Texas’s electricity grid is overseen by the Electricity Reliability Council of Texas, otherwise known as ERCOT. ERCOT oversees the electric grid for most of the land area of Texas. As the grid operator, ERCOT’s job is to ensure that electricity production – quantity supplied – is sufficient to meet the quantity of electricity demanded, in real time, by firms, households, and other electricity consumers in Texas.
In pursuing its mission, ERCOT is deeply interested in the reliability and sufficiency of electricity production capacity and transmission capacity. Whether it is wind turbines or solar panels or gas-fired plants or some other means of production, ERCOT’s job is to see that electric power is available when demanded by users, and where electricity is demanded by users.
To do its job, ERCOT must forecast future demand, and provide incentives for investors to provide sufficient generating capacity to meet that future demand. Texas is a growing state with a growing economy. More people lead to greater demand for electricity. A growing economy requires greater quantities of electric power.
Two specific aspects of future demand require special attention, because they are particularly energy-dependent, and their growth leads to an increased use of energy even if the population does not grow. One of these is the growth of data centers and crypto-currency mining centers within the state. These businesses are large users of electricity, and thus represent a growth in demand over and above population growth. The second special concern is the switch to electric vehicles, or EVs, with their demand for electricity instead of gasoline. Every switch from a gasoline or diesel-powered vehicle to an EV represents a net increase in demand for electricity to charge the vehicle, an increase in electricity demand even if Texas were not otherwise growing.
Data Centers.
As we write this, Texas is already the home of more than 250 data centers and that number is expected to continue to grow over time. These data centers use large quantities of electric power. The number of data centers is largely driven by the increased interest in artificial intelligence and in cloud-based technologies, and has been on the rise since 2021. Nationwide AI data centers are expected to consume 8% of the total U.S. electricity by the end of the decade.
Data centers are not just big users of electricity. They are also constructed quickly. In the past, the construction of a large industrial plant would take years, giving ERCOT years to plan for the increased demand and the necessary transmission infrastructure. Data centers have changed that calculus. Pablo Vegas, the President and CEO of ERCOT said in a recent interview that “We are seeing 500-700 MW data centers being built in a year.” An example is Meta’s $800 data center in Temple. The map below shows the concentration of data centers (in numbers) in Texas. There were 116 entities described as data centers in Dallas-Fort Worth, 42 in the Houston area, and 49 in the Austin-San Antonio area.
Figure 1. Data Center Locations
Source: Data Center Map
In addition to data centers, Texas has seen a growth in crypto mining facilities and hydrogen production facilities (aka electrolyzers). Also, the increased electrification of the oil and gas processes in the Permian Basin added large loads to the ERCOT[1] grid system. Based on a meeting report by ERCOT on 23rd of April ,2024, the grid handler updated the prospective large load growth in 2030 by approximately 41GW, of which growth in load in the Permian Basin was 59% of the increase.
Electric Vehicles
Currently there are relatively few electric vehicles (defined as plug-in hybrids plus fully electric) registered in Texas, 274,669 as of April 30 2024. This is roughly 1% of the 25 million registered vehicles in Texas. This past year, 2023, saw the largest spike in the registration of EVs in Texas, as adoption rates grew rapidly from a very small base. This growth brings up the issue of how much ERCOT’s production capacity will have to increase to service the growing demand for electricity to charge EVs. Figure 1 shows the trend of the registered electric vehicles in Texas.
Figure 2 shows the EV load distribution by county forecasted for year 2029 by Brattle.com, a consulting firm hired by ERCOT to make forecasts. Most of the gray areas are counties not served by ERCOT and some of the counties are rural where Brattle did not forecast any EVs. Noticeable is the concentration of EVs in the Texas triangle covering Dallas, Austin, San Antonio and Houston. The forecast report stated, “Adoption of EVs is expected to increase significantly in the near future, with 4% of all the vehicles on the road projected to be EVs in Texas by 2029.” More specifically, by 2029 there will be approximately 750,000 light duty vehicles (LDVs ) and 208,000 medium and heavy duty vehicles (MHDVs) registered in Texas, which will add 6.7 TWh (Terawatt-hour) to the forecasted base load in 2029. The baseline forecast without assuming EV growth was 490 TWh, so the total load forecast with EV growth included was 496.7 TWh in 2029. That represents a 2.4% per year growth over the 2022 base load of 420TWh. Of the 2.4% growth, 0.02% is growth due to addition of EVs. So far EVs have had de minimus impact on demand.
Figure 2. Electric Vehicle Trend, 2013-2024
Source: EVs in Texas | DFWCC (dfwcleancities.org)
Figure 3. Total EV Load Distribution by County, Texas
An interesting counterfactual is to examine what would happen if all 25 million cars registered as of 2024 were EVs. Based on a report by Edmunds, an average electric car uses 394 Kwh a month, which means 4728 Kwh per year for the average electric car. Multiplying this number by the 25 million cars registered in Texas gives a total 118.2 TWh[2] of extra energy demanded per year. ERCOT predicted 472 TWh of energy production in 2024, so if all vehicles were already EVs, then Texas would need an additional production of 118 TWh, a 25% increase in electricity production. It is indeed fortunate that the conversion to EVs is happening slowly, but the numbers indicate the large scale of the additional electricity production needed if we continue to an all-EV future.
What Is the Impact of Increased EV Adoption During Summer Peak Demand?
EV adoption is increasing, but from a slow base. The federal government has decided that EVs are the future, and eventually foresees an end to the use of internal combustion engines for transportation. This will increase the demand for electricity.
The climate in Texas means that the state demands more summer electricity than winter electricity. According to ERCOT, the current all-time peak demand record of 85,508 MW in one hour was set on August 10, 2023. This was substantially higher than the highest peak demand record set in 2022 at 80,148 MW. In fact, 2023 was especially hot, and there were 49 days in 2023 when the peak demand exceeded the 2022 record of 80 GW. This trend of increased demand is expected to continue due to many factors, including data center expansion and increased EV usage.
In our counterfactual, where all vehicles registered in Texas today were assumed to be EVs, there would be an additional 118 TWh of energy required on top of 472 TWh forecast by ERCOT in 2024. If this additional electricity demand is evenly distributed across each hour throughout the year, then 13,493 MW[3] additional demand would occur every hour. So, summer peak load would then also be higher by that amount. ERCOT predicts summer peak load of 82,239 MW in 2024, so this represents a 16% increase in peak load. Of course, if EVs are all charged at night, then the peak load would be less impacted, so the timing of when owners will charge their EVs will matter. But again, this calculation shows the magnitude of the increase in power that will eventually be needed.
Transmissions
Transmission line limitations also constrain the delivery of electricity to certain areas even when overall production would be sufficient to cover overall demand.
A key takeaway from a recent report by ERCOT was that “The forecasted pace of load growth could exceed the pace at which transmission capacity can be built to support it.” On September 6, 2023, Texas was brought to the brink of its first blackout since the freeze in 2021 when ERCOT officials were faced with a transmission bottleneck that moves energy across the state. In the words of Brad Jones, ERCOT’s former interim CEO, “The grid was facing the potential of congestion overload on the line coming from south Texas toward Dallas. All the wind that was on in the south was struggling to get to Dallas to help meet demand. So right in the middle of this, ERCOT had to reduce generation in the south to prevent that line from being overloaded.” ERCOT began deploying emergency reserves, and a rolling blackout was avoided only because power usage dropped after sunset.
It can be said with the growth of data centers and EVs the demand for electricity will continue to grow faster than the Texas population for years to come. Texas will need to continue to increase production capacity and continue to improve its transmission grid in order for ERCOT to successfully fulfill its mission as grid operator for Texas.
Footnotes
[1] ERCOT -Electric Reliability Council of Texas
[2] Kwh to TWh: 4728 KWh * 25,000,000=118,200,000,000 KWh. 1TWh= 1,000,000,000 KWh.
[3] 118.2 TWh is the annual energy required if all vehicles turn electric in 2024. Evenly distributing 118.2 over each day each hour is (118.2/(365*24))=0.013493151 TWh per hour. Converting TWh to MWh is multiplying 0.013493151*1,000,000