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Companies have abandoned almost half the projects in a $5bn Texas programme to fund gas power plant construction and prevent more electricity blackouts, as they struggle with ballooning expenses and supply chain delays.
Eight projects, including those backed by Constellation Energy and France’s Engie, have been cancelled or withdrawn from the state-backed scheme to beef up energy supplies in Texas, which was hit by a brutal blackout in 2021.
The companies blamed rising expenses, delays getting parts and uncertain revenue for their exits. The departures underscore how Donald Trump’s plan to unleash fossil fuels to meet soaring demand faces hurdles — even in oil- and gas-rich Texas.
“We’re entering a new phase in demand growth. It’s now a challenge to build and operate a power plant,” said Michael Caravaggio, vice-president of fleet reliability at EPRI, a Washington-based energy research institute.
The Texas Energy Fund was established by the state to bolster the power grid after the winter 2021 blackout, which plunged 4.5mn residents into darkness, cost almost $130bn, and was responsible for hundreds of deaths.
Last year, state officials unveiled 17 applications to build gas-fired power plants, which promised to deliver about 9.8 gigawatts, or enough to power about 2.5mn homes.
But the departure of developers, which also includes the exit of Texas group Howard Energy Partners, has prompted warnings that the scheme could soon collapse.
Citi analysts said in a recent note that the fund was “falling apart” and that they expected more projects to be scrapped because of “pure economics”.
A representative of Texas’ public utility commission, which operates the fund, said it was reviewing applications to ensure they support electric reliability in Texas and safeguard taxpayer funds. The fund has denied loans to a handful of projects and has not provided any details for their cancellations.
The fears for the fund come as Texas’s grid operator, Ercot, estimates peak demand would nearly double by 2030 due to an explosion in data centres, cryptocurrency mining and population growth.
In February, Ercot said the state’s peak power demand may exceed its supply beginning next summer.
“We’re staring down the barrel of massive load growth and we’re going to need more than natural gas to power Texas,” said Doug Lewin, president of Stoic Energy Consulting, in Austin.
While demand for gas-fired electricity is rising across the US, plant construction costs have tripled in the past few years and are expected to rise further as Trump’s tariffs hit the sector.
Wait times for gas turbines now average five years. Prices have risen 50 per cent in the past 10 months, according to investment bank Jefferies. Labour costs are also up sharply.
“Turbines and labour are the two things that are going to drive the speed of capacity additions,” said Larry Coben, chief executive officer of NRG Energy, one of the state’s biggest power producers. “It’s probably the limiting factor on electricity growth overall.”
Turbine manufacturers have until recently been reluctant to invest heavily in new expansion for fear that the market could later evaporate — as it has done in the past.
“The last thing we want to do is ramp up a factory, hire people, get them all trained up, and then we’ve got to lay them off,” said Rich Voorberg, president of Siemens Energy North America, the country’s second-largest gas-turbine maker.
Additional reporting Jamie Smyth and Amanda Chu in New York
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