Texas is poised to become the leader in solar power capacity in the U.S. by the end of the decade, as its tripling of installed capacity puts it ahead of California. But this record could be eclipsed by projected growth in electricity demand, driven by the electrification of oil and gas production and the rapid expansion of data centers.
Electricity consumption in the region managed by the Electric Reliability Council of Texas (better known as Ercot) is already breaking records due to heat waves and winter storms. Peak demand is projected to reach 118 gigawatts in 2030 under the baseline scenario. BloombergNEFmore than a third more than today.
As Texas wind and solar capacity grows, so do power outages
This load growth is on track to outpace the pace at which new renewables are coming online. Ercot’s projected supply is barely enough to meet BNEF’s projected demand, especially during peak summer days when solar power fades.
The reserve margin – the ratio of total supply capacity to demand – is forecast to fall from 20% in 2023 to just 1% by the end of the decade. To meet projected demand, new gas-fired power plants or batteries combined with renewables will need to come online. Beyond peak times, BNEF expects annual generation from gas and coal to rise to meet load growth.
Did someone say data centers?
Texas faces the critical challenge of meeting the electricity needs of its rapidly expanding industries. Residential demand is set to take a backseat to the rise of new, permanent industrial load, driven by the electrification of oil and gas production in the Permian Basin, and the rise of data centers to power cryptocurrency mining and artificial intelligence.
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Flexible cryptocurrency mines, a type of specialized data center, add even more complexity to the network. While Bitcoin mines are estimated to account for only 16% of demand in 2030 according to BNEF’s outlook, the impact on energy prices could be significant, potentially doubling prices based on their break-even price.
Ercot is on track to become the largest U.S. market for solar by the end of the decade, with installed capacity expected to triple. With wind and battery storage lagging, solar will increasingly determine hourly electricity prices in Ercot.
Prices will steadily decline midday and peak as the sun sets. The shape of Ercot’s net load, which reflects the time difference between demand and renewables, will soon begin to resemble California’s signature “duck curve.”
The solar-induced slump, coupled with the round-the-clock industrial load profile, will mean that peak-hour prices between 6am and 10pm will be cheaper than off-peak prices by 2026. Wind will have the largest commercial revenue of any clean energy source, thanks to its strong night-time capacity factors soon aligning with premium off-peak prices.
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