Texas Renewables Roundup: 2025 Texas Legislature Update

The Texas Legislature has been debating several bills aimed at boosting dispatchable power in ERCOT while erecting new economic and permitting barriers for renewables. Texas lawmakers have expressed their growing concerns about the threat to grid reliability posed by the proliferation of intermittent renewable generation, the explosion of large load requests from hyperscale data centers, and the threat to grid security posed by foreign control of electric infrastructure. Three key bills making progress through the Legislature are worth watching closely because of their potential impact on both existing and new renewable energy projects: Senate Bills (SB) 388, 715, and 819. Below we provide an overview of key features in these bills.

SB 388 – Dispatchable Generation Credits Trading Program

SB 388 sets an ambitious goal for new dispatchable generation. If signed into law, the bill would push for 50% of the generating capacity installed in the Electric Reliability Council of Texas (ERCOT) region after January 1, 2026, to be sourced from dispatchable generation. To achieve this, the bill would direct the Public Utility Commission of Texas (PUCT) to create a new dispatchable generation credits trading program and set dispatchable generation requirements for power generation owners if this threshold is not organically met through ERCOT’s generation interconnection queue. For each power generation company (PGC), municipally owned utility, and electric cooperative in ERCOT, these requirements could be met with each entity’s own dispatchable generation and/or with acquired credits. Interestingly, battery energy storage systems (BESS) are treated neutrally under the program: Generators that only operate BESS assets would neither receive nor need to acquire dispatchable credits under the program. While the bill does not explicitly make the dispatchable credits program applicable only to new generation or to existing generators, the bill appears more likely intended to cover both.

Program Activation and PUCT Rulemaking

The bill requires the PUCT to activate the new program on or before January 1, 2027, if it determines that dispatchable generation will make up less than 55% of all new generation capacity installed in ERCOT after January 1, 2026. Today, less than 10% of generation in the ERCOT interconnection queue is dispatchable (excluding BESS), so it is very likely that the program would be activated.

Within 180 days of activation, the bill requires the PUCT to create compliance rules and penalties. It must calculate dispatchable generation requirements for each entity subject to the program in a manner reasonably calculated to produce compliance with the 50% goal. Each entity subject to the program can fulfill its requirement by owning or purchasing rights to dispatchable capacity, or by purchasing dispatchable credits.

Credit Generation and Program Administration

Under the new bill, each megawatt of installed dispatchable generation capacity energized after January 1, 2026, is eligible to generate one dispatchable generation credit. (New nuclear projects would effectively receive double credits.) To promote reliability, the bill directs the PUCT to create performance standards that new dispatchable generation must comply with to generate credits.

ERCOT would administer the new program. It must create a tracking system to award dispatchable generation credits to new dispatchable generation facilities that meet eligibility requirements. Before September 15 of each year, ERCOT must file a report with the PUCT indicating whether the 50% goal was met in the prior year.

Before January 15 of each year, the PUCT must notify each relevant entity of its credit requirement for the previous year. Each relevant entity must meet their credit requirement by acquiring and retiring sufficient credits by an annual deadline to be set by the PUCT.

Current Status

SB 388 passed the Texas Senate on March 19 and awaits action in the Texas House.

SB 819 – Renewable Generation Facility Permitting

SB 819 would create a siting regime for most new or expanded solar and wind projects. The permitting statute would require a solar or wind developer to apply for a permit by sharing facility information, providing notice, hosting a public meeting, and facilitating an environmental impact review. While the version of SB 819 that passed the Senate scaled back some of the more rigorous requirements, it would still represent a significant change to renewables development.

When a Permit is Required

A person must apply for and receive a permit before interconnection to the ERCOT transmission grid of a renewable generation facility with a capacity of 10 MW or greater. The requirement does not apply to solar facilities inside a home-rule municipality’s corporate limits.

Application Contents

The bill directs the PUCT to create a new permit application that would require an applicant to provide the location and type of facility, copies of any FERC registrations, applicant information, a facility agreement under Tex. Util. Code chapter 301 or 302, documentation of local governmental support or opposition, the facility’s effect on national security, information related to other state authorizations issued by the Texas Commission on Environmental Quality or Texas Parks and Wildlife Department, and any other information required by the PUCT. Applicants may also provide an environmental impact statement or fire mitigation plan.

Notice Requirements

An applicant must provide notice to the county judge of each county within 25 miles of the proposed facility and publish two notices in a local newspaper.

Setback Requirement

Originally, the introduced version of the bill required wind equipment to be located at least 3,000 feet from any property line, unless each affected person provides a written waiver, but Senate floor amendments reduced this setback requirement to twice the height of the wind turbine (inclusive of blade length). Solar equipment must be located at least 100 feet from any property line and 200 feet from any habitable structure, unless each affected person provides a written waiver. The bill allows the PUCT to require greater setback distances as a condition of approval.

Application Approval or Denial

The PUCT must approve or deny an application within 180 days, subject to an extension up to 30 days, or else it is considered approved. The PUCT can only deny an application if it finds that the new facility’s potential harm substantially outweighs the potential benefits to the state, or the application otherwise does not meet the statute’s requirements. The PUCT must explain any denial and give the applicant an opportunity to file an amended application.

Current Status

SB 819 passed the Texas Senate on April 15 and awaits action in the Texas House.

SB 715 – Generation Reliability Requirements

SB 715 adjusts the implementation of the generation reliability requirements of Tex. Util. Code Section 39.1592 added by H.B. 1500 in 2023. Current law would require new generators that sign standard generator interconnection agreements on or after January 1, 2027, to demonstrate availability to dispatch when called upon at or above the seasonal average capability during the lowest operating reserve hours, taking into account maintenance, unrelated outages, and daily ramping periods. Generators that do not meet the reliability requirements could contract with other resources, including BESS, for supplemental power. It also empowers the PUCT and ERCOT to create a program of financial incentives and penalties for exceeding or failing to meet reliability requirements.

SB 715 would make these requirements subject to sooner phase-in at the PUCT’s discretion. A substitute version, which passed the Senate Business and Commerce Committee on April 15, has not been publicly posted on the Legislature’s website as of noon on Sunday, April 20. However, the Senate committee hearing discussion noted the substitute bill would exempt facilities that can continuously dispatch for 24 hours or that sufficiently contract with BESS or backup power sources. The committee debate about the substitute version also described removal of specific implementation dates that were present in the filed version, giving the PUCT more flexibility both in adopting and enforcing its provisions.

Current Status

The committee substitute version of SB 715 passed the Senate Business and Commerce Committee and is pending with the full Senate. A companion bill, HB 3356, containing identical language to the initially filed version of SB 715, has also been debated and remains pending in the Texas House State Affairs Committee.

Takeaways

As the Legislature continues to evaluate how renewables factor into reliably meeting Texas’ explosive load growth, it is not too late for project owners to contact their representatives, especially in the Texas House, to make their voices heard. By engaging with relevant stakeholders before policies get finalized, developers will put themselves in the best position to influence the debate. And once the Legislative session ends on June 2, focus will shift to the inevitable PUCT rulemakings necessary to implement whatever policy choices the Legislature and Governor Abbott choose to enact. We have deep experience in assisting with energy policy advocacy before the Legislature and the PUCT.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.