There’s a lot going in the Lone Star State that contributes to Texas’ load growth. There’s the state’s expanding footprint of energy-intensive data centers, artificial intelligence and cryptocurrency mining, a growing population, extreme weather patterns and the increase of electric vehicles.
All of this comes as the state’s grid operator ERCOT works to maintain reliability among peak demand, or when consumer demand for electricity is at its highest. But peak demand has been growing significantly faster, said Joshua Rhodes , an energy research scientist at the University of Texas at Austin . It grew faster between 2021 and 2023 than it grew from 2006 and 2021.
The increase of energy demand across the country is growing to rates that haven’t been seen since the end of World War II, said Garrett Golding, a senior business economist at the Federal Reserve Bank of Dallas . The 1.3% demand growth pace is more than twice as fast as the decade before the pandemic.
“These dynamics, on top of the uncertainty of current forecasts, present major challenges for grid planners, power generators, transmission developers, regulators and at the end of the day, everyday consumers in the broader economy,” Golding said.
Industry leaders, government officials, business people and bankers gathered on Wednesday at the Federal Reserve Bank of Dallas to discuss the need for developing domestic energy infrastructure at scale across the country to keep up with growing demands.
The conversation comes asworst-case scenario models from Texas power grid operator ERCOTshow that if the state were to be hit by winter weather on par with that of December 2022 , the state would have a 50% chance of rolling blackouts.
That figure jumps to nearly 80% if Texas experiences a more severe winter like that of February 2021 , when storms caused widespread outages and killed more than 200 people.
The probabilistic model isn’t a forecast, ERCOT said. The grid operator’s officials said the chance of rolling blackouts has decreased since the 2021 winter storm thanks to state-mandated power plant weatherization and programs that provide incentives for many power generators to keep backup fuel sources on site.
More than $100 billion has been invested into ERCOT’s generation sector over the last 20 years, Vistra Corp. chief strategy and sustainability officer Stacey Doré said.
Ina resource adequacy report ERCOT published earlier this month, the grid operator reported that some of the low risk of ordering an energy emergency alert, or controlled outages, has been influenced by the recent and forecasted addition of data centers that are planned to operate 24/7.
The U.S. operates 40% of the world’s data centers. And soon, Texas is expected to become the next market leader of data center buildouts across the country , said Geoffrey Hebertson , lead renewables analyst of Rystad Energy.
The Dallas-Fort Worth area makes up nearly a third of the state’s buildout of data centers, thanks to North Texas’ high Internet connectivity capabilities. The state is set to outpace Virginia , the current front runner in data centers, which handles about 70% of the world’s Internet traffic, Hebertson said.
But it’s not just data centers that are contributing to an increase in energy demand. It’s coming from a variety of sectors, Doré said. Focused investments on domestic manufacturing have boosted demandas well as artificial intelligence.
“It’s important for us in the electricity industry to make sure that we’re not discriminating against certain types of load customers, favoring stuff over others,” Doré said. “Load is load is load.”
Since Texas has its own isolated energy grid, it’s responsible for generating the majority of its energy for its residents. Most of the state’s energy comes from natural gas, but other energy sources, namely solar and wind, have played a critical role in offsetting high demand.
As the nation’s leader in wind energy production, Texas accounted for more than a fourth of the country’s wind-sourced electricity in 2022, according to the state comptroller.
In the resource adequacy report from ERCOT , the grid operator notes that the possibility of low wind production remains a significant risk for maintaining sufficient reserves for peak energy demand this coming January.
For Doré, this is where there’s been a misalignment in dollars. A majority of investments into ERCOT have gone toward subsidized renewables, like wind and solar. Vistra plans to convert one of their Texas coal plants to gas.
“We believe in the next 10 years or so, we do have to solve the resource adequacy issue with additional gas, as well as renewables,” she said.
But Rhodes argues it might be worth adopting a new mentality of the supply and demand issue.
The old mentality sings that when demand goes up, it’s worth paying to boost supply. He argues, sometimes it might be cheaper to pay for the energy demand to not go so high, or even go down.
Demand response can be carried out by ERCOT by tapping industrials, like big oil refineries or petrochemical facilities, to turn off their power during emergency situations, or by paying energy producers to reduce their loads.
Rhodes said it can reduce the need for dirtier assets and can save the state a lot of money.
“The less we can control supply, the more useful it is to be able to better control demand,” Rhodes said.
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