Daily on Energy: The hole in the Texas $10B natural gas ballot measure

If passed, a majority of funding from Proposition 7—$7.2 billion—would be funneled into a program to subsidize and offer low-interest loans to new fossil fuel plants. (Read more on the conditional amendment here.)

But there’s no guarantee that this massive cash infusion will help the Electric Reliability Council of Texas, or ERCOT, reach its firming goals—or that ERCOT will be able to rely on these gas-fired plants to generate enough power during extreme weather. That’s because:

• The crux of the problem with Texas’s natural gas supply is weatherization, not generation. Winterization (or lack thereof) was the single largest cause of outages during Winter Storm Uri in 2021, as FERC and NERC noted in a subsequent analysis.  
• Texas already has abundant natural gas production and has added 7,000 MW in the past eight years alone. 
• No natural gas producers have committed to building out new generation if Proposition 7 is approved.

These issues were brought up during debate at the state Capitol in May, when lawmakers tried and failed to clear Texas S.B. 6, a bill that would have incentivized adding new gas-fired capacity to ERCOT.

During debate, primary owners of dispatchable generation in the state (i.e., natural gas plants) did not recommend the measure be approved. “They did not want it. They did not say that it was going to help,” Michael Jewell, an attorney and advisory board member for the Conservative Texans for Energy Innovation, told Breanne.

Builders “did not feel that they were running into a lack of ability to finance new generation,” Jewell added. Rather, they cited issues with costly maintenance or upgrades needed to improve operations during extreme heat or extreme cold events.

Which raises the question: If primary builders of dispatchable generation are saying that this is not necessary, Jewell said, “how much new capacity is actually going to get built?”

More concerns: Energy storage, or batteries—a highly efficient and reliable form of “dispatchable” energy, is explicitly excluded from Prop. 7 funding.

“Voters should have a choice between efficiency and new power plants — instead, we only get to vote on the power plants,” Doug Lewin, president of the Texas-based Stoic Energy Consulting firm, said in a blog post.

Environmentalists say it favors natural gas at the expense of more efficient resources: “The thing that used to be said all the time in the Texas legislature was that the government shouldn’t pick winners and losers,” Luke Metzger, executive director of the group Environment Texas, told Breanne. “Now, that ethos has just been kind of thrown out the window … the government just seems so blatantly putting their thumb on the scale for gas.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

INTERIOR-EPA APPROPS BILL PASSES HOUSE: The House passed the Interior and Environment appropriations bill this morning, advancing the seventh appropriations bill out of the lower chamber.

But the measure’s lower-than-agreed-upon funding levels and controversial riders earned a veto threat from the White House earlier this week.

Approved in a 213-206 vote, the $34.8 billion bill — which funds the Interior Department, the Environmental Protection Agency, and a number of related agencies — stands 10% below funding levels for fiscal 2023 and operates below 2018’s, while setting discretionary levels below those previously agreed to by the White House and House Republicans. To enact these allocations, the bill reduces funding for the EPA to 1991 levels, rescinds billions for programs within the Inflation Reduction Act, and cuts hundreds of millions from the Department of Interior. Read more on that from Nancy here. 

MICHIGAN CLEAN ENERGY PACKAGE CLOSER TO BECOMING LAW: The Michigan House approved a slew of reforms early this morning aimed at transitioning the state to cleaner energy, most notably by implementing a clean energy standard by 2040.

The package, which we’ve written extensively about, would require utilities to get 100% of their energy from clean sources by 2040, and implement a number of deadlines beforehand to help the state gradually reach the 100% clean energy standard.

Other bills within the package would give the state permitting authority over large-scale renewable energy projects, require utilities to boost their energy-efficiency savings, expand the scope of the Michigan Public Service Commission, create an office in the Department of Labor and Economic Opportunity that would help train and transition workers to greener industries, and codify an existing state rule allowing farmers to rent their land for solar arrays.

The measures were approved along party lines and now head to the Senate.

The reforms are the most significant since a 2016 state energy overhaul. They moved through the House fairly quickly as Democrats rushed to pass legislation while they still maintained a two-seat majority.

The Senate, which approved earlier packages, will have to revisit several bills recommended by the House before they head to Gov. Gretchen Whitmer to be signed into law. Read more from Bridge Michigan here. 

WORK ON TRANS MOUNTAIN PIPELINE HALTED: Work on the Trans Mountain pipeline expansion has been halted by the Canada Energy Regulator over noncompliance with environmental rules.

The agency said that inspectors found that Trans Mountain Corp. had not installed sufficient fencing to protect amphibians near Abbotsford, British Columbia, The Canadian Press reported.

CASSIDY’S FOREIGN POLLUTION FEE BILL: Senate Republicans introduced a bill yesterday that would impose a fee on products imported from high greenhouse gas-emitting countries – a move that aims to shield American manufacturers from competition with China, along with other countries with lax environmental standards.

Led by Sen. Bill Cassidy – a member of the Senate Energy and Natural Resources Committee – the foreign pollution fee aims to ensure that the pollution intensity of products imported in the U.S. is “no dirtier” than the production of similar, domestically produced goods. The measure is the first Republican-led proposal that would intertwine climate change policy with U.S. trade rules through carbon border adjustment fees.

Who’s a cosponsor: Sens. Lindsey Graham of South Carolina and Roger Wicker of Mississippi.

“It makes absolutely no sense that we allow China to pollute freely and export their products to the U.S.—displacing U.S jobs, manufacturing, and excellence,” Cassidy said in a written statement. “The Foreign Pollution Fee begins to hold China accountable for their lack of environmental standards while expanding domestic production, increasing opportunities for the American family, and decreasing global emissions.”

Read the bill here. Washington Examiner alum Josh Siegel got the scoop first – read that here. 

FITCH CUTS ORSTED’S OUTLOOK IN WAKE OF NEW JERSEY CANCELLATIONS: The Fitch rating agency downgraded Orsted’s rating to negative this morning, just two days after the Danish offshore wind giant announced it will halt development on two planned projects offshore New Jersey.

Orsted, the largest offshore wind developer in the world, announced related impairments of $5.6 billion following the halt in production on its Ocean 1 and Ocean 2 projects in New Jersey, and the news that it would stop construction sent its shares plummeting by 26%, a six-year low for the company.

Fitch’s rating comes just one day after S&P Global said it was placing Orsted on a long-term “CreditWatch Negative” rating list due to the severity of its losses, which were larger than anticipated. It also revised the company’s management and governance ratings to “fair,” down from “strong,” saying there were “signs that management might have been too aggressive in its expansion plans, and in reacting late to serious adverse developments,” according to the Financial Times. 

Orsted’s cancellations highlight the broader threats facing U.S. offshore developers, which have struggled to advance their projects amid fast-rising materials costs, supply chain delays, and poorly negotiated power purchase agreements. BP’s head of low-carbon energy, Anja-Isabel Dotzenrath, told FT this week the U.S. offshore industry was “fundamentally broken” and would require a “fundamental reset” in order to ensure growth for commercial-scale projects.

FALLING SHORT OF PARIS CLIMATE AGREEMENT: The world is expected to cross the 1.5 degrees Celsius warming threshold as soon as this decade, according to a new paper published in the Oxford Open Climate Change journal – falling short of the promises made by countries in the 2015 Paris agreement to keep warming below those levels, Reuters reports. 

Countries had pledged in the Paris Climate Accords to hold global warming within 1.5 degrees Celsius above pre-industrial temperatures, but the new paper suggests that the goal is already out of reach. Most emissions scenarios under the United Nations Intergovernmental Panel on Climate Change envision the world breaking the 1.5 degrees Celsius threshold during the 2030s.

“The 1.5C limit is deader than a doornail,” said study co-author James Hansen of Columbia University’s Earth Institute. Hansen was one of the first scientists to alert the world in the 1980s about the impact of greenhouse gasses on climate change.

However, the new report has received mixed feedback from other climate scientists, with some questioning its findings. Michael Mann of the University of Pennsylvania stated in a blog post that the findings were “very much out of the mainstream.”

The new report also comes ahead of this year’s COP28 climate talks, where countries will gather later this month in Dubai to discuss global policy efforts to rein in greenhouse gas emissions. Read more on that here. 

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