By Dr. Ariane Beck, TXSES Board Chair & Research Fellow in Energy Systems Transformation at University of Texas at Austin
This summer, warnings of a potential grid outage have been noticeably absent. There has been no fretting or hand wringing. When a significant amount coal capacity unexpectedly went offline, solar, wind and storage stepped up to fill the need. In June, solar peaked at 27.7%, and, on multiple days, wind and solar met over half of the state’s peak demand. In July, Texas hit a new solar power record – 28,451 MW. This summer, solar shined and showed just how important solar is for grid resiliency and reliability. ERCOT lowered the outage risk to 1%, compared to 16% last year, with solar, wind and storage making up 90% of new capacity. The big question on now is – can we sustain it?
Rumor has it that we’re in an energy crisis, and if there isn’t one now there is likely one coming. With new layers of bureaucracy and reviews, the elimination of tax credits for solar, and continued ambiguity of what will qualify and how, many projects face an uncertain future. Meanwhile, ERCOT is forecasting that demand will double by 2030. So, what will meet the need? Federal and state policy is pushing fossil fuels and even nuclear, but the natural gas turbine supply chain now has a delay upwards of 5 years by some estimates. Nuclear timelines are even longer. Renewables are the only resource that can come online fast enough to meet the demand.
Demand is up and growing everywhere, as data center mania takes over. Energy bills are up everywhere too, and at twice the rate of inflation nationally. While AI is definitely in the hype cycle, it’s unclear how close we are to the Peak of Inflated Expectations. According to the NY Times, corporate spending on AI isn’t paying off. The data center pipeline may also be exaggerated as project developers make multiple requests for a single project, many of which will never be built. Utilities are building out infrastructure to support these speculative projects, which will need to be paid for whether the data centers are built or not. In all this speculation and uncertain forecasting, what does seem certain is that when we reach the Trough of Disillusionment, electricity customers will be footing the bill.
For all this risk, AI data centers are a questionable investment for communities at best. They come with a large amount of resource consumption (electricity, water, and land), a lot of noise, and don’t provide that many long-term local jobs. They do raise energy prices, and Texans have already faced significant electricity cost increases from data centers. Many utilities and their shareholders are happy to upgrade the infrastructure and take the returns. Absent policy that protects consumers by making sure that the data center owner foots the bill, projects that don’t come to fruition or shut down before paying for the infrastructure upgrades will be paid for by local communities.
Texas lawmakers have taken some precautions to protect consumers through SB6, which requires data centers to cover upgrade costs rather than pass them on to residential rate payers. Additionally, large energy users will pay fees for transmission screening and be required to disclose similar applications both in and outside of Texas in an effort to stem speculation. SB6 also requires large loads to install back up power meeting 50% of site demand and register with their utility and ERCOT. Starting in 2026, new facilities will also have to have a remote disconnect. All of these rules will allow ERCOT to call on data centers for curtailment, switching to back up power, or complete load shedding under extreme grid stress.
Texas isn’t the only state acting now to protect residents from the surge in energy demand and continued price increases. It will be interesting to see how effective the varied policies are in protecting residential energy rates from increasing costs to serve large data centers. But data centers aren’t the only cause of rising electricity prices. Electricity rates in Texas have increased by around 25% since 2020. Increasing demand, coupled with rising natural gas exports and a backlog of grid maintenance, are putting considerable pressure on electricity prices. The cuts to the solar tax credit couldn’t come at a worse time for people trying to insulate themselves from the speculation and uncertainty of the current market. Solar plus storage is an investment in a productive asset, that provides a necessity, security, and resiliency, in addition to financial returns. The economics will be challenging in the short term, but I have every confidence that with innovation and grit the solar industry will weather this storm.