$8 Billion Proposals Could Bring New Gas-Fired Plants to Texas

An energy investment group told Texas regulators the company has a plan to help solve some of that state’s electricity reliability issues, proposing a plan similar to one put forth by billionaire Warren Buffett’s Berkshire Hathaway Energy in March.

Starwood Energy Group on April 23 sent the state’s Public Utility Commission a proposal to build 11 natural gas-fired power plants, investing more than $8 billion to develop and construct the facilities. Representatives from Berkshire Hathaway Energy last month met with Texas lawmakers and said their group was prepared to spend about $8.3 billion to build 10 gas-fired plants across the state.

Starwood, based in Greenwich, Connecticut, in an April 23 letter from CEO Himanshu Saxena to the Texas PUC (PUCT) and the board of the Electric Reliability Council of Texas (ERCOT), the state’s main grid operator, said it wanted to outline “a compelling proposal to solve ERCOT’s reliability issues as was demonstrated by the energy crisis that occurred in February 2021.” The company said it already has developed, built, and operated more than 1 GW of wind generation across the ERCOT system, and has owned and operated another 550 MW of gas-fired power capacity. It said the new gas-fired plants would represent 11 GW of generation capacity.

The February storm killed more than a 100 people, left about 4.5 million Texans without power for days, and sent wholesale electricity prices soaring. At least three energy companies declared bankruptcy after the storm, and several others are suing ERCOT regarding unexpected price spikes for electricity during the crisis.

The situation resulted in the resignations of several state and ERCOT officials, including the firing of ERCOT CEO Bill Magness, and brought calls to restructure the state’s deregulated electricity market.

ERCOT on April 27 said its board has chosen Brad Jones, a former ERCOT executive and past chairman of the Edison Electric Institute’s Executive Advisory Committee, to serve as ERCOT’s interim president and CEO. Jones will start in the role on May 4. Jones in an emailed statement Tuesday said, “Electricity is the engine of the Texas economy, and Texas businesses expect the driver to be reliable, resilient, trustworthy and competent. I will work to restore ERCOT’s reputation as that reliable and trustworthy driver of our grid and the economy.”

He continued: “Over the next few weeks, I will be meeting with ERCOT staff, elected officials and leaders of various state agencies and developing a 100-day strategic plan to present to state officials and the public. The plan will put ERCOT on a solid foundation for providing reliable electric service year-round.”

“The Board looks forward to working with Brad during this time as ERCOT prepares for summer operations,” said ERCOT Board Director and HR&G Committee Chair Mark Carpenter in an email to POWER. “He is an experienced leader and understands the ERCOT vision and mission.” 

ERCOT Investments

The plans from Berkshire Hathaway Energy and Starwood Energy Group could be a precursor to other companies looking to invest in power generation in Texas in the wake of the winter blackouts, as they look to provide solutions in a deregulated market that also continues to deal with instability of its power supply in the summer months.

“We have invested several billion dollars in ERCOT markets already and have the capital and the expertise needed to solve ERCOT’s pressing energy issues,” wrote Starwood’s Saxena in his April 23 letter. He said there would be “ample” storage capacity for natural gas at each site, “located across ERCOT and subject to ERCOT’s control. These power plants will be highly efficient, state of the art and will have dual-fuel and black start capabilities.”

Starwood Energy said it “would create a regulated company that would hold the assets and recover a PUCT approved regulated rate of return on the investment. Any revenues, net of any fuel cost and variable operating costs, generated when the facilities operate would be returned to ERCOT for distribution to ERCOT customers. ERCOT will have full rights to dispatch the facilities as and when necessary to maintain the system reliability and for other purposes.” Saxena said the company is “open to different structures such that this effort is consistent with the law and market design and does not harm existing generators.”

The group said its plan “addresses two key issues facing ERCOT, limited dispatchable power generation and the need for additional reliable, non-intermittent generation to support long-term demand growth.” Starwood said its ownership and operation of the gas plants would “create a single point of accountability to manage emergency energy issues in ERCOT in a cost-effective and transparent manner.”

Berkshire Hathaway Proposes Power Reserve

Berkshire Hathaway proposed a company that it said could be known as the Texas Emergency Power Reserve, which would build and maintain 10 natural gas-fired plants that would not be used during periods of normal power demand, but could quickly start up during times of peak demand if ERCOT said they were needed.

Berkshire Hathaway Energy has had lobbyists and political consultants in Texas in the wake of the February blackouts, meeting with state lawmakers to discuss solutions to the state’s continuing problems with electricity supply and demand.

Chris Brown, CEO of Berkshire Hathaway Energy, has said his group is not in favor of supplanting Texas’ deregulated power market, a competitive situation in which all power generators in Texas are paid for the energy they produce and sell, as opposed to the power they could potentially generate. The group’s executives said their plan would not create a capacity market, but would instead be a way to provide highly regulated backup electricity generation.

Brown in March told The Texas Tribune that his company is “uniquely suited” to provide 10 new plants that would bring 10 GW of generation capacity to the Texas grid by November 2023. Brown told the Tribune that Berkshire Hathaway Energy would owe the state $4 billion if it did not have the plants operating by that deadline.

Starwood Energy said that along with its investment in new power plants, it also would provide credit support to ERCOT, and would ask the PUCT to approve a regulated rate of return not to exceed 9%. The company said it thinks the impact of its plan on ERCOT customer bills would be negligible, while the new generation capacity would provide the state with long-term electricity reliability “and cost-effective insurance against future blackouts.”

Said Saxena: “Starwood Energy is excited about the opportunity to partner with the Board and PUCT to help it improve reliability on the ERCOT grid and prevent future energy crises.”

—Darrell Proctor is associate editor for POWER (@POWERmagazine).