The Public Utility Commission of Texas (PUC) has published proposed rules to implement the Texas Backup Power Package Program, the state’s latest subsidy program trying to deal with the harmful effects of renewable energy in the state.
According to the proposed rule, the program “will establish procedures for applying for a grant or loan for procurement, installation, and operation of Texas Backup Power Packages.” The program is funded through the Texas Energy Fund, which the Texas Legislature capitalized with $5 billion in 2023 and an additional $5 billion in 2025.
Texas Lt. Gov. Dan Patrick has been one of the primary supporters of the Texas Energy Fund.
“The fact that Texas needs to add dispatchable power to our grid due to our growing economy is clear for all to see,” said Patrick. “The TEF will provide grants and low-interest loans to finance the construction, maintenance, modernization, and operation of electric facilities in Texas.”
The Backup Power Package Program is intended to support on-site electricity generation or storage capable of operating independently of the electric grid during outages. Eligible technologies include natural gas generation and battery storage systems.
Under the proposed rules, backup power systems must be “capable of operating for at least 48 continuous hours” and may not serve more than 2.5 megawatts of load at a single critical facility.
The rules define “critical facilities” broadly. Eligible recipients include hospitals, public schools, public libraries, food banks, and other facilities that provide essential services. Houses of worship may also qualify if designated as critical by a local government entity.
The program provides both grants and loans. Grant funding for a backup power provider may not exceed $500,000 per megawatt of installed capacity, placing a cap of $1.25 million for a project serving the maximum allowable 2.5 megawatts.
Loans are also available under the program. While the proposed rules do not establish a dollar cap for loans, they specify that loans issued under the program are “100 percent forgivable” if the applicant complies with program requirements. As a result, funds distributed as loans may ultimately function as grants, with no repayment to the state.
The proposed program represents the latest in a series of legislative interventions in the Texas electricity market over the past two decades.
In 1999, the Texas Legislature enacted renewable energy mandates as part of electric market restructuring. Those mandates were expanded in 2005. Since that time, state and local governments have spent an estimated $20 billion supporting renewable energy development, with an additional $28 billion in federal subsidies flowing to Texas-based wind and solar projects.
As a result of those policies, wind and solar generation now account for approximately 37 percent of total electricity generation on the Texas grid. However, output from those sources fluctuates significantly based on weather conditions and time of day.
During winter months, solar generation’s share of the grid typically falls from about 14 percent to roughly 9 percent. In summer months, wind generation’s share declines from approximately 23 percent to around 15 percent. Solar production drops to zero at night, while wind generation often declines during daytime peak demand hours.
These seasonal and daily variations coincide with periods of highest electricity demand, particularly during extreme heat and cold events.
The Backup Power Package Program is structured to address those reliability concerns by subsidizing dispatchable generation and storage at individual facilities rather than relying solely on grid-scale resources.
The program operates alongside other Texas Energy Fund initiatives, including programs that provide financial incentives to large-scale natural gas generators. Many of those generators have multi-billion-dollar market capitalizations.
Under the Backup Power Package Program, taxpayer funds are directed to private entities for infrastructure that would otherwise be financed through private investment or utility planning. The PUC will administer the application, review, and award process once the rules are finalized.
The proposed rules are subject to public comment before adoption. If finalized as written, the program will authorize the distribution of taxpayer funds to support backup power systems for selected facilities across the state, with limited mechanisms for repayment or cost recovery.
