Texas is doubling down on natural gas to boost its power grid as the state faces surging energy demands. Governor Greg Abbott has announced a $562 million loan from the Texas Energy Fund to NRG Energy for construction of a massive 721-megawatt natural gas power plant near Baytown.
The new facility, slated to begin operations by summer 2028, represents a significant expansion of dispatchable power generation in one of Texas’ highest-demand regions. The total project cost is estimated at $936 million, with the state-backed loan covering 60% at a favorable 3% interest rate over 20 years.
“Texas continues to grow as more people choose to raise their families and build their businesses in the energy capital of the world,” Abbott said in a statement announcing the project. “This 721 MW investment in the Texas grid will ensure the state continues to meet and provide for this incredible growth with a robust, reliable supply of energy to power Texas homes and businesses.”
Strategic Location for Growing Demand
The natural gas plant won’t be starting from scratch. It’s being constructed at NRG’s existing Cedar Bayou Generating Station in Chambers County, strategically positioned to connect to ERCOT’s Houston Load Zone — a critical region encompassing Houston, Pasadena, Sugar Land, and surrounding communities that represent one of the state’s largest electricity demand centers.
Robert J. Gaudette, Executive Vice President and President of NRG Business and Wholesale Operations, highlighted the project’s economic benefits: “Development of the new unit at our Cedar Bayou power plant will generate significant construction jobs, and once online in 2028 will provide additional permanent jobs, enhanced grid stability and regional economic growth.”
Why natural gas? The focus on dispatchable generation comes after Texas experienced devastating power failures during Winter Storm Uri in 2021, exposing vulnerabilities in the state’s isolated power grid. Natural gas plants offer the ability to ramp up quickly when renewable sources like wind and solar can’t meet demand.
Part of Broader Grid Expansion
The Cedar Bayou project isn’t a standalone effort. It’s part of a coordinated push through the Texas Energy Fund’s In-ERCOT Generation Loan Program, which has already facilitated 1,299 megawatts of new dispatchable power generation including this project. That’s enough to power hundreds of thousands of Texas homes during critical periods.
And there’s more in the pipeline. According to state officials, an additional 14 applications representing 7,671 megawatts of new generation capacity are currently under due diligence review.
“The Texas Energy Fund is bringing reliable, affordable power to ERCOT’s fastest growing regions,” Public Utility Commission of Texas Chairman Thomas Gleeson noted. The program aims to address reliability concerns while maintaining Texas’ energy independence.
The loan terms are carefully structured. The PUC is providing a 20-year TxEF loan at 3% interest, running from September 2025 through September 2045, with stringent performance standards to ensure reliability and dispatchability for ERCOT’s grid when demand peaks.
Second Major NRG Project
This isn’t NRG’s first bite at the Texas Energy Fund apple. The company has already secured another TxEF loan for a 456-megawatt natural gas facility at its TH Wharton Generating Station in Houston. That project is expected to come online even sooner — by summer 2026 — contributing additional capacity to the same Houston Load Zone.
Gaudette expressed appreciation for the state’s support of both projects: “We are grateful to Governor Abbott, the Texas Legislature, and the PUC for being great partners in helping power Texas forward as electricity demand surges.”
The back-to-back approvals for NRG underscore Texas’ commitment to natural gas as a cornerstone of its energy future, even as the state leads the nation in renewable energy production. For a state that prides itself on energy independence, the message is clear: when it comes to keeping the lights on, Texas isn’t taking any chances.
