Texas power market participants face daunting — but surmountable — challenges to accelerate permitting and infrastructure completion to meet load growth driven by economic and demographic factors, experts said March 20 at a conference in Houston.
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The Electric Reliability Council of Texas in December projected that under normal weather conditions load will peak in summer 2024 around 80 GW, but the system set a record of 85.4 GW in the record summer heat of 2024, when it had previously projected a summer peak of just 82.7 GW under normal weather conditions.
But weather is just one factor in load growth, and during a panel discussion entitled “Surging Demand: The Texas Power Breakfast,” Public Utility Commission of Texas member Jimmy Glotfelty noted the Lone Star State’s “amazing economic growth” involving data centers, the oil-and-gas sector and migration to the state of businesses and people.
The session was part of the CERAWeek by S&P Global energy conference in Houston.
“I’m cautiously optimistic about being able to serve the load that we that we’ve been blessed to get … whether it be in the energy space, the information technology and semiconductor space, or just the growth of the industry in Texas,” Glotfelty said. “The pinch points I think are in the infrastructure. The power sector, as we know, takes a long time to make decisions and to build things, and we have not kept up our rules with the timelines that are needed for industry systems to succeed.”
Texas policymakers – regulators and legislators – are “trying to change that,” Glotfelty said.
“I don’t think we are there yet, but we’re going to have to do a better job at ERCOT and the commission and the legislature to address issues sooner looking forward, before they become reliability problems,” Glotfelty said.
Permian load growth
Danny Wesson, Diamondback Energy executive vice president and chief operating officer, said the growing West Texas Permian Basin oil and gas sector is increasingly reliant upon the Texas grid to meet exploration and production energy needs, but has also widely developed behind-the-meter resources.
“Over the past probably five or six years, the oil and gas industry has been really accelerating toward electrification of its business, in an effort to reduce our emissions for the brand and enhance our operations,” Wesson said.
The Permian Basin produces more than 6 million barrels of oil a day, nearly 80% of US oil production, Wesson said.
“There’s just an awful amount of electricity demand in the Permian Basin, and we’ve seen some really tight bottlenecks in trying to connect our operations into the grid,” Wesson said. “So, it’s been a unique challenge, but it also has been a wonderful learning experience for the industry and it has helped us reduce our costs,” he added. “I’d say three years ago, we had probably about 60% of our field electrified. Today, we run about 95-plus percent of our field on the electric grid.”
The region has also had an influx of cryptocurrency mining operations that have built power demand, partly to benefit from low-cost wind and solar resources, Wesson said.
“It’s great land for these kinds of businesses that also happen to be very power hungry,” Wesson said.
Transmission permitting
At the other end of the state, Jason Ryan, CenterPoint Energy executive vice president for regulatory services and government affairs, said his hometown of Houston takes up about 2% of the Texas land area but consumes about 25% of the state’s electricity.
“There is not enough power in Houston to serve that load, which means we have to import it from other parts of ERCOT,” Ryan said. “On the hottest day of the year, we import between 60 and 70% of the power ERCOT produces.”
The Houston Ship Channel, the Port of Houston and the world’s largest petrochemical complex are big industrial loads, Ryan said, but the city also adds about 50,000 new electrical meters a year, roughly equal to the meters in Waco, Texas, which has a population of 140,000 people.
“So, all of that growth means we need to build up a lot more infrastructure,” Ryan said. “We’re not without tools to do so. We’ve been actively supporting legislation that allows transmission lines to be built based on economic criteria, which has been incredibly important to stay ahead of meeting transmission lines for critical reliability needs and build them when they’re affordable for customers.”
Texas has cut in half — from 12 to six months — the time needed to get permits for big new transmission lines, Ryan said.
Peakload projection
In contrast with market participants’ bullish expectations for ERCOT loads, the independent system operator does not project setting a new peakload record until 2029, and current ERCOT North Hub on-peak forward are backwardated, falling to less than $51.50/MWh by 2030, compared with 2023’s annual day-ahead on-peak average of almost $74/MWh.
However, Michele Wheeler, NextEra Energy Resources vice president for regulatory and political affairs, said her Florida-based company – which has operations in every state except Alaska – has its second-largest asset base in Texas, partly because demand is growing and weather is appropriate for renewable resources.
“It’s even easier to go here in terms of permits, and it’s a one-state regional transmission organization, so if anyone’s trying to build things and other moments they are in ERCOT,” Wheeler said. “And in particular, Texas appreciates the value of economic development and growth and so you know, all that comes together to make this very effective state in which two do business,” Wheeler concluded.
