New report says ERCOT estimate of future grid needs is overblown

Pablo Vegas, CEO of the Electric Reliability Council of Texas (ERCOT), made headlines in June when he told a Texas legislative hearing that his team had radically revised its estimate of future demand on the state’s electric grid. Before that hearing, ERCOT had estimated that the grid would need to grow from its current 85 GW of generating capacity to 110 GW by 2030, a relatively modest 30 percent growth target that few saw as a cause for major concern.

But during that June 12 hearing, Vegas informed policymakers that his agency’s new view is that capacity would need to increase by more than 75 percent in just six years to meet skyrocketing demand, driven in part by the exponential growth of data centers tied to AI technology and crypto mining. The new estimate shocked lawmakers and other state officials, prompting Lt. Gov. Dan Patrick, who chairs the state Senate in the Texas system, to speculate about the need to “take a closer look” at AI and crypto mining and their net contributions to the state’s economy.

Such concerns aren’t limited to Texas and ERCOT. Independent System Operators (ISOs) of regional grids across the United States face similar challenges. A new report from Enverus Intelligence Research (EIR) cites the SE, PJM and WEST regional grids as those facing capacity growth needs that are equal to or greater than ERCOT’s future needs.

At the same time, EIR believes that the tax forecasts made by Mr Vegas in June are significantly overstated.

“We believe data center load estimates in the U.S. are overstated,” said Riley Prescott, an analyst at EIR. “Our model includes more realistic projections for each significant load segment using an unbiased and consistent methodology across the U.S.”

When asked specifically about EIR’s view of ERCOT’s needs through 2030, Prescott said in an email that “ERCOT’s peak load will grow to 93.5 GW by 2030 based on differentiated forecasts for each major load segment, including data centers and electric vehicles that feed into our total system load forecast. The latest update to the ERCOT Regional Transmission Planning (RTP) forecast puts peak load at 152.5 GW, which we believe overstates the growth of large industrial loads.”

In unveiling ERCOT’s revised demand forecast, Vegas also speculated that rapidly rising load demand could create a need to restart some idled coal plants on days when demand is particularly high. Prescott says EIR believes that is unlikely.

“Given our more conservative load forecast, we believe sufficient projects will be built from the interconnection queue and additional dispatchable generation supported by the Texas Energy Fund through Senate Bill 2627, the Powering Texas Forward Act, to meet peak load,” she said, adding, “During days of high demand, we believe other technologies, including lithium-ion batteries and natural gas peakers, will fill the gap.”

The Texas Energy Fund (TEF), created by the state legislature in the 2023 session, will award $5 billion in low-interest loans to spur the buildout of additional dispatchable gas-fired reserve capacity in the coming years. As I wrote in June, the program drew an overwhelming response when it was opened for bids by the Public Utility Commission of Texas (PUC).

TEF supporters had hoped the program would spur the installation of about 10 GW of additional natural gas generation by 2029. But the PUC announced in early June that bids had been received from 125 applicants for 56 GW of new capacity, which would require a total investment of $38.9 billion.

It comes down to

If EIR’s more modest load forecast for Texas and the other regional grids proves correct, what seemed like a looming crisis in the electricity sector could turn into a minor tragedy.

In the press release announcing the new report, EIR notes that it believes its model makes more realistic predictions “by using an unbiased and consistent methodology,” adding that “ISOs’ tax forecasts often contain biases to drive new policies or add a margin of safety.”

If true, such a bias by ERCOT and fellow grid operators seems logical. After all, it is better to overestimate future capacity needs than to underestimate them and run out of resources in an extreme weather emergency. That’s what happened during Winter Storm Uri in February 2021, which killed 300 Texans. No one wants to experience such a tragedy in the future.