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.
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