Dow Chemical Company and X-energy Reactor Company plan to begin construction on Texas’ first advanced nuclear reactor in Seadrift, Texas in 2026.

Hydrogen fuel

HB 2847, enacted during the 88th Legislature, created the Texas Hydrogen Production Policy Council and authorized the Texas Railroad Commission (RRC) to study hydrogen production, pipeline transportation, and storage. Texas law also currently offers various grants to incentivize the use and production of hydrogen-powered vehicles.

Hydrogen fuel, produced by separating hydrogen atoms from various sources like hydrocarbon fuels, water, and biomass, emits only water when converted into energy. While clean hydrogen can be created by splitting water molecules, Texas primarily relies on hydrogen from natural gas, which emits carbon during the production process. This carbon can be captured and stored, but carbon capture is not yet standard practice in hydrogen production. Supporters of policies that promote clean hydrogen fuel production argue that it could help to decarbonize hard-to-electrify industries, like transportation.

Several energy companies in Texas are in the process of developing infrastructure for large-scale clean hydrogen production, in part because of funding from the federal Regional Clean Hydrogen Hubs program under the 2021 Infrastructure Investment and Jobs Act. The program will allocate up to $1.2 billion for the construction of the Gulf Coast Hydrogen Hub, one of seven hubs across the country, in the Houston area.

Geothermal energy

The 88th Legislature recently passed several laws regulating geothermal energy. Advancements in drilling and fracturing technology within the oil and gas industry have made it possible to locate new geothermal generation facilities in Texas, which lacks the specific subsurface conditions necessary for traditional geothermal generation. SB 785 specifies property rights and insurance policy provisions for geothermal energy and SB 786 places closed-loop geothermal wells, a new type of geothermal generation, under the jurisdiction of the RRC.

A University of Texas Energy Institute study from 2023 recommends legislation related to geothermal grants and tax incentives and suggests the establishment of geothermal-specific workforce training. The study suggests that further geothermal development has considerable potential to meet Texas’ growing energy demand.

By Kiera Eriksen-McAuliffe

CMS approves Texas’ postpartum Medicaid extension

The federal Centers for Medicare and Medicaid Services (CMS) recently approved Texas’ application for a state plan amendment to extend postpartum Medicaid coverage from two months to 12 months after the 88th Legislature passed HB 12 by Rose. The application was approved on January 17, 2024, and took effect on March 1, 2024. Individuals whose eligibility was terminated prior to the effective date will have continuous eligibility for the remainder of their 12-month postpartum period.

In 2021, the 87^th Legislature passed HB 133 by Rose, which extended postpartum Medicaid coverage from two months to six months after the end of a pregnancy. This required the state to apply for a federal Medicaid waiver because extending postpartum Medicaid coverage to six months instead of 12 months did not meet federal requirements for a state plan amendment. CMS did not take action on the waiver application, as the agency is not required to approve waiver applications within a certain timeframe. In a September 2023 House Appropriations Committee meeting, the Health and Human Services Commission (HHSC) reported that CMS had verbally communicated that language in HB 133 did not align with federal guidelines for a Medicaid waiver because the bill limited eligibility for extended postpartum Medicaid coverage based on how a person’s pregnancy ended.

In 2023, the 88^th Legislature extended postpartum coverage from two months to 12 months by passing HB 12. The bill’s stated legislative purpose is to extend Medicaid coverage for people whose pregnancies end in the delivery or natural loss of the child. Because the bill extended postpartum coverage to 12 months, HHSC could apply for a state plan amendment, which requires a response from CMS within 90 days, instead of a waiver.

Supporters of HB 12 said that the bill could lower maternal morbidity and mortality rates in the state. According to the Texas Maternal Mortality and Morbidity Review Committee, many pregnancy related deaths are preventable, and racial disparities in maternal health outcomes have persisted. Supporters argued that the bill could reduce these negative outcomes by providing comprehensive health care after delivery for a longer period of time. Supporters also said that extended postpartum coverage would give Medicaid recipients better access to primary and preventative care during and after pregnancy, which could reduce health care costs by preventing additional pregnancy complications.

Critics of HB 12 said that the bill’s legislative purpose as written may not meet federal guidelines for postpartum Medicaid extension and should have been excluded from the bill to ensure that the state plan amendment would be approved. Some critics also said that the legislative purpose was unnecessary because abortion is illegal in Texas.

By Chelsea Rose

Texas lawmakers may consider new electric vehicle fee

With increased attention to electric vehicles (EVs) nationwide, including recent federal action to extend and revise tax credits for consumers who buy them, Texas lawmakers have considered how growing use of EVs will affect the funding of Texas highways.

Congress recently extended the federal tax credit for electric vehicles, with certain new requirements, for another decade and eliminated the cap on the number of vehicles eligible for the credit. The federal government also has indicated plans to distribute billions of dollars for EV-charging infrastructure expansion over the next five years.

While hybrid and electric vehicles remain a small percentage of all vehicles in Texas, their numbers have increased significantly in the state in recent years, according to 2021 data reported by the Texas Department of Motor Vehicles. Hybrids still make up the majority of alternatively fueled vehicles (AFVs) in Texas, but the smaller number and percentage of fully electric vehicles has grown rapidly since 2016.

With federal and state gas taxes serving as main sources of funding for building and maintaining Texas highways, the Transportation committees of both the Texas House and Texas Senate were charged this interim with recommending a revenue method for AFVs equivalent to the taxes paid at the pump by drivers of gasoline- and diesel-powered vehicles.

SB 1728 by Schwertner, a bill that would have established an equalization fee for electric vehicles, passed the Texas Senate last year in the regular session of the 87th Legislature but died in the House on a point of order. The bill passed by the Senate would have imposed a fee of $200 on electric vehicles weighing up to 6,000 pounds and $250 on those weighing between 6,000 and 10,000 pounds. For the same weight categories, hybrid vehicles would have incurred fees of $40 and $50 respectively. The $200 dollar fee that would have applied to most EVs was based on a state report required under SB 604, enacted in 2019 by the 86th Legislature. The report estimated that the state loses about $100 in gas taxes for every fully electric vehicle, along with a similar loss in federal gas taxes.

Some critics of the fees proposed under SB 1728 said that while electric vehicle owners should contribute to the maintenance of Texas highways, the proposed fee amounts were too high to be proportionate to EVs’ impact on state finances and would discourage Texans from buying electric vehicles at a time when a transition to less reliance on fossil fuels is needed. They said a state fee closer to $100 for most electric vehicles would be more fair and that the federal government could impose its own equalization fee in the near future. Other critics said fees based on miles traveled per year would be a better alternative to a set fee. This type of annual mileage fee was added to the House committee substitute for SB 1728 as an alternative to the set fee before a point of order killed the bill on the House floor.

The House and Senate Transportation committees addressed the interim charges on electric vehicle fees in public hearings on April 26 and May 3, respectively. Debate continued about whether a fixed fee or annual mileage fee would be the best policy solution. Some stakeholders reiterated concerns about a flat fee, saying a miles traveled fee was more fair and comparable to gas taxes for conventional vehicles. Others said that while a mileage-based fee schedule would have the advantage of corresponding directly to the use of vehicles on roads, it would impose a higher administrative burden than a set fee.

By Luke Landtroop

For more on alternatively fueled vehicles in Texas, see previous Interim News Briefs post, Texas to study additional fees on electric and hybrid vehicles.

Commission addressing community college funding in Texas

As some community colleges in Texas struggle with recent decreases in post-secondary students and resources, a new commission is tasked with making recommendations on community college funding.

While overall enrollment in higher education has increased steadily in Texas since 2010, community colleges, excluding dual-credit students, have seen a decrease, according to data presented at a commission hearing by the Texas Higher Education Coordinating Board.

Proposed constitutional amendments on ballot in May election

Voters will consider two propositions to amend the Texas Constitution in the election on May 7. The propositions were approved for the ballot by the 87th Legislature last year. Voters will consider proposals to:

• reduce the limitation on property taxes for people who are elderly or disabled; and
• increase the residence homestead exemption from $25,000 to $40,000.