ERCOT CEO stuns Texas officials with new estimate of energy needs

The Texas power grid managed by the Electric Reliability Council of Texas (ERCOT) appears set to continue what appears to be an inexorable slide into volatility following testimony Wednesday from ERCOT President and CEO Pablo Vegas.

Speaking to the Texas Senate Business and Commerce Committee, Vegas told members the grid will need a massive injection of additional generating capacity in the coming years if it wants to keep pace with rapidly growing demand. ERCOT had previously estimated total capacity would need to increase from 85,000 MW to 110,000 MW over that time period. But on Wednesday, he said his agency has increased that estimate to the 150,000 MW needed by 2030 because of new unanticipated demands on the system from AI data centers and the rise of crypto-mining.

This projection of a need to nearly double current generating capacity in just a few years caught Texas policymakers by surprise. Gov. Dan Patrick, who just last week celebrated the overwhelming response from power generators to the Texas Energy Fund (TEF) offering low-interest loans for additional natural gas generation, called the Vegas testimony “shocking” in a post on X (formerly Twitter).

Patrick targeted artificial intelligence and crypto mining as industries that are leading a flood of businesses moving to Texas to access cheaper electricity rates than other states, providing little public benefit. “[C]Rypto miners and data centers will account for over 50% of the incremental growth,” he wrote, adding, “We need to take a close look at these two industries. They produce very few jobs compared to the tremendous demands they place on our network.”

Sen. Nathan Johnson, a Democrat from Dallas, said ERCOT’s revised projections have “huge policy implications, and every assumption we’ve made in the last four years is now being called into question once again. All of them.”

Patrick, Johnson and other committee members all noted that the state’s taxpayers will ultimately pay the price, both in the form of suffering the growing lack of grid reliability and footing the bill for billions of dollars in new investment. in additional capacity. Energy rates in Texas are still lower than in most other parts of the country, but have risen rapidly in recent years, resulting in what is effectively a regressive form of taxation that hits the wealthiest citizens the hardest. poor.

I can personally attest to the rapid increase in these rates as a Texas homeowner. Four years ago, the fuel charge on my monthly electricity bill was a very low 8.5 cents/kwh. When I had to renew my contract in 2021, the best available rate had increased to 12 cents/kwh. With my current contract expiring in August, last week I received notice from my provider that the best rate they could offer is now 17 cents/kwh, a 100% increase on that part of the bill in just four years. The fact that such rapid growth has occurred even as current prices for natural gas and other basic fuels have remained at or near century lows should serve as a warning signal to all policy makers that something is very wrong with the structure of the network.

After all

This rate of increase is simply not sustainable over the long term, yet ERCOT’s new projection for capacity needs leaves little doubt of sustained rate increases in the future. While the overwhelming response to the TEF incentives – a proposed new 55.8 GW of natural gas capacity from 125 applicants – was gratifying, the total projected cost would come to $38.9 billion, almost 8 times the $5 billion approved for funding from the 2023 Legislature. Moreover, those projects are ones that will take years to plan, permit and build, but Vegas’ testimony made clear the need is more immediate than that.

Texas officials for many years have been able to boast a strong and growing economy powered by a stable and reliable grid. The last thing they can afford is to let the network degenerate into a Germany- or California-style mess. There are no easy solutions to be had, and another round of finger-pointing is the last thing the Texans can afford.