Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

HB 3778 proposes to amend the Texas Utilities Code to redefine geothermal energy generation facilities as "dispatchable" resources. Under current law, dispatchable resources are those that can be turned on or off or adjusted in output according to demand, typically including natural gas and coal plants. By including geothermal energy within this definition, HB 3778 allows geothermal projects to qualify for existing state financial incentives designed to bolster dispatchable generation capacity within the ERCOT (Electric Reliability Council of Texas) power region.

Specifically, the bill modifies Sections 34.0104 and 34.0105 of the Utilities Code to make geothermal facilities eligible for state-funded loans and completion bonus grants. While most dispatchable energy facilities must meet a minimum threshold of 100 megawatts (MW) to qualify for such funding, HB 3778 sets a lower threshold of 10 MW for geothermal generation and geothermal conservation wells. This differential recognizes the scalable nature and emerging status of geothermal technology in Texas’ energy portfolio.

Additionally, the bill amends Section 39.159 to align broader ERCOT planning definitions with the new status of geothermal as a dispatchable resource. This change ensures consistency across statutory and regulatory frameworks and supports the integration of geothermal into ERCOT's long-term capacity planning.

The originally filed version of HB 3778 and the Committee Substitute share the same purpose—designating geothermal energy as a dispatchable resource in Texas—but there are key differences in structure, detail, and eligibility criteria for state support.

In the originally filed bill, the definition of "dispatchable" is established for general application across relevant sections of the Utilities Code, explicitly stating that geothermal generation facilities are considered dispatchable. The bill then modifies loan and grant provisions under Sections 34.0104 and 34.0105 of the Utilities Code, but it retains a uniform 100 megawatt (MW) capacity threshold for eligibility, including for geothermal facilities. The bill also updates Section 39.159(a) to change the status of geothermal generation from "non-dispatchable" to "dispatchable".

In contrast, the Committee Substitute introduces a more refined and supportive framework for geothermal projects. While it keeps the dispatchable designation for geothermal facilities, it adds a new subsection, Section 34.0104(a-1), which creates a lower minimum capacity threshold—10 MW—for geothermal facilities and geothermal conservation wells to qualify for state loans. Similarly, Section 34.0105(c) is amended to provide eligibility for bonus grants to geothermal projects that meet a reduced 10 MW threshold, as opposed to the 100 MW required for other dispatchable sources. This tailoring reflects an acknowledgment of the distinct scale and economics of geothermal energy development compared to traditional fossil-fuel-based dispatchable plants.

The Committee Substitute also provides clearer eligibility distinctions by explicitly excluding electric energy storage facilities—except for geothermal energy conservation wells—from both the loan and grant programs. These nuanced changes expand practical access to financial incentives for smaller-scale geothermal developers while preserving the state's broader dispatchable capacity goals.

Overall, the substitute bill moves beyond simply redefining geothermal's classification to actively enabling its development through appropriately scaled support mechanisms.

Author (5)

A.J. Louderback

Drew Darby

Josey Garcia

Suleman Lalani

Richard Hayes

Sponsor (1)

Lois Kolkhorst

Contact the Author

Rep. A.J. Louderback

Capitol Phone:

(512) 463-0456

Capitol Office:

EXT E1.418

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), HB 3778 would cause no significant fiscal implication to the State. The analysis assumes that any administrative costs associated with implementing the bill could be absorbed within the existing resources of the relevant state agencies, notably the Public Utility Commission of Texas.

This conclusion reflects the nature of the bill, which does not create new programs or allocate new funding but instead expands eligibility for existing state loan and grant programs to include geothermal energy projects. The bill adjusts the definition of "dispatchable generation" to encompass geothermal facilities and allows such facilities to qualify for financial incentives already established under current law—provided they meet reduced capacity thresholds (10 MW rather than 100 MW). Since these programs are already funded and the bill does not increase appropriation levels, no new state expenditures are projected.

Similarly, there is no expected fiscal impact on local governments. The bill does not impose mandates, create administrative burdens, or require local expenditures. Its impact is largely regulatory and definitional, enabling broader participation in existing state programs without imposing costs on cities, counties, or local utilities.

In summary, HB 3778 is anticipated to have a negligible fiscal effect on both state and local governments, as it leverages current funding frameworks and relies on agency implementation within existing capacity.

Vote Recommendation Notes

HB 3778 is a measured and practical adjustment to Texas energy policy that supports the state’s goal of a reliable, diversified electric grid—without expanding the size of government, creating new taxpayer burdens, or imposing additional regulations on individuals or businesses. The bill aligns with a principle of energy neutrality by ensuring geothermal energy, which is dispatchable by nature, is no longer excluded from existing financial tools that support grid reliability.

The bill updates the Utilities Code to formally recognize geothermal energy generation facilities and geothermal conservation wells as "dispatchable" resources. This classification allows them to become eligible for the low-interest loans and completion bonuses available through the Texas Energy Fund—programs already created and funded through Senate Bill 2627 (88th Legislature). Importantly, HB 3778 does not increase the size of this fund or authorize any new appropriations. The Legislative Budget Board has confirmed that the bill has no significant fiscal impact on the state or local governments, and any costs can be absorbed within existing agency resources.

For those concerned about government subsidies, HB 3778 does not create new ones. Instead, it allows geothermal projects to compete for funds already set aside for dispatchable energy projects. It does not guarantee funding, change selection criteria, or introduce new mandates. By extending eligibility to geothermal, the bill enables a wider range of energy technologies to help meet Texas’s electricity needs, especially during peak demand periods—without growing the government’s footprint or committing taxpayers to additional spending.

From a regulatory standpoint, the bill imposes no new burdens on individuals or private businesses. It neither expands compliance requirements nor increases the role of state agencies in project development. Instead, it refines legal definitions to reflect the technological capabilities of geothermal systems—bringing policy in line with practical reality.

By maintaining a level playing field while encouraging private investment in reliable, clean energy, HB 3778 respects free enterprise and limited government principles. It strengthens grid reliability without favoring one energy source over another, and without fiscal or regulatory overreach. For those who support an all-of-the-above energy strategy while remaining cautious about subsidies or government growth, this bill strikes a responsible and balanced approach. Therefore, Texas Policy Research recommends that lawmakers vote YES on HB 3778.

Individual Liberty: While not directly affecting individuals, the bill promotes broader energy diversity and grid stability, which are foundational to economic freedom and community resilience. A more reliable grid supports uninterrupted business operations, medical care, and home energy use—all of which help protect personal autonomy and quality of life.
Personal Responsibility: HB 3778 does not create or remove obligations for individuals, nor does it affect personal conduct or responsibility. Its focus is on infrastructure eligibility for voluntary financial programs. As such, it does not significantly touch on this principle.
Free Enterprise: The bill opens up existing competitive loan and grant programs to geothermal energy developers, removing a legal barrier that previously excluded them. By allowing geothermal to compete on equal footing with other dispatchable energy sources, it supports open markets and innovation without distorting outcomes. It also respects the principle that government shouldn’t favor or exclude specific technologies without clear justification.
Private Property Rights: By making geothermal projects more viable, the bill indirectly strengthens the value and utility of subsurface property rights (which geothermal projects depend on). It encourages voluntary development of private property for energy production without authorizing eminent domain or other coercive tools.
Limited Government: HB 3778 exemplifies limited government by refining existing law rather than expanding state authority. It does not create new programs, agencies, or regulatory powers. It simply updates definitions to allow geothermal energy to qualify for existing financial mechanisms. This approach corrects an inconsistency without growing the scope of government or creating new administrative overhead.

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