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A renewable energy boom in Texas is under threat at the state legislature, as lawmakers take up new bills that would hobble wind and solar projects.

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Texas is well known as the top U.S. state in oil and natural gas production. It has also become the leading state in wind power and is on track this year to surpass California with the largest solar capacity in the U.S.

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The renewable technologies were already proliferating before the U.S. Congress passed the Inflation Reduction Act climate law last year, which with US$369 billion in clean-energy subsidies promises to supercharge solar and wind development.

The Republican-dominated state legislature is now debating bills that throw up new hurdles for wind and solar projects and guarantee fossil fuels’ future as an energy source on the state power grid.

“We have invested heavily in renewables, but now it’s time to focus on dispatchable,” Dan Patrick, the Texas lieutenant-governor spearheading the effort, said at a recent press conference, using a term commonly used to refer to fossil fuel power generation.

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One bill would impose new environmental permit requirements for renewable energy projects but not other types of power plants, evaluating factors such as encroachment on agricultural and wildlife lands. The measure would even require currently operating plants to apply for the permits.

“Texans have always prided themselves on having an open market, not picking and choosing which technologies should win, and being a state where we don’t heavily regulate. None of those things are true about this,” said Becky Diffen, a partner at law firm Norton Rose Fulbright.

“It is absolutely being viewed as a real threat. Renewables is basically a bad word at the Capitol right now, there’s just a lot of opposition,” she added.

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The proposed state permit regulations run counter to an important energy bill passed by the Republican-controlled U.S. House of Representatives last week that would streamline federal permitting for big energy projects.

The swift rise of renewable energy has drawn a backlash from many Texas Republicans who argue the rising share of intermittent wind and solar resources on the grid has made the state’s energy system less reliable and is hurting the oil and gas sector.

Many blame renewables for the devastating blackouts during Winter Storm Uri in February 2021, which led to hundreds of deaths and more than US$100 billion in economic damage, although natural gas-fuelled generation was also significantly disrupted during the deep freeze.

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Charles Schwertner, a Texas state senator, said Republicans wanted to offset “market distortions” created by federal subsidies for “less reliable generation” in the Inflation Reduction Act, President Joe Biden’s flagship climate law, and ensure fossil-fuel generation was still being added in the state.

The clean energy backlash could hurt Texas’ ability to take advantage of the subsidies in the IRA.

“Texas stands to be a major winner under [the IRA], but a lot of our political leaders just seem dead set on cutting off our nose to spite our face,” said Doug Lewin, president of Stoic Energy, a consultancy.

Another bill under debate in the biennial legislative session would lead Texas to spend more than US$10 billion to back construction of 10 gigawatts of gas-fired power generating capacity, about 12 per cent of the state’s total current grid capacity, that could be tapped when power demand peaks. The state would guarantee the plants an annual rate of return of around 10 per cent.

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Patrick has also proposed using funds from the state’s budget surplus to provide low-cost loans to fossil fuel power projects.

“We want to ensure there’s an incentive for more thermal power to be built in this state as quickly as we can build it,” Patrick said.

Governor Greg Abbott has said that he wants renewable projects excluded from any new state-backed economic incentive programmes, which have been critical to drawing big investors to the state, such as Elon Musk’s Tesla and Samsung of South Korea.

“There’s already a federal incentive for renewable projects,” Abbott said. “Our focus is on dispatchable power to make sure that we will have the needed dispatchable power to provide reliable electricity to everybody in the state.”

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Texas has by far the highest electricity consumption of any state, so efforts to preserve fossil fuel use would deal a serious blow to federal goals of stripping carbon from the national power system.

Jeff Clark, president of the Advanced Power Alliance, an Austin-based renewable energy industry group, said the Republican legislative effort put the clean energy sector in the state “at risk.”

“Companies looking at Texas and contemplating investment here should listen, because Texas is turning its back on clean energy,” he said.

© 2023 The Financial Times Ltd