ERCOT's "New Era" of Growth Needs Clean Energy
Texas will need an all-of-the-above approach, including renewables, storage, transmission, and demand-side resources to meet high projected demand growth
This month, ERCOT released a staggering projection: the agency says 62 gigawatts of new demand could plug into Texas’ grid by 2030.
It looks like a decimal point got lost somewhere. The state’s all-time demand record is 85.5 gigawatts, and it took a century to get there. ERCOT says that could jump 72% in a little more than five years.
Texas simply isn’t going to build that much gas generation — there’s no way to build even a fraction of that and even if we could, consumers couldn’t possibly afford it. But there is a way to serve all of that demand and increase reliability at the same time.
We’re going to need a lot of renewable energy, battery storage, transmission, and distributed resources, including energy efficiency, demand flexibility, and distributed generation.
For anyone who’s been in this world for a while, this is a predictable but nonetheless ironic twist of fate: the future of the Texas economy now relies on the success of renewables, batteries, and demand-side strategies, and the state’s political and business leadership increasingly recognizes it.
Do the Math
So ERCOT thinks we’ll need 62 gigawatts of generation by 2030. Where will it come from?
Not from gas: there are only 15 gigawatts of gas plants in ERCOT’s interconnection queue right now. Undaunted, Gov. Abbott recently attended a press conference to showcase the Lower Colorado River Authority’s plans to double its current gas generation project. The project’s capacity is going to grow from one-fifth of one gigawatt to … two-fifths of a gigawatt.
Drop, meet bucket. To give you a sense of scale, we’d need 324 similar projects to reach 62 gigawatts.
Meanwhile, generators already have queued up 155 gigawatts of solar power and 140 gigawatts of batteries to store that energy when it’s plentiful and dispatch it onto the grid when it’s needed. Governor Abbott touted 3,000 megawatts of new dispatchable power energized in the last year in his press release; most of that is from dispatchable and flexible batteries.
Not everything in the queue will be built, obviously. But a lot of it will and it will go a long, long way toward solving this problem.
A Good Problem to Have
Why do so many AI data centers, chip manufacturers, hydrogen developers, and other large consumers want to come to Texas anyway?
A big reason is cheap power for industrial users. Our mix of solar, wind, and gas power has made our state incredibly attractive to large consumers — it helps Texas offer some of the lowest wholesale power prices in the world. The abundance of sun, wind and fossil fuels here also gives us a natural edge.
The state’s energy-only market also is incredibly important. In most other markets, users big and small pay extra for electricity simply to be available, even when it’s not needed or used. It often doesn’t work (just look at the blackouts in the Eastern U.S. during 2022’s Winter Storm Elliott), and it’s very expensive.
Texas’ groundbreaking energy market helped cultivate our enviable mix of resources. It’s why we are so well-positioned to serve the incredible growth that ERCOT projects.
Unfortunately and inexplicably, too many policymakers seem intent on weakening that hyper-competitive market. The PUC continues to kick around the so-called Performance Credit Mechanism, a capacity market that would reduce competition and force Texans to spend far more on power.
Similarly, some anti-renewable activists have proposed “firming” requirements designed explicitly to force consumers to pay more for clean energy. ERCOT CEO Pablo Vegas has repeatedly pointed out that firming would do little to increase reliability, but would do a lot to drive up costs, calling it a “tax” on energy.
To serve robust demand growth, Texas must continue giving users real control over their costs. With firming or a capacity market, they’ll lose that.
Let the Little Guys Save!
While rates and bills are low for big customers, they are not low for residential consumers — the little guys never got as good a deal as the large users after Texas restructured the market a quarter-century ago.
In fact, residential power bills in Texas are sixth-highest in the country. Now is the time to change that: not only because it’s the right thing to do, but also because, in another ironic twist, large users increasingly need smaller ones to keep their own costs low.
Consider the state’s power picture on winter mornings — still the grid’s biggest Achilles heel. It’s a poorly kept secret right now that on bitter cold days, state leaders call big users to shut down industrial operations to ensure the grid can meet demand.
How many calls will they need to make to maintain a 150-gigawatt grid?
By helping smaller consumers reduce energy waste and lower use when demand spikes, the state can fortify the grid and cut costs for Texans. The American Council for an Energy Efficient Economy in 2023 identified 25.3 gigawatts of energy efficiency and demand response opportunities to reduce winter peak. That would get us 40% of the way to the 62 additional gigawatts ERCOT is forecasting. To get there by the end of 2030 would have required aggressive efforts by the PUC and utilities in 2024 which, unfortunately, aren’t yes happening.
But they could — and soon. In fact, the PUC posted a list of questions for comment on energy efficiency just this week.
They should start with a focus on reducing the reliance on resistance heat and adding insulation as much as possible. The PUC can leverage utility energy efficiency programs (as they’re required by legislation to do, by the way) to dramatically reduce winter heating load by 15 gigawatts; federal tax credits and rebates for low-income customers will catalyze this effort.
Then the state should sign up as many customers as possible for demand flexibility offerings that pay them to pre-heat (or, in the summer, pre-cool) their houses when ERCOT knows electricity will be plentiful, and to throttle back use when supply gets tight. Coupled with an EV charging demand response program, that brings eight gigawatts more. Reliability goes up, bills go down, and Texas can accommodate much more demand without sacrificing already precarious reliability on cold winter days and hot summer evenings.
This is what flexible demand looks like, and Texas will need more and more of it to ensure the grid can meet the state’s needs. Texas has and probably will have plenty of power available for 95% of any given year — we need to think creatively and innovate to solve the problem of a few hundred hours when things get tight.
In those hours, we must have a two-sided market where demand can respond to price signals. Given ERCOT’s incredible projections, now’s the time to create it.
Other Critical Needs
In a presentation to his board this week, ERCOT’s Vegas also pointed to the need for additional transmission in Texas. He’s right; this is critical.
Vegas laid the groundwork to change ERCOT’s cost tests for new transmission lines, though he gave no details. Regardless, it’s way past time for ERCOT to start approving transmission projects based on Texas’ economic needs, not just its reliability needs. This new, more appropriate test will enable far more transmission lines to be built across the state.
We also need to better use the transmission we have. ERCOT and transmission owners need to use sensors, AI and advanced computing to move more power safely and efficiently, reduce curtailments, and spot weaknesses in the transmission system. These improvements, broadly defined as Grid Enhancing Technologies (GETs), can and should gear up before summer.
And we’re going to need a lot more distributed power: smaller-scale generation resources like solar panels and storage systems that are located closer to where the power is used. Vegas mentioned “generation hubs”; he didn’t detail what those would look like, but it’s easy to imagine large hubs in remote, resource-rich areas like West Texas and others of varying sizes closer to urban areas.
For years, the PUC missed good opportunities to plug distributed energy resources into the grid. There’s never been a better time to fix that.
A True Texas Miracle?
Politicians often describe our state’s economic growth as the Texas miracle. Well, if we can nearly double the grid in six years — or even increase it by 50% — that would actually be miraculous.
Our only shot is through renewable power, battery storage, transmission, and demand-side resources, including both energy efficiency and demand response. It’s a lot, but there’s a lot of demand that’s likely coming.
If we can mix these elements together, we’ve got the recipe to attract massive amounts of demand and the economic benefits that come from it — and use it to increase reliability while lowering overall system costs.
With the right policy and regulatory support, it’s all possible.
I’ll host a Substack Chat from 10:00-11:00 CT during this morning’s PUC Open Meeting. Join me to follow along, ask questions, and discuss the issues with other subscribers.
Why are renewable energy sources, like solar and wind, so important to Texas' energy supply? Particularly during last year's scorching summer heat? It is impossible to overlook their success. After all these years, why do renewables still have stranded electricity—basically, wasted power supply and revenue?
Why, immediately following the devastating Uri winter storm, was Warren Buffett denied permission to use his own money (billions) to construct ten generating power plants?
Why do important breakthroughs like these not receive the recognition they merit? The deregulation measure was created in order to support these kinds of energy sources.
Whether energy solutions are employed now or in five or ten years, they need to be properly studied for the Texas grid.
Wilton Smith round rock (not anonymous)