Three new Texas laws provide funding for critical infrastructure in three unique areas that all contribute to the Texas economy: energy generation, semiconductor chip manufacturing, and seaports.
Eligible entities should prepare for these funding opportunities now, in advance of the programs being available.
These new funding programs create an exciting time for growth, and investing in these industries means strengthening Texas’ economy. The following is a brief synopsis of each law and how eligible entities can prepare for these opportunities.
Texas Energy Bill
The newly created Texas bill brings roughly $10 billion in loans and grants allocated toward creating new natural gas-fired power generation.
The state will sponsor loan programs for human-controllable assets (i.e., natural gas) above 100 megawatts (MW), and explicitly excludes battery energy storage systems (BESS). This senior secured debt will cover up to 60% of the total project capital costs under a 20-year term at 3% interest, which represents a significant advantage over those available from commercial banks for projects with similar risk profiles.
In addition, grants will be available for those same qualifying projects that can be online by specified dates, including $120,000/MW for projects online by June 1, 2026, and $80,000/MW for those online by June 1, 2029. For example, a 100-MW plant online for 2026 use would be eligible for $12 million, amortized over a 10-year period, which could equate to a net cost reduction of 8%-17% for typical plants in that space.
This law is meant to improve the investment economics of building a new facility while addressing the vulnerabilities of the Texas power system through the addition of more reliable resources.
“These loans and grants are coming in limited quantities and may be swept up fairly quickly,” says David Daley, regional manager for the Energy Group of Burns & McDonnell in Houston. “Additionally, if you want to invest in this space, from a development timeline perspective you have to move very quickly. Critical path milestones such as navigating through the ERCOT electrical interconnection process and air permitting are time-consuming but essential to meeting the desired timelines. Also, having a well-developed project commercialization plan with a thoughtful risk assessment will help in the loan application process, as these projects will be vetted through a similar lens as any project seeking senior secured debt.”
CHIPS Act
The CHIPS and Science Act of 2022 is meant to elevate the United States to a leadership position in technology by driving a large percentage of chip design and fabrication back to the states. Following the 2022 federal act to boost domestic research and manufacturing, Texas has doubled down and is providing further incentives for manufacturers to locate or expand their facilities in the state. The Texas CHIPS Act is meant to reaffirm that the state is a business-friendly location for advanced technology and manufacturing facilities.
The law creates the Texas Semiconductor Innovation Fund to subsidize companies that manufacture microchips in Texas, and provide matching funds to universities and other entities that invest in chip design or manufacturing projects. Lawmakers appropriated $698.3 million for the new fund and an additional $666.4 million for the creation of advanced research and development centers at the University of Texas at Austin and Texas A&M University.
“Texas has a long history of government, industry and local business collaborative investments in the electronics industry, which further advances the ability for Texas to stay in a leading position in advanced manufacturing,” says Jacob Merriman, manager of the Austin office of Burns & McDonnell. “Comprehensive master planning and proactive environmental permitting is critical to the success of collaborative funding endeavors. Having an additional reinvestment plan for the local communities through educational programs and local hiring will also better manufacturers’ eligibility for state funding.”
Maritime Infrastructure Program
For the first time in history, the state has funded capital projects within the port’s jurisdiction. The $200 million Maritime Infrastructure Program (MIP) funding for fiscal years 2024 and 2025 is already spoken for, with the Texas Department of Transportation and the Port Authority Advisory Committee coordinating closely to quickly approve the list of projects. The Texas Transportation Commission approved funding for 12 projects across the Texas coast. There is an emphasis on advancing these projects to construction before the 89th legislative session begins in January 2025. Alternative delivery methods, such as design-build, can be a key tool for ports to speed delivery and meet that time frame.
A request for port projects to be funded by the 2026-2027 MIP is already out. Ports will need to be thoughtful about their project selection to account for infrastructure needs two years in advance that would need to be implemented quickly. Early planning, including environmental reviews and conceptual engineering, is essential for quick implementation. Statutory change would be required to allow project selection after funding is appropriated, but this would allow ports to be more nimble in addressing infrastructure needs. Additionally, the MIP could be a great tool for ports to leverage future federal funding.
With the multiple opportunities at hand in various industries, one common theme is to establish a well-prepared project plan to aid in the competitive loan and grant processes.
Securing grant funding can be challenging, but applicants can take the opportunity to collaborate with local leaders, build relationships with funding agencies and envision the ideal project.
