Houston City Hall in Houston, Wednesday, Aug. 12, 2026.
Jacob Lujan/Houston Chronicle
The city of Houston will chip in a projected $11 million in tax incentives for a new natural gas power plant to be built and operated by NRG Energy.
The proposal, which Houston City Council passed unanimously Wednesday, will be the city’s largest active tax abatement, and required the council to waive a city rule prohibiting tax incentives from going to energy generation projects. City officials, meanwhile, pointed to ongoing concerns about the stability of the Texas grid, particularly as a rash of new power-hungry data centers creates a political firestorm across the state.
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The 10-year deal will lower the annual property tax bill on the new $570 million facility in far northeast Houston by roughly $1.1 million annually. The 455-megawatt “Project Moonshot” will be a “peaker” plant, generating more energy during periods of high demand.
The city funds join a $21 million property tax break NRG has already secured from Galena Park ISD and a $370 million loan the project has received from the Texas Energy Fund. That taxpayer-backed program, which gives low-interest loans to help build new power plants, was created after the state power grid failed during Winter Storm Uri in 2021, killing hundreds.
NRG has said its plan hinges on government support. Without it, “sites outside of Texas would have to be prioritized,” the company told the state in its loan application, mentioning alternative NRG facilities the company could expand in New York and other states.
The plant will add capacity to power 110,000 homes per year, and NRG representatives told the council at a committee hearing in February that it could lower or stabilize utility bills in the Houston area.
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But the company has also said in its state loan application that the facility will specifically help “attract investment and industries that rely heavily on energy, such as heavy or advanced manufacturing and data centers” because of its ability to power up quickly. NRG also last year announced plans to build out a separate suite of brand-new gas plants to supply data centers.
“We are growing rapidly, and with that growth comes a greater need for reliable energy and additional power generation, especially as the grid continues to face strain,” Mayor John Whitmire said in a statement.
The abatement is set at 50%, meaning the city still will collect a projected $11 million in property taxes from the facility over the next decade. The plant, to be built next to a group of existing NRG facilities, would generate roughly 500 construction jobs and 14 full-time jobs once it is operational in 2028, company leaders told the council.
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The key question, said Nathan Jensen, a government professor at the University of Texas-Austin, is whether the company would have chosen to build the plant without the city’s support.
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“Is that extra piece of incentive really going to swing that project?” said Jensen. “Because if not, then you’re just burning tax revenues for no benefit.”
The project’s benefit to Houston residents’ utility bills may also be difficult to measure against the statewide power grid at large, Jensen said.
An atypical tax break
The abatement was approved with little discussion on Wednesday, and city leaders had previously signaled support.
“Obviously I would prefer not to give an abatement, but unfortunately they did have other choices,” Council Member Fred Flickinger said last week, when the item first appeared on the agenda. “Of all the abatement deals that have come before us, I thought this one was the best one.”
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The deal’s projected annual price tag will be more than double the next-biggest active abatement, according to the city’s annual audit. Houston’s eight other active abatements totaled $1.6 million in tax breaks in fiscal year 2024.
The abatement is also atypical among the city’s existing tax deals, which generally have gone to large-scale facilities operated by major employers, like a corporate hub for the engineering firm Halliburton or distribution centers for Kroger and United Parcel Service.
The item approved Wednesday included a provision waiving city rules that would otherwise prohibit the city from granting this type of tax break to a power generation project.
The plant is one of three major expansions NRG is pursuing in the Houston area, part of Texas’ push to expand grid resilience after power outages during 2023’s Winter Storm Uri.
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