In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Subscribe now

Where to find information about data centers in Texas | Texas Tribune

As the data center picture continues to complexify, a new guide from The Texas Tribune lays out where Texans can look for information about proposed data centers near them. They advise on:

How to find how much water a data center will use

How to find how much electricity a data center will use

Who owns a data center’s property or land?

How to find information about data centers through local government

And where planned construction projects will take place.

So Much Solar: Digging Into the List of Every US Power Plant That Went Online This Year | Inside Climate News

While utility-scale solar accounted for the largest share of new U.S. generating capacity in the first half of 2026, Texas has a mixed picture.

Three states account for about half of the country’s new generating capacity: Texas, New Mexico and Arizona.

Texas was the leader, with a power mix that leaned more heavily on batteries and gas than other states. The leading category in Texas was batteries, with 3,067 megawatts, followed by utility-scale solar, with 2,311 megawatts, and then natural gas combustion turbines or natural gas internal combustion engines, with 1,154 megawatts.

A chart from the publication shows Texas in the lead.

Read more

On this week’s Energy Capital Podcast, Joshua Rhodes talks with Cyrus Reed, legislative and conservation director of the Sierra Club’s Lone Star Chapter, about what it means to run an environmental group in a state with no renewable mandate, and about nearly everything happening on the Texas grid this summer.

Subscribe now

The rest of the conversation:

• The routing fight: Reed says 765 kV is the right design and the process is the problem. Routes drawn from satellite imagery that missed homes and schools, landowners knocked out of the docket for filing a week early, a 180-day clock he says does not fit lines this long, and two potential legal paths for the PUCT: deny the applications, or remand them.

• Why Texas built more renewables than the mandate states: private property rights, an energy-only market, and what the Sierra Club defends now that the renewable portfolio standard is gone.

• The Lone Star Chapter’s platform for the 90th session: data center protections, distributed energy, county authority over codes and floodplains, and why Reed says the Sierra Club is “not an organization that’s been calling for bans and moratoriums.”

• Why ERCOT’s batch zero study depends on the lines getting built, and what a delay does to 400 gigawatts of large load. ERCOT postponed the study three days after we recorded.

• Non-disclosure agreements, mitigation fees, and community benefit agreements: why data centers keep losing the room, and what Reed’s members would accept.

• Behind-the-meter gas permitted one engine at a time, when Reed says the total would trigger major source review.

• The Sierra Club with Texas Oil and Gas Association against the Performance Credit Mechanism, the Green Tea Coalition, and the home builders on energy codes.

• Plus: ERCOT against the Southwest Power Pool, the fear underlying the artificial intelligence backlash, and the one plank he’d pass if he could only pass one.

Share

Chapters

• 00:00 – Introduction and guest background

• 00:46 – What it means to be an environmental group in Texas

• 02:50 – How property rights and an energy-only market built out renewables

• 06:54 – The Lone Star Chapter's platform for the 90th Legislature

• 08:48 – County authority, HB 40, and codes instead of bans

• 10:46 – How load growth, 765 kV, and data centers got tangled together

• 15:43 – ERCOT versus SPP, and who carries the risk

• 17:11 – Schwertner's letter and what the PUCT could actually do

• 20:47 – How a CCN works, and the 180-day clock

• 23:07 – A bigger grid and more oil and gas extraction

• 25:37 – What a fairer routing process would look like

• 29:18 – Batch Zero, the large load queue, and the disclosure problem

• 33:19 – Mitigation fees and community benefit agreements

• 36:02 – Behind-the-meter gas and the minor source permit threshold

• 38:33 – The Green Tea Coalition, unlikely allies, and the 2027 platform

Resources

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Webber Energy Group (Website - LinkedIn)

  • IdeaSmiths (Website - LinkedIn)

  • Energy Capital (Podcast - LinkedIn - YouTube)

  • Texas Energy & Power (Website)

• Cyrus Reed (LinkedIn)

  • Sierra Club Lone Star Chapter (Website - LinkedIn)

• Other Orgs Mentioned:

  • LCRA - Big Hill to Sand Lake 765 kV Transmission Project

  • Base Power (Website)

  • Energy Empire (Website)

Company & Industry News

• Lt. Gov. Dan Patrick, Texas senators call for PUC to deny 765-kV transmission line applications

• Chairman calls for a halt to controversial state transmission line project

• Environmental Groups Contest Texas Data Centers’ Air Pollution

• Environmental groups threaten lawsuit over West Side San Antonio data centers

Books, Articles & Filings Discussed

• Sierra Club Lone Star Chapter - 2027 Legislative Policy Platform

• Public Utility Commission of Texas - Permian Basin Reliability Plan

• Texas House Bill 5066, 88th Legislature - Bill text

• ERCOT - New Batch Connection Process for Large Electricity Users

• Texas Commission on Environmental Quality - Texas Emissions Reduction Plan

Related Podcasts by Energy Capital

• Texas competes on everything except transmission

• What batch zero settles and what it leaves open

• Inside the PUC’s cost-allocation overhaul with Chairman Gleeson

• Why some large loads insist on paying their way

• Transmission takes a decade, load doesn’t

Related Posts by Texas Energy & Power

• Transmission Lines and Good Times, Reading and Podcast Picks

Transcript

Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. I’m really excited to have Cyrus Reed here from the Sierra Club to just talk about what it means to be an environmental group in Texas and kind of how they see what is going on right now. Cyrus has a PhD in geography from the University of Texas with a focus on water policy and the dispute over the Rio Grande Valley, Rio Grande water with Mexico. Prior to becoming the legislative and conservation director for Sierra Club’s Lone Star chapter, he served as Sierra Club’s lobbyist on energy and water quality issues during the ‘05 and ‘07 legislative sessions, and he directed the Texas Center for Policy Studies.

Cyrus Reed, welcome to the Energy Capital Podcast

Cyrus Reed: It’s a pleasure to be here.

Joshua Rhodes: I wanted to have this conversation. A lot of times on this podcast, at least for folks that I’m tuned-- that I talk to, we get real technical into, like, real details and stuff, but I wanted to kind of, like, take a little bit of a s- a step out, a little bit of a step back, start talking about kind of what environmentalism means in Texas, and then maybe we’ll get into some of the current issues right now and kind of like where Sierra Club sees that, where Cyrus sees that, if possible, these types of things. But I guess, like writ large, what does it mean to be an environmental group in Texas?

Cyrus Reed: I think it means being very flexible and being very nimble. So I work for the Sierra Club, which is a national organization. The mission is the same: explore, enjoy, protect the planet, basically, and then there’s a bunch of other things in our mission statement, but it’s basically that. So that hasn’t changed. The values haven’t changed. But how I work here in Texas is probably different than how I might work in New York and California. Texas has always been a very, call it a property rights state, one where, you know, we have a right of capture on groundwater.

Joshua Rhodes: Right.

Cyrus Reed: We have our own independent grid, as you well know, and we’ve traditionally resisted federal mandates and sometimes even money. So it means the approach, the methods, the narrative we use have to be a little different in Texas. But we are, at the end of the day, a grassroots organization. We have members, and a lot of what we’ve been trying to do in recent years is get those members more engaged at the legislature or at the Public Utility Commission so people aren’t in their own little bubbles, right?

Joshua Rhodes: Yeah.

Cyrus Reed: And they’re actually talking to other Texans about these issues ‘cause at the end of the day, there’s more that probably unites us on the environmental front than divides us. And by that, I mean, most people want clean air, clean water, affordable energy.

Joshua Rhodes: Yeah.

Cyrus Reed: And so I think there’s a lot we can do. We might not lead with the same message we would lead in California or New York, but I think the values and what we’re trying to achieve is largely the same.

Joshua Rhodes: Yeah, and so, like, it’s interesting, a lot of times when I talk to media interviews and a lot of folks are like, “Texas, you’re an oil and gas state. What are you doing with, like, you know, all these renewables?” I mean, I think of as of, like, the first half of this year, we got about a quarter of our electricity from wind and about 15% from solar. And, and you mentioned, you know- Resisting federal efforts during certain administrations to pick certain technologies or other types of things like that.

So what is it that Texas has done different that would maybe not have worked in New York or California, but we’ve still ended up with a lot of renewables?

Cyrus Reed: Well, I think part of it is that private property rights.

Joshua Rhodes: Yeah.

Cyrus Reed: The idea that people can do what they want with their land, because, and I think it’s been a benefit to us, we have an energy-only market that’s fairly competitive. I mean, I guess it’s not totally competitive, but it’s fairly competitive. It means it makes a whole lot of sense in our market, which is based on the lowest cost resources getting picked first, for private landowners to lease their land for wind, solar, and now even batteries.

And so I think because we have that system in place, we’ve been able to get to these, you know, amazing numbers. We talk about in a few years 40,000 gigawatts of wind, 40,000 gigawatts of solar. I think we’re near already 20 gigawatts of storage.

Joshua Rhodes: Right.

Cyrus Reed: My friends that work for the Sierra Club in places like New York are... You know, they’d love to see those numbers. They’re not seeing them. And so ironically, somewhat ironically, even though we don’t have the mandates some of those states do, we’re actually achieving as much or more.

Joshua Rhodes: I’ll let you take credit for it if you want to, Cyrus. I mean, that’s fine.

Cyrus Reed: I don’t know that I can take credit for that. I have been around a while, but I really didn’t start with Sierra Club until 2005. So I was involved in the RPS expansion, but I wasn’t involved in the original dereg bill. But I like to say a lot of our work has just been defending what we’ve achieved. And so even as the state has now moved away from any kind of renewable mandate, we no longer have a mandatory RPS. We’ve done away with additional transmission specifically for renewable energy like we did, you know, a few years back.

But now we’re just trying to defend that market to make sure it keeps going forward, because I would rather that we build resources, at least when they operate, don’t create air pollution, and don’t use water.

Joshua Rhodes: Yeah.

Cyrus Reed: Because we have problems with air pollution, and obviously we care about climate change as well, and we also have problems with water. So the more we can have our electrical system be carbon-free and not be a big water hog, the better for all Texans.

Joshua Rhodes: Yeah, it makes quite a bit of sense. We recently put out a podcast with John Davis, who’s a landowner kind of out in, out in West Texas. He’s got some wind on his farm. He’s also a former Texas legislator, I think around the time that you were talking, so maybe you might have interfaced with him back then.

Cyrus Reed: Yeah, I definitely know him. We know each other. Yeah, he’s a good guy.

Joshua Rhodes: Yeah, he, he talked about how Texas doesn’t have a binding r- renewable portfolio standard right now, but at one point it did, put in by, you know, the left-leaning George W. Bushes and Rick Perrys of the world, apparently. But it is interesting what, like, Texas has done since then.

Cyrus Reed: Yeah, it’s an amazing story, and we have other stories in Texas. We have an amazing program run by TCEQ, Texas Commission on Environmental Quality, called TERP, the Texas Emission Reduction-

Joshua Rhodes: Right.

Cyrus Reed: Plan. Hopefully I got the acronym right. Where we’ve used a little bit of kinda sales tax and fees here and there to put into grants that help get cleaner engines on the road, and that’s made... We still have lots of air pollution problems, but it’s made a huge difference, and we’re kind of a leader on the creation of that fund and the use of it to clean up our airports and our train stations.

Yeah, where freight comes in and out, and just the heavy diesel equipment, getting it off the road. So we have some examples in Texas of things we’ve done, usually by working with industry, you know, usually not against industry, but we have some example where we’ve achieved some great things.

Joshua Rhodes: Yeah. And so let’s, like, dig into a little bit of working with industry, working with policymakers. I mean, the Lone Star Chapter, you just released your 2027 legislative policy roadmap, you know, for the 90th legislative session. So, you know, what are the top two or three, you know, priorities in there that you see?

Cyrus Reed: I’m only laughing because I’m the person that works for the Lone Star chapter who has about 50 different ideas, and then

Joshua Rhodes: Okay.

Cyrus Reed: They have to try to rein me in. So you’re asking me two or three. I mean, what we really did is we put it into four buckets.

Joshua Rhodes: Okay.

Cyrus Reed: Clean, affordable energy, clean air and water and, you know, projections for communities, land conservation, and then really, uh, sustainable water and climate resiliency. So within those four buckets, there are lots and lots of things, but to me, given what’s happening right now, some of the most important are really protecting us from data centers, and I don’t mean because of what data centers do, I just mean because of the impacts they have on land, water, and energy use

Joshua Rhodes: Yeah.

Cyrus Reed: And potentially air pollution to the extent they use, uh, gas plants. So putting in some common sense protections for that. Like I think you do, I would really like to see our market evolve even more towards, uh, smaller stuff, so distributed energy resources I think would be really important. And then the other area that I think is very important is giving counties a little more authority on some land use issues, but also on things like building codes. Just generally-

Joshua Rhodes: Hmm.

Cyrus Reed: Having better buildings, ‘cause that’s gonna help us in all those areas. If we have better buildings, we use less energy, we use less water-

Joshua Rhodes: Yeah.

Cyrus Reed: And hopefully we don’t locate them in places that flood a lot or get a lot of hurricanes. And I think we would avoid the millions and billions of dollars that get spent after every natural disaster. So those are three things that I think are really important.

Joshua Rhodes: Okay. No, yeah, no, I, I totally with you there on the efficiency point. Efficiency was my, you know, first love getting into the energy space and in Texas. Can you pull this little thread on the local authority part? I guess when someone talks about local authority issues, the example that immediately pops into my head is, you know, back at the beginning of kinda the fracking debate when Denton tried to, I think it was Denton, tried to outlaw or outlaw fracking in the state, like came over the top of them. Is that, is that the kind of thing you’re talking about?

Cyrus Reed: Yeah. And then we were a part of that debate and, you know, I’ve sort of come around to the idea there has to be somewhat of a balance.

Joshua Rhodes: Got it.

Cyrus Reed: Right? You can’t give so much power to local government that they can’t allow any development, because that’s also going in the wrong direction. There has to be some sort of happy medium, and they’ve really pulled back on the authority of counties. The legislatures basically said, “Unless we give you specific authority, you can’t do stuff,” is basically where we are. And it started with HB 40, but they’ve gone much further through the years.

Joshua Rhodes: Okay.

Cyrus Reed: But we think on certain aspects it makes sense for counties to have more authority, and things like codes and standards. So not saying you can’t do development, but if you do development, you’ve gotta adhere to certain codes that a county could set or a local government could set. Things like impervious cover and keeping development out of flood zones. So it’s basically the idea is yes, private property rights.

Joshua Rhodes: Mm.

Cyrus Reed: You know, yes, if someone wants to develop solar or wind or storage on their land, they should be able to do so. But the county can have some authority to say, “Don’t put it right next to the river,” or, “If you’re gonna build it, use better technology to use less energy and water.” So things like that is where we see a sort of a happy medium.

Joshua Rhodes: Okay.

Cyrus Reed: We’re not an organization that’s been calling for bans and moratoriums. We’ve been calling for kind of more reasonable regulations on things like data centers or, for that matter, transmission lines, et cetera.

Joshua Rhodes: Got it. Okay. Yeah. We’ll get to some of the-- I mean, might as well go ahead and get into some of that now.

Cyrus Reed: It’s complicated.

Joshua Rhodes: It really is, ‘cause it’s like the electricity sector, you know, I’ve been talking about this for a while. I mean, there’s just so many things going on right now in terms of like load growth was already happening. We, you know, had decided we were gonna build these, these big 765 lines to electrify oil and gas operations out in the Permian and Delaware basins. That was also gonna open up some parts of the state for, you know, more resource, but for some like more solar regions and things like that. And then came along, we taught the internet how to talk and all my students how to cheat on their homework, and now AI and data centers are, you know, data centers are getting wrapped up in this like whole thing.

It’s like it, it just turbocharged everything and there’s some causation in there, but a lot of it’s correlation, but that’s hard for people to flag. It just feels like a really big mess right now that we’re all trying to swim out of here.

Cyrus Reed: Yes, and it’s been interesting for me. I was at the hearing two days ago, Senate Business and Commerce hearing, and hearing all the individuals who came to Austin, and many of them are very concerned about transmission lines, and I understand why, because some of them are actually gonna be impacted directly. But in folks’ mind, everything is causing another thing, right, as you said. So Oncor is building these transmission lines not to meet the needs of the state or the oil and gas patch. They’re really doing it, well, because they’re gonna get a return on the investment, but also because of data centers and because they want renewable energy.

And of course, Oncor is simply a transmission company. They’re-

Joshua Rhodes: Sure.

Cyrus Reed: Building a line that’s been approved by the PUC. Yeah. And you know, I can criticize Oncor about how they’re doing it and where they’re choosing to place it, all those things are true. But in people’s minds, all of these things have come together. There’s some correlation, but it makes it somewhat difficult to know how to respond when people are against data centers, transmission, and renewable energy. And our position has been more we need some reasonable regulations on all those things, but it doesn’t mean we should stop them.

Joshua Rhodes: Yeah. No, I mean, I think... Like, I get asked to go to town halls quite often actually to talk about data centers and their impacts on, like, electricity and water consumption and things like that. But I also feel this under-- We’re getting way off into the weeds here and maybe off into left field, but we’ll see if we bring it back. I also feel like there’s just this undercurrent of just, like, also what we’re building this kind of stuff for, for the AI itself. Like, a question I’ve been asked before is, like, you know, “Why would I want something to come into my, my community that’s gonna take all the energy, take all the water, and then create the thing that takes my kids’ jobs away?” Or something like that.

Like, I mean, there’s this other bit of it there too, I think, that is that folks are, right or wrong, are kind of, like, afraid of what the actual thing that the data center create is gonna do. Are you hearing anything like that either?

Cyrus Reed: Oh, all the time. And-

Joshua Rhodes: Okay.

Cyrus Reed: You know, again, there’s a kernel of truth in it. Some of these technologies could take people’s jobs, right? And so I understand the fear. And then, you know, you hear about AI being used for military applications where AI is gonna start doing decision-making instead of our soldiers or our captains. And so it is a concern that we’re creating something-

Joshua Rhodes: I feel like we’ve seen this movie before, right?

Cyrus Reed: Yeah, like we’ve seen this movie before, yeah. So I understand it. So I think taking our time a little bit and pausing some things isn’t the worst idea. I was glad when ERCOT, and again, we can debate the particulars of it, but I think the Batch Study process, I’m glad they’re doing it-

Joshua Rhodes: Okay.

Cyrus Reed: So that at least there’s a process in place-

Joshua Rhodes: Yeah

Cyrus Reed: And we’re vetting, you know, some of those large loads. And so they really have to start thinking, “Well, if I’m gonna put this money in and go through this process, is this just speculation, or am I really gonna build something that’s gonna last?” So I think getting those rules right, getting the rules right around who pays for transmission can help assure that the folks actually coming are in our benefit ultimately. So I don’t know if I answered your question, but-

Joshua Rhodes: I don’t really know if I asked a question on that one. It, there’s just a bunch of that kind of thing, uh, got that kind of thing going on. So-

Cyrus Reed: Yeah, and the other theme I was hearing the other day was almost we need to go back to not an ERCOT-wide deregulated market, but a vertically integrated regional approach. I mean, a lot of people are saying, “Why are we doing all this transmission and connecting everyone?”

Joshua Rhodes: Hmm. “

Cyrus Reed: Why not just build a bunch of local generation?” And that usually means from the folks that are saying this, gas plants-

Joshua Rhodes: Yeah.

Cyrus Reed: In the region where the demand is, and then we don’t have to worry about these things going back, back and forth. And that it is very expensive to do transmission, but it’s probably ultimately more expensive to try to do everything locally, right? So...

Joshua Rhodes: Yeah. I mean, kind of as we sit, right, I mean, one of the things that I was also keeping tabs on was, like, that’s basically SPP’s model, so the Southern Power Pool, the grid that operates, like, Oklahoma up to North Dakota above ERCOT.

Cyrus Reed: Yeah.

Joshua Rhodes: And they’re having some issues right now with, like, ERCOT just set new peak demand records and, you know, was charging batteries on net during the peak. We’ve built so much stuff. Given how that, like, it’s private companies doing it and, like, they’re taking risk in market and this, that, and the other, and I think it’s one of the reasons we have for almost 40 gigawatts of solar. And I was being asked, like, “Why doesn’t SPP have this?” I was like, “Well, but they’ve got, like, these little fiefdoms everywhere, and if you make a poor decision, then it’s on your ratepayers, and you get hauled before the Public Utility Commission or Public Service Commissions.

But in ERCOT, it’s like if someone builds a wind farm and it doesn’t work out super well for them, well, that’s on your shareholders. Tough luck, right?”

Cyrus Reed: Yeah, and if you looked at those days, the 90,000 gigawatt days, the records we hit last week, the prices were low. I mean, they were-

Joshua Rhodes: Yeah.

Cyrus Reed: 30 to $50 per megawatt hour, so they weren’t your traditional kind of peak, you know, 1,000, 2,000 type. So it’s pretty good news.

Joshua Rhodes: Totally. I mean, I think those days are gone. I mean, uh, peak demand and peak pricing in ERCOT got divorced last year or the year before because it’s the same sun that’s like heating up the buildings that’s driving the air conditioning use that makes the electricity in the solar panels. Because we can do a lot of this in West Texas too, we’ve got like a solar hour later, it really kinda helps.

So recording this on July 31st, you said you were at a, a meeting at the Capitol the other day, and I’ll put you on the spot a little bit. I’ll- if you don’t wanna talk about this, then that’s fine ‘cause you haven’t, you might not have seen it. But I just saw today a letter from Chairman Schwertner. At the end, he says, “Accordingly, I’m calling on the PUC to deny the existing CCN applications. Any reapplications need to take into consideration concerns raised during the hearing. Legislature will reform the CCN process next session.” So you were at that meeting. There’s like three paragraphs in that letter, and I just read you the last one.

I mean, so you were at the meeting. What are you hearing from this letter that just got released today as we’re recording this?

Cyrus Reed: What I’m hearing... Well, first of all, let’s not forget that we’re in an election season.

Joshua Rhodes: Fair enough.

Cyrus Reed: So there are elections in November, and there’s a, I don’t know if Schwertner’s up for election or not, but the governor is, and the lieutenant governor is, and this particular is- these two issues, data centers and transmission lines, are bipartisan issues in that particular people in those areas being affected, but also all over the state-

Joshua Rhodes: Yeah

Cyrus Reed: Are pretty pissed off that they’re seeing all of this growth. They’re seeing at least reports that electricity prices could go up a lot-

Joshua Rhodes: Yeah.

Cyrus Reed: You know, whether that’s directly caused by this or not, and at least they’re taking to social media and saying, “You know, even though I’ve been a lifelong conservative-” I’m thinking about, you know, sitting this one out or even God help us vote for a Democrat. And so I think the members are seeing this and they’re wanting to be responsive to their constituents, and a lot of

Joshua Rhodes: Yeah.

Cyrus Reed: Schwertner’s constituents were there. His area includes some of these areas that would be intersected by transmission lines.

Joshua Rhodes: Yeah.

Cyrus Reed: So I think he’s reacting to that, whether or not his letter asking the PUC to deny these CCNs, whether they can do that or not, I’m not sure. Legally, however, they could remand them. Well, they could reject them, but they could also remand them and say, “You haven’t... There’s some things that were done in this process that weren’t done correctly. There were a lot of people knocked out of the process. There was very little time for people to do things like discovery and cross-examination.” So they could say, “It was an unfair process and we wanna remand it on these particular issues.” So I think there are things the PUC could do, and it wouldn’t surprise me if some of this gets delayed.

Joshua Rhodes: Okay.

Cyrus Reed: There are also a lot of people calling for the governor to call a special session right now. That is probably unlikely to happen given we have, you know, early voting starts pretty soon-

Joshua Rhodes: Right

Cyrus Reed: In October, so it’s probably unlikely. But this would then allow the legislature to talk about this, about transmission while these projects get reconsidered or are remanded or whatever. So I’m not really surprised by it given, you know, you had 207 people who signed up to give public comments-

Joshua Rhodes: Yeah.

Cyrus Reed: Two days ago, which is pretty rare for an interim hearing. Generally at an interim hearing it’s just the suits, you know, the people who normally lobby.

Joshua Rhodes: Right.

Cyrus Reed: But at both this one and there was an earlier hearing involving data centers and on the House side, and again, data centers are water. Over 100 people came and signed up to speak at that hearing. So I think there’s general anger in rural communities who tend to, you know, vote Republican.

Joshua Rhodes: Yeah.

Cyrus Reed: And the Republican leadership is responding, and they’re almost looking for an out. I don’t think Schwertner’s letter says we shouldn’t build 765 lines or we don’t need transmission. He’s just saying, “Reject these so we can consider some reforms.”

Joshua Rhodes: Got it. Okay. Yeah, just full disclosure, I was involved in one of the dockets on one of these siting things. I think there was like 6,000 things submitted, and like, I think broke a record in terms of like, you know, the poor PUCT exchange thing. And CCN stands for Convenience Su- Con- Certificate for Convenience and Necessity, right? That’s something that, like, the Public Utility Commission has to grant the transmission service provider in order to be able to get a regulated rate of return on that asset. Is that right?

Cyrus Reed: That is correct.

Joshua Rhodes: Okay.

Cyrus Reed: Every transmission project has to go through a process. Some of them require a CCN, some don’t. The larger ones generally do.

Joshua Rhodes: Okay.

Cyrus Reed: That creates another process, and one thing the legislature did is they passed a law saying all this has to occur within 180 days, and that is probably part of the problem in these cases. The transmission lines are so long-

Joshua Rhodes: Yeah.

Cyrus Reed: And it’s so complex with multiple potential routes that I think people are having a hard time even really participating, as you noted.

Joshua Rhodes: And that was based on HB 5066, right? Like, that’s where all of that’s coming from, right?

Cyrus Reed: I can’t remember if the 180 days was in that bill or another bill, to be honest. But yes, there was legislative action that session to make all of these transmission decisions fit within 180 days. And that may be fine for a 345 line or a 69... You know it. But these are really complex, these huge lines.

Joshua Rhodes: One of the things I remember, I think was in the analysis, is like if they decided to go the 345 route instead of the 765, it was actually more lines, maybe more right away, I don’t know, more fights.

Cyrus Reed: Yeah, I mean, honestly, the Sierra Club position, I don’t know that we opined on these particular lines.

Joshua Rhodes: Sure.

Cyrus Reed: But on the whole idea was 765 actually makes more sense. It actually leads to less land degradation and more efficiency on those lines. So it does make sense.

Joshua Rhodes: Yeah.

Cyrus Reed: Then there’s the question whether this particular process was fair, and we did file some comments in one of the cases and just say, “Hey, Oncor, why didn’t you just look at going a little further north along the existing highway instead of, you know, really cutting over the San Saba River nine or 10 times?” And, you know, it’s pretty complex terrain up there.

Joshua Rhodes: Yeah.

Cyrus Reed: So I think we’re actually for 765 lines, but this probably some routing and better public input should be considered.

Joshua Rhodes: Yeah. How do you-- I mean, if you don’t wanna opine on this, that’s fine. I’m just curious, like, I mean, one of the things that I see about the Texas miracle in particular is every once in a while, like we’re willing to build big tranches of like infrastructure that allow the economic engine to run. And one of those is we built the CREZ lines not only to get wind, but that also electrified oil and gas operations. The STEP line or the 765 lines, nominally to electrify oil and gas operations, but it’s gonna unlock a lot of like solar resources and just generally overall connect the state a little better.

I mean, it seems like to me, having more that infrastructure would help like the Texas grid be cleaner, also is probably gonna mean more like oil and gas extraction, maybe for LNG exports or other types of things like that. I don’t know. How do you see threading that needle with this infrastructure?

Cyrus Reed: I’m having a hard time-

Joshua Rhodes: Yeah. Yeah, me too,

Cyrus Reed: Man ... To be honest, because like you said, what’s it for? If at the end of the day it’s for data centers and AI, and they do lead to job loss, then is that a good thing or not? But I guess I have to go with, we can’t actually totally control the future and all things being equal. Having a more efficient, bigger grid is probably better for consumers-

Joshua Rhodes: Yeah

Cyrus Reed: In terms of the cost, as long as we can get the transmission part of it worked out so it’s allocated fairly, that’s probably better for consumers.

Joshua Rhodes: Yeah.

Cyrus Reed: And then I go back to y- your first love and mine, which is efficiency, which is if at the same time we do this big stuff, we can also do things on the smaller end, make sure that consumers who want can get access to on-site solar, on-site storage, or-

Joshua Rhodes: Yeah

Cyrus Reed: Make their houses more efficient or participate in demand response. Those are ways that consumers can participate, and also hopefully that would lead to less need for really big power plants, which then can have other impacts. So I’m for the big stuff and the small stuff, and I’m not sure quite how to thread that needle.

Joshua Rhodes: Yeah.

Cyrus Reed: But at the same time, as a grassroots environmental organization, we do care about process and making sure that there’s transparency, and people who want to contest permits can do so, whether that’s an environmental permit or a CCN, that’s important to us. So it’s not that we just wanna build stuff as fast as possible with no public transparency. We want the public transparency too.

Joshua Rhodes: Okay. So for this process in particular, like what do you think that would look like, if you’re willing to opine on that?

Cyrus Reed: So one thing, and I’m really reacting to the testimony I, I heard because I wasn’t involved in these cases, is There were a lot of people who came and said their map didn’t show my residency, or their map didn’t show the school I built, or the particular kind of terrain or the karst Edwards Aquifer, Trinity Aquifer, I might be getting my words wrong, wasn’t recognized. And I think a lot of this was done aerially with satellite imagery or drones, and there wasn’t a lot of ground testing-

Joshua Rhodes: Okay.

Cyrus Reed: As they looked at these routes. So I think requiring some actually kinda truth testing on the ground is important, and maybe being a little more flexible and allowing folks like Oncor, LCRA to have a wider swath of land they can look at, so-

Joshua Rhodes: Okay

Cyrus Reed: Not necessarily always going the straightest line, but also if there are existing highways with right of ways or other infrastructure that you could easily follow and therefore you’re not degrading as much new land, I think that would be important. And then just generally making it easy for people to participate and clearer. There were people who were knocked out of this case because they filed their protest, they said, “I wanna intervene,” and maybe they put their reason for intervening at the same time, and they were actually supposed to do it, you know, a week later.

Joshua Rhodes: Oh.

Cyrus Reed: But they were knocked out because they didn’t correctly follow the procedure. So I think some general education for people, including videos maybe in some cases, not everyone reads every word, right? You know, is gonna be important.

Joshua Rhodes: Terms and conditions.

Cyrus Reed: Yeah. Maybe allowing also county governments to get more involved in the process, saying they’re... If you’re a county government official or, you know, a groundwater district, you have the ability to also opine or enter as a party, I think could be helpful, ‘cause they’re representing multiple constituents, and they’ve gotta look out for the betterment of their county as well and what, how they want it to develop. So there are some things that can be done.

Joshua Rhodes: Okay.

Cyrus Reed: The other area, you know, I think we probably share this is, making it so utilities have to look at all alternatives, and by that I mean, and I don’t know if there’s an alternative to 765, that’s a big line. But some of these distribution lines, et cetera, making sure they’re looking at non-wires alternatives. Are there things we can do on distribution or through demand response or through locating storage in certain places? Can we avoid the need for building new lines or delay them? Or can we do reconductoring or use grid-enhancing technologies? Are there... Can we put that into our process at the front end so we’re not always going for the biggest thing that we think is needed and maybe it’s not?

I don’t know if that affects the 765, but the smaller stuff, it certainly could help.

Joshua Rhodes: I’m all for wringing every single megawatt out of all the capacity and things like that that we do build. But at the end of the day, if we need to build these lines, they’ve gotta go somewhere. We’re probably not gonna make-- Not everyone’s gonna be happy.

Cyrus Reed: Not everyone’s gonna be happy.

Joshua Rhodes: Yeah.

Cyrus Reed: Yeah, but if the one that’s going through the Devils River and that area, if we could put it along I-10, that might be better. I’m gonna draw a blank on the other highway, the one that’s going from Bell County out west. There’s a highway that’s being built a little north of there. Now I can’t remember which highway it is. I mean, there are some options they could look at. It just may not be the cheapest option or the most direct, but it might avoid a lot of that land.

Joshua Rhodes: Got it.

Cyrus Reed: And people’s ranches and homesteads.

Joshua Rhodes: Okay. So he talks about, we talk about transmission lines. We’ll talk about the other favorite topic, everyone, for a minute, for, uh, data centers, the two things that unite us all now, as you mentioned. So there’s also 400, or 90% of 400 gigawatts worth of large load that’s trying to connect to the system that are data centers. It’s one of the reasons why ERCOT’s setting up this Batch Zero process, which we’ve done a couple episodes on this podcast trying to explain and trying to figure out. Well, actually, before we get to data centers, I just had a thought. Like, if the 765 stuff gets delayed, this may mess up the Batch Zero process.

Cyrus Reed: It could.

Joshua Rhodes: Yeah.

Cyrus Reed: Because if you remember that Batch Study process, the study is, I guess, just beginning, but it’s supposed to come out next spring, and it’s really pretty dependent on building these lines or them being in service by-

Joshua Rhodes: Yeah

Cyrus Reed: 2031 or whenever, right? So yeah, that could mess that up. I’m sure there’s a lot of people who work for data centers who are very nervous right now.

Joshua Rhodes: Yeah. As we’re recording this on July 31st, that letter just came out today, so we’ll see how that plays out. But yeah, I mean, you know, the Batch Zero process is supposed to end up, if the numbers are still right, like a plan to the regional transmission group at the end of 2027, and then there’s like a five or six-year build-out process, which easily crosses into the 2030, 2031, where, which, which is when a lot of these, you know, 765 lines were supposed to be in service. That’s a lot of transmission to have to take out of a study, and that probably means a lot less large load is able to make it in.

So let’s stick with that thread a little bit, though. So the process around transmission lines, the other thing that is... For the 765 lines, the data centers came later, but they’re kind of all mixed in it together now. Like, one of the things that’s really surprised me is it feels like that the data center companies are not making a very good case for their value proposition. You’ve got leadership at Anthropic saying this is gonna take a bunch of white collar work away. Things like that. Like, which is not helping, like the general angst and, and anxiety around that.

But like, I’ve been shocked at how bad those companies have been in terms of like doing PR around this. I mean, maybe they’re doing stuff in the background that I don’t know of, but like, I mean, what are you feeling from like the folks that the Sierra Club, you know, talks to about data centers?

Cyrus Reed: Yeah, I mean, one of the things that is really pissing everyone off is just the lack of information.

Joshua Rhodes: Okay.

Cyrus Reed: And so A data center comes to a town or a county, there doesn’t tend to be a lot of information about it. Sometimes the information is later leaked, or they sign a non-disclosure agreement because they’re gonna get some sort of incentive from the county or city, so they sign a non-disclosure agreement. That really pisses people off ‘cause then they’re like, “We can’t even know who the company is, where the water’s gonna come from, where the energy’s gonna come from.” And so it creates -- whether they would want it anyway, they may not want it in their community anyway, but it just creates a lot of bad PR for them and just bad practice.

And we have a lot of members, you know, we have 20,000 members in Texas, and some of them are involved in fighting data centers in their communities.

Joshua Rhodes: Yeah.

Cyrus Reed: Whether that’s in, you know, Round Rock or up in the Fort Worth area, and they’re very upset by not having basic information, and then when there are these kind of public meetings, feeling like they’re being lied to or the full truth isn’t being given to them. So yeah, I think data centers and AI companies, for whatever reason, they may not have good community relations or know how to do community relations. But there’s probably some exceptions. I saw that, you know, the gentleman from Google that works here in Texas came to the hearing and mentioned some of the investments they’re making, and I don’t know if people are excited about their data centers or not, but-

Joshua Rhodes: Yeah

Cyrus Reed: At least they’re talking to the community about, “We’re gonna make these investments. We’re gonna do this training for folks.” But I’m not seeing that from most AI or data center companies.

Joshua Rhodes: Yeah. No, I mean, I think one of the, another podcast, I think it was Energy Empire I was listening to, or one of Jigar Shah’s podcast, he’s always railing also about, like, how bad like these hyperscalers are, have been in terms of PR. And he’s basically says like, “If you’ve gotten to this point where you screwed it up this much, you just gotta start paying people off.” What he means by paying people off is like investing heavily into the community.

I mean, just tossing ideas around, like putting solar and storage at everybody’s house, so they have like backup if the grid goes down or something like, and just paying for it. I mean, just maybe getting Base Power just bankrolled in for the next few decades or whatever to like do that kind of thing.

Cyrus Reed: I mean, it’s in our legislative platform, that idea that if we truly, and the governor did his letter to the PUC and said residential rates should not go up, they should go down.

Joshua Rhodes: Yep.

Cyrus Reed: But if we’re really gonna do that, we almost have to put some sort of a mitigation, either require them to do a community benefit agreement or put some sort of a mitigation fee, and I don’t know if it’s upfront or annual, that kind of pays for the water use or the energy use or the potential increase in costs by investing directly into the community. So that may be something the legislature should look at.

Joshua Rhodes: Yeah.

Cyrus Reed: If you wanna come to Texas, not only do you have to meet these interconnection standards, you’ve gotta do some investments locally that will mitigate against your natural resource use. And that, I think, would be a way... And maybe we leave it up to them. You can either do a community benefit agreement with, with local government-

Joshua Rhodes: Yeah.

Cyrus Reed: For X amount of money, or we’ll just charge you, and we’ll put it into state agencies that do the same type of things. So that could be a way to kind of force them to come to the table to communities.

Joshua Rhodes: Yeah, to keep environmentalisms going. So more than leave no trace, you know, like leave it better than you found it.

Cyrus Reed: Yeah, leave it better. Well, not environmental, that’s just basic Boy Scouts and Girl Scouts. I don’t know if you’re involved in scouting. But yeah, it’s, you know, leave it better than you found it. But it goes back to 1892 and John Muir and trying to protect the mountains and the vi- vistas, you know. In that case, we were the original Sierra Club founders were trying to prevent all these lands from just being dammed and overtaken, and protect it in some way. I don’t know that we can do that-

Joshua Rhodes: Yeah.

Cyrus Reed: In Texas right now. I mean, we did put some money into state parks. But there’s a lot of-

Joshua Rhodes: Yeah.

Cyrus Reed: Land that is obviously gonna be impacted by this development, so we might as well try to mitigate some of it.

Joshua Rhodes: Yeah, totally. And like if you don’t have any examples off the top of your head, that’s fine. But I was like, I’m just curious, when you’re talking to your members, particularly those that are kind of pushing back against data centers or other types of things like that, I was like, do you have a feel for like, I wouldn’t use the term buy them off. Do you have a feel for what your members would say, “Oh, that’s a good deal. Okay, I can accept this because of this other thing that I’m getting”?

Cyrus Reed: I do think it’s investments in the community.

Joshua Rhodes: Okay.

Cyrus Reed: The other thing that concerns us and concerns a lot of our members is, and it probably the thing we’re most concerned about honestly from data centers, is where they’re gonna get their energy from.

Joshua Rhodes: Okay.

Cyrus Reed: And if it’s building a bunch of new gas plants, it could mean all the efforts we’ve had all the, I’d say the wins we have in decarbonizing our market-

Joshua Rhodes: Yeah.

Cyrus Reed: At least here in Texas, would start to go the other direction. And some of the talk really concerned me the other day at Business and Commerce because they were saying, “We need to put more incentives into building gas plants, or we need to require them to bring their own generation, and they need to be gas plants.” Now what that means, if we’re requiring them to bring their own generation and then that generation is not interconnected, it means that’s just gonna run full blast locally and probably pollute a lot more, and, you know, we’re involved in some lawsuits on this. But we’re seeing some data centers just put lots of small engines-

Joshua Rhodes: Yeah

Cyrus Reed: Sort of next to each other, backed by diesel generators to back up that power, and running a l- probably a lot more than they should. Frankly, they’re using kinda some loopholes to say these are minor permits when the total amount of pollution is probably would make it a major permit and would mean you would need much better control technology. So I mean, I’m pretty concerned, a lot of our members are concerned just by that, that these data centers will come-

Joshua Rhodes: Hmm.

Cyrus Reed: And have local generation that will ultimately pollute folks. We would rather they get-- invest in bring capacity by investing in things like energy efficiency programs, and if they wanna also, you know, build cleaner energy sources that feed into our grid, that helps clean up the grid, and then they’re getting some of that energy. So that would be a far better outcome from our perspective.

Joshua Rhodes: I know. It’s, it’s a sticky problem, right? ‘Cause if you don’t want local generation, if you’re wanting to build the best wind and solar resources, that means transmission. That was part of our first conversation. You know, it’s like it’s not probably a tough seat to be sitting in sometimes there when you’ve got... For you.

Cyrus Reed: It is a tough seat. You know, I gave public testimony the other day, and I told the senators who are most in favor of base load, I said- It’s probably a mistake on my part, but I said, “I don’t think the answer is more base load power, big gas plants. We need flexible generation and we need flexible demand.”

Joshua Rhodes: Yeah.

Cyrus Reed: You know, we should try to incentivize that, and that should lead to a, also a cleaner environment.

Joshua Rhodes: Got it. Okay. So maybe this question will come back to kind of what we’ve been talking about. One of my favorite stories that I sometimes tell, it involves the Sierra Club. It’s not the Texas Sierra Club, but like in Georgia, I believe, the Sierra Club and the Tea Party got together one time to form the Green Tea Coalition to push for the ability to get rooftop solar in Southern Company’s area.

I think Southern Company just gave up. They’re like, “Okay, if we got the Sierra Club on, and holding hands with like, you know, the Tea Party right now, we just cry uncle. We’re done. There’s no way we can fight that coalition.” I was curious if in kind of the world in Texas or in Texas, like if you have what you would call like some interesting coalitions that you’re willing to-

Cyrus Reed: I do. I do know the folks in Georgia that were involved in that. In fact, we... Sierra Club gave an award to the kind of the volunteer who helped lead that effort.

Joshua Rhodes: They should have, yeah.

Cyrus Reed: He’s a good old boy in Georgia, yeah, because that was so successful. Now they had a common enemy which is Southern Company. That made it probably easier. You know, we’ve seen similar on things like making permitting easier for on-site solar and storage. We’ve had some similar coalitions in Texas. I’m not sure they’ve been as high profile. But then I think the other issue just a couple years ago when they did the PUC Sunset Bill, it was interesting for me to be on the same side as the Texas Association of Manufacturers, the Texas Chemistry Council, and TXOGA, the Texas Oil and Gas Association, and we were all saying, “Don’t change our energy-only market by adding some sort of a capacity type payment,” and that was then known as the PCM.

And so we all came together-

Joshua Rhodes: Okay.

Cyrus Reed: Worked pretty closely with leadership both in the Senate and especially the House to really push back against that idea.

Joshua Rhodes: Okay.

Cyrus Reed: And so I remember Todd Hunter stood up on the floor of the House. He had the main bill on this, on kind of energy market reforms, and he said, “I can’t believe it. I’ve got Todd Staples with TXOGA and Cyrus Reed with the Sierra Club on the same page supporting my bill.” He said, “I had to reread the bill just to make sure I was still for it.” But the point was, we were both against increasing cost to give extra payments to generators

Joshua Rhodes: Yeah.

Cyrus Reed: In this case gas generators, not because TXOGA’s anti-gas. They aren’t. They’re pro-gas, but because they’re pro cheap electricity, and so that’s an area where we did that. And we had a similar, uh, deal last session. We worked with the Home Builders and again, the Texas Chemistry Council to pass a bill. Now, the bill doesn’t do much. It just says SECO, the State Energy Conservation Office, should look at the latest energy conservation codes for new construction and consider whether to adopt them ‘cause they’ve been stuck, frankly, on standards that are 10 years old.

Joshua Rhodes: Yeah.

Cyrus Reed: And so we’re still waiting for the rulemaking, but it was a nice moment where the builders, the folks who make the products like insulation, the builders in the Sierra Club all said, “We at least need SECO to look at this and raise the standards on new construction in Texas,” because that should ultimately, again, save consumers money and also to help sell those more efficient products. You know, we’ll see if they actually adopt those codes, but that’s an area. So sort of unlikely allies.

Joshua Rhodes: Yeah.

Cyrus Reed: But I do think there’s a lot more we can do with conservatives on the idea of energy independence and being able to do what you want in your own home or on your own property-

Joshua Rhodes: Yeah.

Cyrus Reed: Be that on-site or even large scale solar and wind and storage. There’s more to be done there.

Joshua Rhodes: Awesome. Last question. We’re coming into an odd year, so you know, it’s always odd when the, uh, Texas Legislature meets, but we’re coming into an odd year. So, you know, if you could get one plank of your 27 platform enacted and had to sacrifice the rest, like which one would it be?

Cyrus Reed: One is hard.

Joshua Rhodes: I’ll give you a couple. Okay.

Cyrus Reed: Okay, I’ll do two. I think one is that mitigation fee idea.

Joshua Rhodes: Okay.

Cyrus Reed: The idea if data centers are gonna come, let’s make sure they invest in the local community. I think that would go a long, a long way. The second is, and this is something you’ll like, again, if we can get a real... You know, right now we’ve got, I’ll say, a small market and aggregated distributed energy resources. If we could really make that big-

Joshua Rhodes: Yeah.

Cyrus Reed: And enable a lot more consumers to get involved, I think that will help on all these things. It’ll mean less need for transmission, it will mean we’ll have a cleaner energy grid, and it will make ultimately everything cheaper for consumers. So I think those two things are what I’d like to see.

Joshua Rhodes: Awesome. I think that’s a good place to stop. Cyrus Reed, thank you for coming on the “Energy Capital Podcast.”

Cyrus Reed: Appreciate it.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

New Texas data center projects frozen until state audits them | Texas Tribune

This week’s big story is Gov. Abbott’s announcement of a pause on data center approvals.

Abbott’s letter to the PUCT and ERCOT directs them to conduct the audit on all data centers advancing through ERCOT’s interconnection queue, or the line for energy intensive projects seeking connection to the electric grid. ERCOT is currently tracking more than 1,800 projects in the queue, representing over 474 gigawatts of electricity, or more than five times the grid’s record for peak demand, according to ERCOT. Approximately 90% of the new power requests are data centers, Abbott said…

It is unclear how long the audit will take, but the effort is Abbott’s strongest effort yet to slow the development of these data centers statewide and underscores how little information members of the public, including state leaders, know about the facilities.

The order comes on the heels of the finalization of ERCOT’sbatch zero process, designed to make large load connection, primarily from data centers, easier. The batch zero process has since been delayed.

Texas data center pause puts 20% of US pipeline at risk of delay: Bloomberg NEF | Utility Dive

Analysis from Bloomberg NEF estimates the financial implications of the data center pause could be far greater than expected, risking huge losses to the total U.S. data center pipeline.

“Delays in energization over this period could thus put billions of dollars of data center leasing revenue at risk,” BNEF said. The firm’s analysis estimates AI computing capacity can earn around $1.76 billion per gigawatt per month.

“The implied revenue at risk for data centers runs into many billions of dollars if interconnection policy changes in the next term,” BNEF said.

Read more

The same model is going into a municipal utility’s fleet in Utah, an islanded truck depot in Los Angeles, dairy digesters in California, and data centers. It is still a gas-fired resource. The flameless reaction suppresses nitrogen oxide emissions, and the technology emits less carbon dioxide by virtue of using less fuel than natural gas-fired turbines.

In ERCOT, the product may arrive at a time when demand for power is rising among large loads and the grid operator is regulating growth. However, generation on a customer’s own site operates outside the new ERCOT rules. Gordon does not see his product as a substitute for building the grid, and he says the answer is both.

On this week’s Energy Capital Podcast, Matt Boms talks with Craig Gordon, head of business development for Mainspring, who heads global policy and regulatory affairs at Mainspring after 12 years at Invenergy. The conversation covers:

• How a linear generator works, magnets driven through copper coils 13 times a second, with no flame, water, or oil.

• Where the units are going, a 48 megawatt project for a Utah municipal utility and a Los Angeles depot charging 96 electric trucks with no grid connection.

• What it burns, natural gas today, with dairy and landfill biogas running in California at small scale. .

How much of ERCOT’s queued load ends up served on site rather than through the grid will shape what Texas has to build.

Timestamps

• 00:00 – Introduction and Guest Background

• 00:40 – From Ameren to Invenergy to Mainspring

• 03:43 – What Mainspring Builds and Why It Matters

• 06:19 – How a Linear Generator Works

• 08:39 – Why Customers Are Generating Power Locally

• 11:02 – Data Centers, DERs, and Grid Investment

• 12:16 – Ramping and Efficiency vs Engines, Turbines, and Fuel Cells

• 14:27 – UMPA's 48 MW Project and the Prologis Microgrid

• 17:28 – Maintenance, O&M Hubs, and Field Lessons

• 18:39 – Fuel Flexibility, Biogas, and Hydrogen

• 20:36 – Scaling to Hundreds of Megawatts, and Islanded vs Grid-Parallel

• 25:37 – ERCOT's Cluster Study and the Interconnection Queue

• 29:21 – Policy Barriers, Air Permits, and Behind-the-Meter Value

• 33:57 – Linear Generators in 10 Years

Resources

People & Organizations

• Matt Boms (LinkedIn)

  • Energy Capital (LinkedIn)

• Craig Gordon, Head of Global Policy and Regulatory Affairs, Mainspring Energy

  • Mainspring Energy (Linear Generator)

Company & Industry News

• Utah Municipal Power Agency Selects Mainspring for 48 MW Local Power Generation Project

• Mainspring Appoints Former Cummins Chairman and CEO Tom Linebarger as CEO

• PUCT Approves ERCOT’s Batch Zero Process for Connecting Large Electricity Users

• ERCOT’s large load queue jumped almost 300% last year

Books & Articles Discussed

• Performance Team and Prologis Launch New EV Truck Charging Depot, Powered by the Nation’s Largest EV Truck Microgrid

• Base Power partnership to mitigate price spikes, load peaks for South Texas co-op

• Xcel Minnesota proposes first-of-its-kind distributed capacity procurement

• Planned Texas data centers could emit significant pollution

• Innovation and Investment in ERCOT: Recorded Live from GCPA

Transcript

Matt Boms: Welcome everyone. Today we’re joined by Craig Gordon of Mainspring Energy, where he leads business development and policy and helps advance the company’s fuel-flexible linear generators. Craig brings more than two decades of power sector experience spanning utility operations, power trading, renewable energy development, and public policy. Before joining Mainspring, he spent 12 years at Invenergy and previously worked across several areas of Ameren. Craig, thanks so much for joining us today

Craig Gordon: Thanks, Matt. Happy to be here. Looking forward to the conversation.

Matt Boms: For sure. Well, I wanna start with your origin story, and if you can take us through a little bit of your experience and how you ended up at Mainspring. I love starting off these conversations with that because I think folks are just interested to hear how people got to where they are today.

Craig Gordon: Sure. I mean, it’s all by accident, of course. That’s how life goes. So I fell into the energy sector after finishing an MBA at WashU in St. Louis, and then it just so happened to coincide with the implosion of Enron and a lot of additional scrutiny on energy players, utilities, trading, et cetera. So I landed into a credit risk management role at Ameren St. Louis, and I did that for a couple years and realized that risk management’s cut out for some people, but I’d rather do other things, like be on the other side of the business equation and actually trying to get new things done. So I transitioned over to power trading on the unregulated side of Ameren and then worked my way up the desk, ultimately becoming a power dispatcher, then long-term power originator marketer. During that, the last couple years there, I was the person at the unreg side that was getting involved in renewable policy in Illinois. The RPS had just been passed, and, you know, there was obligations for the company to comply with that on the retail side. So I was the green guy, if you will, at Ameren. That’s where I was introduced to large scale wind, and that’s where I was introduced to Invenergy. And, you know, long story short, I ended up joining Invenergy because I was not able to actually win PPA at Ameren at that time. So I thought, well, I would just make the leap over, start doing renewables instead of what I was doing there at Ameren. And then 12 years later, lots of water under the bridge, lots of origination activities. We did the first, you know, renewable PPAs with corporates. You know, we did Google in 2015, Owens Corning, Equinix, a handful of, you know, those corporates. Some were physical PPAs, some were virtual PPAs, but I was running the sales and marketing team when we did those back in 2015. And then, you know, I also got involved in the policy side, state and federal policy, and by the time I was leaving Invenergy, I was leading the whole thing, and really with a focus at the time in 2022 of, you know, working with other industry companies, pure companies like the NextEras, the Clearways, the Intersects of the world to actually pass what became the Inflation Reduction Act in the summer of 2022. That’s how my stint at Invenergy ended, and I had been recruited actually to Mainspring by a former Invenergy colleague. It was at that time when Senator Manchin was on the fence as to whether or not he was going to actually move forward with the reconciliation bill that would become the Inflation Reduction Act. When he was leaning no, that I was being recruited, and I was like, “Well, man, I’d like to join this startup because their technology looks really cool.” So, I made the switch right as the IRA was being hashed out, and it became law the second day I was on the job at Mainspring, and I’ve been here almost 4 years since.

Matt Boms: That’s awesome. And I wanna jump into Mainspring and help unpack the technology for our listeners. When-- Listening to you talk about the IRA just makes me feel like that was eons ago. It’s just unbelievable how the time flies by. Can you help us understand the technology and, like, for someone encountering Mainspring for the first time, what does the company make, and why does it matter?

Craig Gordon: So for someone who hasn’t heard of Mainspring, and hopefully there’s just few people left at this point. For those who haven’t heard about Mainspring, what we’re actually doing, we’re building probably the most innovative piece of power generation that’s been invented in the last 50-plus years. So several decades have passed since something as interesting and category-changing as a linear generator has come to market. So, it’s this thing called a linear generator that we’re building, and it’s a fuel-flexible, f- providing firm power. It’s local, but it also has the efficiencies of large-scale utility assets like peakers, engines, aeroderivatives, better than aeroderivatives. So, uh- We’re kind of just entering the moment now of coming to market over the last 5 years, introducing our generation to a power sector which has largely not seen a whole lot of change, with the exception being wind, solar, and storage, over the last 50 years. So everyone’s very familiar with nuclear and coal and gas. Well, our category of power generation is also runs on gaseous fuels, but it can run on natural gas, it can run on hydrogen, it can run on biogas, it can run on propane. So our technology is actually fuel agnostic, which really separates us from other types of generation available in the market today.

Matt Boms: So was that the gap that Mainspring was designed to fill, Craig, back to its origin? Was it the versatility of having really any of those fuel sources that you mentioned?

Craig Gordon: I’d love to go back and get in the heads of the founders when they were first putting the technology, working on the technology, making it come together. I don’t know what they were thinking this was going to solve, but I’m pretty sure they were thinking, “This thing’s really cool.” And as they continued in the development cycle of the technology, they probably learned, “This thing can run on multiple fuel types. This thing is fully dispatchable. This thing actually can provide firm power, or it can provide backup power, or it can do anything in between.” It’s like, I don’t know that they fully understood at day one how powerful the technology was ultimately gonna be.

Matt Boms: Yeah. Well, when you say linear generator, I wanna break that down. If you’re talking to a smart high school student, how would you explain linear generator?

Craig Gordon: Okay. Well, I’m gonna break it down really simple, maybe too simply. A linear generator is just passing a magnet back and forth through copper coils. Back and forth. That’s all we’re doing. So if you take away all the mystery, the, you know, peel away the box, ultimately what we have are two translator tubes or oscillators which go back and forth 13 times a second. They have magnets attached to them, and they’re gliding back and forth inside of copper coils, and that movement is what induces electricity. You know, it’s hard to break it down any more than that. It’s pretty simple.

Matt Boms: I think you did a great job. And what were the technological advances that made the design commercially possible today?

Craig Gordon: So the cost of power electronics has really decreased over the last 10 to 15 years, and it’s really the combination of power electronics that are used in EVs, they’re used in solar and BESS, is the decline in cost of those plus, you know, the advancements in software that our software engineers were able to kinda build over the power electronics is really what enabled Mainspring’s linear generator to be the generator that it has become, which is pretty robust. The idea of having a linear generator has existed for decades, but the challenge with the concept and the reason why no one else could figure it out, you know, decades ago, was because the capability of marrying software and power electronics to really control the location of these oscillators with respect to each other in time and space. So if you think about it, you know, these oscillators really have to come together perfectly every single cycle, or they’re gonna get out of sync, and then the whole process falls apart. So our power electronics matched with software really control with a high degree of precision where these oscillators are with respect to each other, with respect to the reaction chamber where the magic happens, where the force is created, and basically that’s what we’re able to do that no one else was able to do beforehand.

Matt Boms: It’s really interesting, and I’m wondering what has changed in the market that makes customers more willing to generate their power locally because this is a trend that we’re seeing across a bunch of different technologies, right? Like not just linear generators. In your mind, is it just costs coming down, or is there something else happening?

Craig Gordon: Well, clearly, you have the cost of new technologies coming down. You know, we’re trying to rapidly bring down our cost of production year over year, so we’re becoming more and more economic. In fact, actually today, we’re probably a less expensive power purchase than a brand-new combined cycle. If you imagine a linear generator that, you know, fits in a box 20 feet long, 9 feet tall, 9 feet wide, has efficiency comparable to a massive combined cycle power plant, and we’re cheaper today, like, that’s pretty remarkable for a company that’s only been commercial for 5 years. What’s really opening the doors for us right now is the fact that, well, all those large combined cycles are already sold for the next 5 to 7 years, and if a customer needs power next year because their load is growing, their utility is likely not able to provide that extra capacity because the demand, the generation is already spoken for. So the fact that we have a pretty big mismatch between supply and demand right now is the perfect opportunity for Mainspring to come right in and fill that gap.

Matt Boms: Yeah.

Craig Gordon: And it just so happens that we do it very economically.

Matt Boms: Yeah, it’s an added benefit for sure. So does Mainspring, in your mind, are you solving a capacity problem? Is it a timeline problem, or is it a resilience problem, or is it just a mix of all three?

Craig Gordon: I mean, right now, it’s timeline and capacity- Mm-hmm ... for sure. Those are the first two. Like, you get resilience thrown in for free with us. Most of our projects aren’t just single-unit deployments or installations. We’re gonna have tens or dozens or hundreds of these things at a particular project site. So you’re getting capacity, you’re getting dispatchable capacity. You know, in the case of a data center, for instance, that needs three nines reliability, it’s very simple math for us to just say, “Okay, you have a 100 MW load. You need three nines or five nines reliability. We’ll just add a few more megawatts to the 100 MW, and we can guarantee you 100 percent uptime 100 percent of the time.”

Matt Boms: Yeah. No question. I’m happy you brought up data centers ‘cause-

Craig Gordon: And we can do it faster.

Matt Boms: Speed to power. And the data center thing, I wanna ask you about this because sometimes when we talk to backup generators or DER companies, it sounds like the argument is maybe we don’t need to invest as much in the grid because you have these new technologies for on-site power. How do you see that dichotomy of not presenting this as either/or, but it’s like we need to invest in the grid, and at the same time, we have these really innovative companies like Mainspring that can show up and power these businesses at a time where it’s really hard to get power?

Craig Gordon: Yeah. We’re not on any crusade that, you know, is out there to champion distributed resources over and above, you know, grid investments. I think it is a both/and. The grid needs to be reinforced. There needs to be large-scale capacity that’s added to it, and at the same time, you have very specific near-term needs that aren’t going to be solved with a 5- or 10-year grid investment plan. So we kinda need to do both. We’re not looking to pick a fight with the large utilities. In fact, we want the large utilities to be our biggest customers. I mean, it would make no sense for us to go down that path on a big crusade trying to champion DERs above all else.

Matt Boms: Yeah, for sure. It’s an all of the above decade is the way I see it. Yeah. So Craig, I wanna shift towards when you mentioned, you know, this is the most innovative technology in decades, what is it about the linear generator that outperforms engines, turbines, fuel cells, batteries, or maybe where does it not outperform? Like, can you kinda specify those differences and help the listener understand?

Craig Gordon: Well, I think I’ve touched on a couple of points already. Mm-hmm. When you have a combination of high efficiency, full dispatchability, quick ramping, doesn’t actually combust fuel in the traditional sense, there’s no flame in our process, so you have very low NOx emissions. We don’t require water, and we’re not loud. Like, the combination of all those things is pretty compelling, and we’re gonna be better than aeroderivatives on heat rates. We’re not gonna use water. We’re not gonna use oil. So looking at different fuel cells, for example, they take hours and hours to kinda get them fully started and up to where they wanna operate and park it in a, you know, high output range. Whereas it takes literally minutes for us to go from a cold start to being online, and then once we’re online, we can ramp to full load from minimum load in 25 seconds. Like, that’s more similar to a battery than anything else. No other engine, no other turbine, no other fuel cell can do what we can on a ramping basis. Battery can do that, but a battery needs to be charged every night. We don’t need to be charged. I think writ lo- no, those ideas writ large kind of differentiate us from different technologies, and I don’t wanna go one by one because we don’t have all day to do that. But I think when our customers are looking at us, they have their own pain points that they’re looking to solve. Some of them might be speed. How much capacity can you get that’s fully dispatchable? Can you give me a power system that I can have backup fuel on as well as taking natural gas off the pipe? We can do that sort of thing. Very few other technologies right now are able to deliver the multiple layers of value that we’re able to at this point.

Matt Boms: Yeah. Craig, I wanna get into the-- I know we don’t have time to go through all the different projects, but can you point to one or two of them to help our listeners understand some use cases and where the real-world deployments are happening, where the best case studies are, and what the commercial operations have taught Mainspring about reliability and maintenance in general?

Craig Gordon: All right. You may have to ask the second part of that question after I finish the first part, so my memory’s not that good. We’ll come back to that last part. So at this point, we have a full range of use cases. They’re on our website. You know, whether it’s utility scale, grid power. We’ve signed a 48 MW contract with Utah Municipal Power Agency, and that project will be built next year. I mean, that’s your classic utility asset, grid asset. It’s gonna connect to the wholesale market. It’s gonna be part of the generation portfolio of UMPA, and they’re very happy about that. If you wanna swing to the others, the other end of the spectrum of scale, then right now we can talk about our Prologis project in the Port of Long Beach in LA. And that project really came about in, let me just... We have 12 units there, 12 units that are paired with batteries, so I think there’s 18 MWh of batteries and about 3 MW of linear generators there. And the reason for that project was, well, Prologis had a customer, Maersk, who had ordered 96 electric trucks to run the containers back and forth from the port and, you know, distribution centers throughout the LA area. And the local utility there told Prologis that was all fine and great that you have, like, all these EV trucks coming, but we don’t have enough power to serve that load, and it’s gonna be years before we do. And when we do, we’re gonna charge you the millions of dollars it’s going to take in order to do those upgrades. So that is a clear case of a speed-to-power issue. You know, you have demand showing up. Demand is showing up on a boat in the form of trucks that need to be charged. So you have the speed-to-power issue, and then you basically have our first true microgrid application. And the system that we have with Prologis is fully islanded. There’s no electric connection whatsoever to that project, so the whole thing is linear generators plus BESS. That also kinda illustrates that our technology marries well with other inverter-based technologies, whether it is solar, BESS, or wind perhaps down the road. So two very different use cases, the same machinery inside the box. It’s just how it’s used is different. So that’s kind of the versatility that you mentioned earlier is really valuable ‘cause we don’t need to be making changes to our product based on what different customers need. So it’s one product that we have multiple use cases, kinda like the Swiss Army knife of power generation.

Matt Boms: Yeah. No question. And the second part of the question there, Craig, was on maintenance and reliability. So what have the commercial operations taught Mainspring about the importance of reliability and maintenance? Maybe some lessons learned there.

Craig Gordon: Customers always wanna have their power, right? So, the lessons are make sure that you have spare parts close by, that you have trained technicians nearby. It doesn’t take a highly trained technician to do the limited maintenance that a linear generator requires. But what we have found is when you do a project that’s 5 hours away from any other linear generator project. You’re gonna have a 5-hour delay in getting someone in the best of cases, and it could be longer, and then they need to have the replacement parts necessary to make the fix when they finally get to the site. So I think one of the things that we focused on the last couple years is making sure that we have a critical mass of customers within a circle, within a radius of kind of our different O&M hubs, if you will. So we have different O&M hubs, you know, at this point across the country, and they’re growing by the year as the projects grow. I think that was a big lesson learned, that you don’t wanna be too far away from your customer.

Matt Boms: For sure. I wanted to ask you about the fuels that these Mainspring units are running on, but I think you answered that already, which is pretty much all of them, right? All of the above.

Craig Gordon: Any gaseous fuels. We don’t take liquid fuels, so that’s not what we do. So gaseous fuels are generally okay. We wanna make sure that they’re clean enough to put in a linear generator. So, like, landfill gas probably needs to be cleaned up a little bit. You know, siloxanes, you know, can muck things up, so we wanna make sure that there’s at least some minimum level of pollutants or contaminants that are not coming into the system.

Matt Boms: Yeah. Like, for hydrogen or renewable fuels, I imagine that it’s a small percentage of the total share. So, like, what would it take for them to become a material share of the operating fleet?

Craig Gordon: I mean, I think we’re probably a long way away from there. We have multiple biogas customers at this point that are actually running. Actually, we signed a couple deals in the last week for some more. So you have a smattering of wastewater treatment gas, landfill gas, dairy biogas. So we have all of that, you know, and we have all of it in California, and we’re looking to do it in other places. Those use cases, those projects are relatively small compared to what we’re thinking about going forward, which is projects on the order of magnitude of 100 or 200 MW, not 500 kW to a megawatt. So when hydrogen’s price comes down a lot, there might be economic viability then, but at this point, there’s, first of all, not enough hydrogen to go around economically to even really make a-- even to try to make that work. There’s not enough interest in the market either at this point. The hydrogen hubs that have been pulled back, we don’t see that as a near-term market solution for us.

Matt Boms: Got you.

Craig Gordon: We’d love to see it when it comes around, but it’s just at this point, the costs are too high, the production of hydrogen is too low.

Matt Boms: Yep. Mm-hmm. Understood. That matches pretty much everything that I’m hearing out there. You mentioned the scaling of the projects and now entering into projects that are hundreds of megawatts. So how have the customer priorities changed as Mainspring has moved into those larger projects?

Craig Gordon: There are some, you know, similar themes that you would expect. How quickly can you get it? Delivering hundreds of megawatts is a different proposition than delivering 10 MW. So now you’re, like, thinking about my supply chain, like how long it’s going to take to get those parts, and how long is it gonna take to build this unit, how are we gonna... You know, how long does it take to ship it? You know, the whole supply chain, lead time, all that stuff becomes much more important as the project size grows. And then, of course, if you’re dealing with orders of that magnitude, your customers are pretty sophisticated at that point, really sophisticated, and they wanna make sure that there’s a high level of reliability associated with it and that you can stand behind any guarantees that they need in order to, in some cases, turn around and resell the power, you know, to a data center themselves. Definitely higher requirements on reliability, stronger real requirements, LDs for missing delivery dates, and that sort of thing.

Matt Boms: Yeah, that makes a lot of sense. And as far as like, you know, we’ve been talking to a lot of DER companies on the podcast recently, and the question of islanding and what it means to run in parallel, I wanted to ask for Mainspring, what changes technically and contractually for y’all when a project moves from grid parallel to simply islanded operations? Like, are there operational or technical changes that need to happen?

Craig Gordon: There’s nothing technical about the LGen that changes. It’s more the balance of plant design. You know, you gotta make sure that you have the right balance of plant design that can handle either being grid parallel or switching over to grid islanded, and that’s a level of technical expertise that I don’t have, so I can’t share with you exactly what that means. It adds some cost to be able to do both, but what really happens is your customers really don’t want you to fail, because if you fail, they fail. And so the credit requirements, the level of overbuild is going to increase when you move away from the grid, especially if you’re talking about a sensitive load.

Matt Boms: Right. Yeah, ‘cause you’re the line of last defense- You’re the only one. All of-- Yeah. Yeah.

Craig Gordon: Yeah, you’re the first and last line of defense- Right. ... to keep that thing going.

Matt Boms: Cool. Well, so when you talk about the intersection, like when we think about a microgrid and the role that linear generators could play within broader microgrid, like thinking about batteries, renewable generation, how do they complement each other? And maybe there’s some real world examples or even like theoretically, how do the different technologies complement each other within a bigger microgrid? And I’m thinking particularly like now with the data center question and speed to power, and I’m sure you’re seeing a lot of deployment across the country.

Craig Gordon: Yeah. I mean, I think- At the macro level, if XYZ hyperscaler wants to have on-site power or something quasi on-site power, but they also have pretty lofty environmental goals, they might be, you know, bringing in power from wind or solar either, you know, physically or virtually, and then they’re gonna have batteries on-site. And so if they’re really sophisticated and they really want to reduce their carbon footprint, you know, they could have linear generators on-site. They could use hydrogen, they could use ammonia, or they could use natural gas because, you know, that’s again, the go-to fuel at this point. And so our capability to firm that renewable power or to firm that power, recharge those batteries, I think sets us apart. We have a, the low environmental footprint. We have quick start times. Because of our ramping capability, we’re able to kind of naturally fill the gap where a large data center might otherwise have turned to a much larger technology or a different type of technology. And because we’re inverter-based, we pair well with the BESS that’s on-site or the solar that’s on-site perhaps as well.

Matt Boms: Right. Yeah, the pairing is a lot easier. Like for a data center customer, what do they need from a power solution that a typical commercial customer doesn’t? Like, what makes a data center customer unique in that sense?

Craig Gordon: Well, they just can’t afford to go offline, and they’re willing to pay to ensure that they don’t ever lose power. I mean, I think that’s gotta be the biggest difference that’s out there. I mean, power is power. It’s like, are you willing to have your lights go off at night on a super hot day, or do you wanna buy that extra layer of protection, that insurance policy by having on-site power that’s redundant, and so the odds of a blackout are whatever, like that, are almost neg-- no, almost zero.

Matt Boms: Yeah. And for someone like you that’s been working in this industry for a very long time and wearing different hats with different companies, how do you view this broader issue that, especially here in Texas, but I think it’s a national problem, where we have significant delays as far as interconnection and on-site generation is a responsible solution to that problem, but is it-- in certain cases, is it just moving that constraint elsewhere on the grid? How are you seeing that play out in real time?

Craig Gordon: I guess when I first got involved in the industry, you know, 20-plus years ago, didn’t really think too much about the grid. It was pretty much static. You know, “Don’t worry about the grid. Nothing’s happening. Nothing to see here, folks.” And so no one gave it much attention. And then renewables started coming in, and they started renewables plus low gas prices, plus no load growth basically meant, “Okay, now we just have substitution going on, and we’re gonna retire these old plants, so we’re gonna bring in these new things.” Net, there wasn’t a whole lot of need for brand-new transmission. Of course, ERCOT had the CREZ lines. Was it 2007? Like, that seems like eons ago. 2007 and 2012, like, what? $7.5 billion. I mean, that was a recognition that all this wind was coming onto the system, you know, out in West Texas, and there just needed to be a way to bring it into load. Look, nowadays there’s so much happening on the grid, whether it’s from data centers, whether it’s from developers building wind project or that solar project or this project. Like, everything is more dynamic now than it ever was before. So it’s really hard to isolate one distributed resource having, you know, shifting the congestion from one line over to another line. Everything’s at play now, hard to pin it down. ERCOT’s going this cluster process to study new loads, right? Like, everything’s a mess, and we’re trying to figure out like, “Oh, how do we make sense of this giant cluster of things happening simultaneously?” It’s not easy, and that’s why these-- you see FERC getting involved outside of ERCOT, of course, trying to create some clear guidelines on how the processes should work and prioritization of studies and who gets firm versus non-firm. So I’m not sure if I’m answering your question or just, like, going on, but I’ll just stop there.

Matt Boms: No, you definitely are answering the question. I think it-- we’re living in complicated times, not just in the energy world.

Craig Gordon: You put it much more succinctly than I did. So I- ... you should’ve said that. Wouldn’t have had to answer at all.

Matt Boms: No, I completely agree with everything you just said, and like, I think there is no silver bullet to any of these problems, right? Like it see- it feels like we’re living in a time of infinite demand, and everyone questions the queue right now because it just seems like an unbelievable number that we’re dealing with when you just add up all the gigawatts that are asking to be interconnected. But at the same time, a lot of that is real. We’ve been having this discussion on this podcast for the last three or four months with a bunch of different guests who are all pretty much saying variations of the same theme, which is like, ERCOT needs to do a better job planning for all of the loads that are coming. But at the same time, it can’t plan fast enough because the speed is unparalleled. Like, we’ve never seen so much load come online at-- so quickly all at once. Like, that’s the key problem. We could accommodate it, but the challenge is the time period that we’re dealing with.

Craig Gordon: If only there was something like AI to help solve that problem.

Matt Boms: Yeah.

Craig Gordon: Load it into the computer and let it solve itself. Like, I don’t know, maybe there’s something there.

Matt Boms: Yeah, the-- I think there is. That’s the irony of all of this, and we had Pablo on the podcast and asked him about that, and he felt like AI will be part of the solution moving forward. That was definitely interesting. But yeah, we’ll see where this all takes us. I think nobody knows where we’re headed. Well, Craig, when you think about, I wanna talk energy policy with you because that’s the space that we both work in, and for Mainspring’s technology, what is the biggest policy barrier that you’re facing across the country? Like, what’s having the largest effect on your timelines for the projects that you’re working on?

Craig Gordon: I guess, Matt, I’m very happy to say that we don’t have too many issues or obstacles, like from an air permitting standpoint. Even in places like California, we’re well known at this point, and air permits aren’t an issue, so we can get air permits relatively quickly, I think. We’ve received air permits in Texas, you know, inside of 3 weeks once upon a time. So like, that’s really not a binding constraint for us. You know, obviously, everyone struggles with getting interconnected. That’s really not been an issue for us either since until these days, until recently, we’re really not doing transmission-level interconnection, so we haven’t really been impacted by the huge queues and the waits in places like PJM or California. So like, that really hasn’t been an issue. Like, you know, we’ve been lucky, knock on wood, that there aren’t a whole lot of policy headwinds that are giving us fits at night. Nothing’s keeping me up right now on the policy side.

Matt Boms: Yeah, that’s good to hear. Well, so I guess I could reframe that question and ask you, do you think that the market rules today are assigning the value for behind-the-meter resources like Mainspring? Do you think that the value might be higher than what it is currently because of the market rules that we have set up? Of course, I’m thinking with the Texas frame, but you might have some other markets that come to mind.

Craig Gordon: And I’ll be honest with you, like, I don’t give that too much thought whether the markets are gonna give DERs the right value. They’re probably not, of course, right? So it’s really hard to value small distributed assets in the context of very large assets. And so, like, doing that is not a simple proposition. So I don’t know, companies like Base Power, maybe they’re figuring that out, how to make money in places like ERCOT with their technology. I hope they’re successful. And like Sparkfund, I hope they’re successful in doing their distributed capacity product. You know, I think their first project really is in MISO and with Xcel in Minnesota. Like, I wish them the best on that. Whether those check all the economic boxes, I don’t know. We haven’t spent a whole lot of time at Mainspring trying to get value for behind-the-meter assets just on the face of it. Like, we’re always trying to find customers who need power for other reasons, not to just get a high valuation, you know, in PJM or MISO or something like that. I think we are moving-- We are definitely moving toward a place in our company’s progression where we are looking at PJM, we are looking at MISO, and we are thinking about, well, how do we make sure that on an aggregated basis, you know, for a 50 MW project, we’re gonna be able to get a high level of ELCC. We don’t wanna be a technology that PJM has never heard of before and, as a consequence, gives us zero value of capacity. Now, we’ve already been in conversations with PJM. That’s not going to happen. The question is, where will we start off and where will we end? And I think a very similar conversation will be taking place at MISO. I mean, the great news about our technology and what we’ve seen so far in our limited time of commercial operations is our portfolio is performing at over 90 percent uptime. Nothing performs at that level that’s 5 years old. I mean, coal plants don’t perform at that level. Like most things, nuclear plant being one big exception. Our technology, although still in its infancy stage, is performing at a level that’s really unbelievable in some cases. And it’s just going to get better from here. So I mean, it’s really amazing what the technology can do and how it’s performing already. And we were able to attract our new CEO, Tom Linebarger, who had been the chairman of our company for the last, you know, year. But he was a chairman and CEO of Cummins. He was there for 30 years, and he thinks our technology is better than anything he’s ever seen. I mean, he came out of retirement to come lead our company to the next stages of growth. Like, that’s pretty compelling. That’s persuasive, and I think people are really excited about that.

Matt Boms: You got me fired up. I’m ready to go. That 90 percent number is really impressive. Yeah, you’re right. That’s unheard of in any-

Craig Gordon: It’s crazy high. It’s crazy high.

Matt Boms: Yeah. Well, I wanna take this, Craig, like to round out the conversation and wrap it up more forward-thinking and kind of where does Mainspring go from here. If Mainspring succeeds, in your mind, where will linear generators sit in the power system 10 years from now?

Craig Gordon: I really do think they are going to be pervasive throughout the power system. They will be locally sited at cold food storage locations. They’ll be on Long Island as peaking plants perhaps using zero carbon fuels. They’ll be on site at large data centers. They’ll be grid scale assets for large IOUs. Like, there’s no reason Mainspring technology can’t serve every customer class, solving the specific needs of that particular customer class or that specific customer. Like, it’s just a matter of time. We’re not gonna take over the world, and we have a lot of room to grow. I do think we’re gonna have a place all throughout the power system. The efficiency’s really good. The emissions are really low. There’s no water usage. It’s not loud. No big smokestacks. Like, the community opposition is nonexistent. So I mean, we have a lot of tailwinds right now. We have a lot of tailwinds.

Matt Boms: Awesome. Well, looking forward to seeing Mainspring continue to succeed. And thank you so much, Craig. Thanks for walking us through the technology and helping us understand what it’s all about. Looking forward to having you on again sometime soon. So thanks so much for your time.

Craig Gordon: Thanks, Matt. I hope I answered all your questions.

Matt Boms: You did. Thanks, Craig.

Craig Gordon: All right. Okay, excellent.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Subscribe now

Energy agencies want more authority over Texas data centers | The Texas Tribune

The Public Utility Commission and ERCOT are asking lawmakers for more authority to regulate data centers, following the governor’s directive.

University of Texas energy researcher Joshua Rhodes said data centers are likely to be a central focus of the next legislative session.

“Data centers are not polling very favorably in public opinion,” he said. “And so it’ll be an indication that there will be some bills trying to inject some discipline into this market.”

Rhodes said there’s been a lot of discussion about how to prevent data centers from passing on the costs of new infrastructure to consumers, but state regulators are still fleshing out the specifics of concrete policies.

This Texas coal mine will soon be home to a 1.2GW solar farm | Canary Media

A new solar project has found a home in Bremond, Texas, at the Twin Oaks coal-fired power plant and Calvert coal mine. Panamint Capital, backed by KKR, acquired the coal plant in 2019 and announced last week it broke ground on the solar farm.

Panamint’s clean energy project will be among the largest in the nation — and, the developer claims, the biggest solar array ever built at a brownfield site in North America.

“We believe deploying new capacity at existing energy sites is the clearest way to benefit communities, ratepayers, and the environment alike,” said Apolka Totth, CEO of Panamint, a Nevada-based investment firm.

The giant installation will further boost Texas’ thriving solar sector, which this year is expected to generate more electricity than coal in the Lone Star State.

Read more

That works out to roughly 10 gigawatts of export capacity. In ERCOT the value of tapping it splits three ways, because transmission and distribution utilities own the wires, competitive retailers sell the electricity, and generators sell the power. A TXU Energy customer in Oncor territory can collect free overnight charging from the retailer and a separate rebate from the utility, with nothing combining the two.

On this episode of the Energy Capital Podcast, Matt Boms talks with Joseph Vellone, chief executive of ChargeScape, the vehicle-grid venture owned by BMW, Ford, Honda, and Nissan, about what it takes to move a parked car from load to capacity. The core argument: the hardware is arriving on its own, and what holds the resource back is incentive design and interconnection policy.

Subscribe now

For years EVs have been cast as a threat to grid stability. Vellone calls that a misconception and points to record adoption without failure: “we haven’t brought the power grid down.” During the episode, Boms and Vellone work through:

• Split incentives in ERCOT, why a deregulated market gives the wires company, the retailer, and the generator each a reason to pay an EV driver and none of them a reason to coordinate.

• Grid-parallel interconnection, the argument that a vehicle backing up a home without exporting to the grid should not need an interconnection agreement.

• V1G, V2H, and V2G, the three tiers of vehicle-grid integration, what each requires in hardware, and which are running commercially today.

• The lease-return wave, Cox Automotive’s forecast of 300,000 EVs coming off lease in 2026 to second owners more price-sensitive than the first.

How the Public Utility Commission draws the line between grid-parallel operation and export will shape how much of that parked capacity ERCOT can call on.

Share

Timestamps

• 00:00 – Introduction: Joseph Vellone and ChargeScape

• 02:34 – Why competing automakers built a shared platform

• 05:49 – When an EV becomes a grid resource

• 07:35 – V1G, V2H, and V2G in plain English

• 10:48 – Six million EVs and 10 gigawatts of export capacity

• 12:07 – The consumer progression to bidirectional charging

• 15:57 – Texas incentives and what moves customer behavior

• 18:07 – The changing profile of the American EV driver

• 21:04 – Policy barriers: unstacked value and interconnection queues

• 24:58 – Splitting EV value across ERCOT wires, retail, and generation

• 28:00 – Grid-parallel interconnection at the PUCT

• 30:05 – Scaling from pilots to full market participation

• 32:50 – Secondhand EVs, multifamily, and fleets

• 37:15 – Why record EV adoption has not strained the grid

Resources

People & Organizations

• Matt Boms (LinkedIn)

  • Texas Advanced Energy Business Alliance (Website - LinkedIn)

• Joseph Vellone, CEO of ChargeScape, previously North America head at ev.energy and a consultant at Boston Consulting Group (LinkedIn)

  • ChargeScape (Website)

• Energy Capital (Podcast - LinkedIn - Apple Podcasts - Spotify)

Company & Industry News

• BMW, Ford and Honda Agree to Create ChargeScape, the 2023 agreement forming the joint venture, built on the Open Vehicle-Grid Integration Platform

• ChargeScape Welcomes Nissan to Its Alliance of Automakers, making Nissan an equal 25 percent investor alongside BMW, Ford, and Honda

• PUCT Project No. 54233, Technical Requirements and Interconnection Processes for Distributed Energy Resources, the rulemaking covering new 16 TAC 25.210, amendments to 25.211, and the repeal and replacement of 25.212

• Vehicle-Grid Integration Council comments in Project No. 54233, addressing grid-parallel bidirectional charging and the V2G DC and V2G AC configurations

Transcript

Matt Boms: Hi, everyone. Today we’re joined by Joseph Vellone. He’s the CEO of ChargeScape, the automaker-backed company helping turn electric vehicles into flexible grid assets. Joseph has spent more than 15 years at the intersection of energy and technology. Before ChargeScape, he helped launch and scale the EV charging platform called ev.energy, and advised utilities and energy companies at Boston Consulting Group. His career began in clean energy research, including work on hydrogen fuel cells. Joseph, thanks so much for joining us today and being on the podcast.

Joseph Vellone: Thanks for having me, Matt.

Matt Boms: Of course. I wanna jump into your origin story a little bit, and if you could help us understand how you got to where you are today, and maybe just giving us a quick intro to ChargeScape.

Joseph Vellone: Yeah, sure. So I have been interested in clean transportation since I was in high school. I grew up in the New York City metro area and had an incredible opportunity to actually do some research at the Columbia University School of Engineering on hydrogen fuel cells, which I’m dating myself here, but back when I was in high school, hydrogen fuel cells were actually the promising clean transportation technology at the time. This was well before, uh, Tesla or any other EV manufacturer came onto the scene. So after doing that research in high school, continued studying clean energy and energy policy in college, actually worked for the United Nations right out of college, doing a bunch of different work, including some energy and poverty alleviation work, where really access to affordable clean energy made me realize it’s so fundamental to economic development no matter where you are in the world. So went and did a master’s in energy economics after that, ended up in management consulting, as you mentioned, consulting for some of the world’s largest energy companies, including power utilities. Back at the time, distributed energy resources were first starting to pop up onto the grid, so helping them kind of navigate things like solar and batteries. And then actually left the Boston Consulting Group to join a couple of colleagues at a brand-new startup called ev.energy, as you mentioned. They were quite early. This was, uh, back in Europe, actually, when, uh, EV adoption in Europe was a bit ahead of the United States and sort of building a smart charging platform and then left to come and run ChargeScape a couple of years ago.

Matt Boms: Awesome. Thank you for running us through your story, and it’s an interesting journey that you’ve had to get to where you are today. Can you help listeners understand more about ChargeScape and the company’s mission and the role it’s playing right now in EV charging? I think you’re really at the inflection point of what’s going on right now with electric vehicles across the country.

Joseph Vellone: Yeah, absolutely. So ChargeScape’s mission is to unite automakers and utilities and their shared customer, which is the EV driver, to make electric transportation simple, scalable, affordable, and reliable. And now what that means in practice and, like, what ChargeScape does is we operate this software platform that is the connective tissue between power utilities across North America and electric vehicles on American roads and in American driveways. And so we’re this platform that essentially allows electric vehicles and the power grid to talk to each other. Something that I think makes us very unique in this space is that we are an automotive joint venture. So a lot of other companies is— in this space are venture capital-backed. We’re very different. We’re a joint venture of automakers, actually competing automakers, who pooled their money together to build this common platform for the industry. And so what that means is we have this unparalleled access into automakers’ boardrooms across the country, across the world. We work hand-in-hand with them on vehicle grid integration. It also just means that we are really well-capitalized and kind of provide, like, a stable partner to utilities looking to do this long-term.

Matt Boms: That all sounds really interesting, Joseph. I want to really dig in on ChargeScape and how you’re working with these auto companies right now, really at the intersection of utilities and EVs, as you mentioned. So can you run us through why the platform is backed by automakers? Because I think you mentioned that really briefly, but I think it’s important to emphasize how different the company is and kind of the origin story there of how you started partnering with these different auto companies.

Joseph Vellone: Yeah. So why did automakers pool all of this money to form ChargeScape? Well, a couple of reasons. You know, firstly, they formed ChargeScape to sell more electric vehicles. Their goal as automakers is to sell cars. Now, electric vehicles have something kind of unique about them, where their fuel costs can be a lot cheaper than a combustion engine vehicle. And there’s this additional potential to unlock more savings for the consumer, the EV driver, through smart charging. So anything that ultimately lowers the total cost of ownership for an electric vehicle is gonna help an automaker sell more cars. So it’s very much a strategic play. Now, why doesn’t each automaker just do this themselves? Well, there’s this many-to-many problem. An automaker doesn’t want to partner and contract with dozens or hundreds of power utilities across America to make sure that their customers have access to smart charging and smart charging savings. And at the same time, a utility doesn’t want to contract with the 10 to 20-plus automakers selling cars in the United States and have different contracts and APIs with each one. So ChargeScape really kind of serves as this common platform, solving that many-to-many problem.

Matt Boms: I’m happy that you’re getting into this because that’s really the meat of the conversation I wanted to have with you today, which is: When does an electric vehicle stop being simply a source of new demand and become a useful resource for the grid?

Joseph Vellone: Yeah, the answer is the moment that that EV is plugged in and connected to ChargeScape. So data from our platform shows that a typical EV is parked for about 95 percent of the time. It’s only mobile 5 percent of the time, and most drivers only need about a few hours of charging per night. So more data from our platform, you know, typical EV is, is plugged in somewhere between 12 to 14 hours at a time, but only requires 2 to 3 hours of charge on average. So that gives us a very long window in which to kind of optimize when those 2 to 3 hours of charge gets delivered. And when you think about also like the size of an EV battery, you know, they’re well above 50 kWh, some of them larger than 100 kWh, which is several times larger than a typical home battery. So just being able to, you know, number one, kind of shift when an EV charges, when it’s plugged in, can deliver really meaningful value to the power grid. And then when you actually unlock bidirectional charging and actually connect that EV back into the grid and export electrons from the battery to actually power the grid, it essentially turns an electric vehicle into a little mini power plant on wheels.

Matt Boms: Yeah, and that’s really exciting for nerds like me who track these issues really closely and are looking forward to the day where we have millions of electric vehicles juicing the grid. Let’s get into the weeds a little bit. So there’s a whole bunch of acronyms out there. We’ve got V1G, V2H, V2G. There’s a, a whole alphabet soup that I’m hoping you could help us understand for the average listener that maybe just isn’t familiar with all the technicalities of bidirectional charging. But start from the beginning and then maybe get a little more granular. Are most of these EVs bidirectional? Because I remember a few years ago we were getting there, but there were still plenty of electric vehicles that didn’t have that capability yet.

Joseph Vellone: Yeah, great questions. So actually, maybe let’s break down these terms into plain English to start. So V1G, just an acronym for managed charging, and that’s the very simple technology of just optimizing the vehicle’s power draw a little bit to align with the power grid’s needs. So that could be maybe just delaying when a vehicle starts charging because it doesn’t need to start charging immediately to still get the battery charged to where the customer needs by the time they need it. It could also mean it’s charging immediately, but maybe reducing its power draw slightly so it’s a longer charge session at a lower power, or maybe even temporarily pausing charging for a little bit if the grid is kind of really overloaded. So think about a hot afternoon in the summer when there’s a lot of air conditioners running. That’s V1G managed charging. You mentioned V2H. That stands for vehicle to home. So this is where you’re actually using your car as backup power for your home. So instead of buying a generator, you’ve actually got this really big battery inside of your car that can power your home for days. And so quite a few automakers, including Ford and their F-150 Lightning, have rolled out vehicles that are capable of vehicle to home. And so this is actually, in a lot of ways, kind of one of the emotional gateways for the EV driver to kind of start smart charging. It’s the idea of having resilience to blackouts, and we’re doing this in many parts of the country, including in the Pacific Northwest with Puget Sound Energy, where, you know, they experience both winter storms and summer storms, and the utility’s really interested in increasing customer resilience to blackouts. Blackouts are just a part of life in the United States. I think anyone who grew up here, you know, has experienced power outages before. And sometimes they, you know, they can last a while. They can last hours or days. And to the extent that a customer’s already bought a vehicle, they’ve already got an asset that can provide backup power without the need for an additional generator. Then finally, V2G stands for vehicle-to-grid. That’s what I was describing before, the actual export of electrons from the EV battery, not to the home, but back into the power grid, essentially selling electrons back into the power grid. And this probably the earliest stage kind of technology, but it is real. It’s happening today. We’re doing it currently in, in Silicon Valley. We’re using EVs to actually power data centers, and so this is probably the furthest away. It does require, you know, some special hardware, some special interconnection with the grid. But we do think it’s gonna be actually increasingly commonplace toward the end of the decade.

Matt Boms: That’s great. And we’re getting to the point now where the EVs are really penetrating the market. Like here in Texas, in the next 5 or so years, I think we’re gonna hit the 1 million mark of, uh, EVs on the road. So there’s huge potential when you do the napkin math and add up all the potential gigawatts of power that might bring to the grid.

Joseph Vellone: Yeah, and just to make that math real, there’s about 6 million EVs on the road in America today. About 1 million of those already have that bidirectional power capability. So you think about a million EVs with, you know, maybe a nameplate capacity of 10 kW of power export, that’s 10 GW of power, which is the equivalent of 10 nuclear power plants. So imagine, you know, we’re talking about building new power plants for data centers and stuff, and nuclear power plants can take decades to actually build and cost billions and billions of dollars, but we’ve actually got all of that energy potential just kind of sitting idle in American driveways and on American roads today that we could be tapping into.

Matt Boms: Yeah, for sure. These are just batteries on wheels. You mentioned the Puget Sound program, and I know there’s a few other programs that we could talk about across the country that are really promising. I think we can get into those, Joseph, and I think it would really help the listener understand from a practical standpoint what’s happening on the ground. But the first question I have for you on this would be, is it crawl before you can walk? Because you just walked us through 3 really practical examples of how, uh, EVs could help power up the grid. But do we first need to figure out, you know, how we use these things to back up our homes and businesses and then move on to the V2G, V2X, and all the fancy technologies?

Joseph Vellone: I think it depends on what perspective you’re looking at this from. I think what we see from the average American consumer is there is that kind of natural transition that they go through, right? I think, you know, first of all, just buying an EV in the first place feels like a big first step for a lot of Americans, and we’re getting there, and there’s more EVs on the roads than there ever have been in America that are on the roads today, and just kind of overcoming, right, that kind of emotional hurdle of, “How do I charge, and how do I charge at home, and what happens on a road trip?” Then as people start to get a little bit more comfortable, they become comfortable with the idea of, you know, having their automaker kind of optimize their charging at home, especially if it’s gonna save them money. And we’re talking about Texas here, so I would be remiss if I did not talk about our free EV miles program with TXU Energy across Texas that offers, uh, TXU customers unlimited free at-home EV charging that they do on this plan. And so that just requires a little bit of scheduling, making sure that you’re charging your EV during the hours of 10 PM until 1 PM the next day, so you have a very long window to play with there. That’s usually a pretty clear financial decision for a consumer to make, right? If they’re going to get free charging, the idea of just like setting a schedule or letting their automaker kind of maybe delay charging for a few hours to align with off-peak hours, if that means, again, they’re going to get free charging or a lot of cash back maybe from the utility. You know, we run another program in New York, which is— it’s a very different program. It’s with Con Edison. You know, their customers get cash back for every kilowatt hour of charging they do off-peak. And we have customers who are earning over $1,000 a year in cash just for doing that. So that’s kind of like the first step as a consumer, and then you start to get comfortable with this idea of managed charging, and maybe you’re living in a part of the country where there are frequent power outages, and you realize that your vehicle can actually serve as backup power for your home. And so there is probably a little bit of electrical work that you need to do to be able to get that EV plugged into your home, the same way you would need to do for a generator. A lot of automakers kind of offer a kit that allows you to do that. You could also have an electrician come and do that. And then you’re starting to get comfortable with actually having a backup power source, draining your EV battery a little bit to power your home, provide that backup resilience. We’re starting to see, you know, some Americans get comfortable with is, “Okay, well, there’s not a power outage right now, but I know how it works in terms of draining my EV battery. I know what I’m comfortable with as, as a consumer. I know that I never want my battery level to go below, I don’t know, 30 or 40%. There’s usually quite a few kilowatt hours to play with. I could actually sell a little bit of power back to the grid, right? And I’m gonna sell it back when power prices are really expensive, and then I’m gonna have my automaker charge my car when power prices drop later.” I’m actually gonna engage in some energy arbitrage that you don’t need to be sophisticated to do because through ChargeScape, your automaker is kind of doing that for you behind the scenes. And that’s kind of the progression that we see the consumer go through, and we also see a lot of power utilities, the power utilities that we work with across the country. When they’re kind of launching propositions and programs for their customers, they go through kind of like a similar phase of, let’s start with just the basic managed charging first. Let’s get the consumer comfortable with backup power, and then let’s actually start to do vehicle-to-grid.

Matt Boms: Absolutely. And the Texas customer is extremely savvy because there are a bunch of different factors, but the fact that we have competitive retail choice, we deregulated our energy market back in 2002. Winter Storm Uri certainly plays a factor in that when you’re talking about blackouts and folks wanting to have backup power. The fact that millions of Texans are now looking at, uh, residential batteries as potential source of backup power, but now EVs are kind of entering the scene as this new alternative way to back up your home. So when you speak about these programs, Joseph, that ChargeScape is currently offering, what are the incentives that you’ve noticed actually move the needle and actually encourage customers to shift their behavior? Because one thing you said really caught my attention, which is most people don’t want to be bothered. Their vehicle can be charged at 9:00 PM or 3:00 AM or whatever it might be, as long as they wake up in the morning and they’ve got their battery juiced and ready to go. So is it simply just taking that away and allowing the retail provider to manage the charging, or what’s been kind of the silver bullet here for getting customers enrolled in these programs?

Joseph Vellone: Yeah. Look, as you mentioned, Americans are very savvy, very financially motivated, and so it all comes down to the financial incentives. That’s what we see time and again in every state from the South in Texas to New England, where we work with Eversource Energy in Massachusetts and Connecticut. And generally, like, the programs that are most successful offer customers a very kind of like reliable financial incentive, and that can take different forms. So I mentioned free EV charging in Texas. Yeah, really easy to understand. You knew as a consumer when you plug in at home and you plug in during those hours, you’re never gonna pay for EV charging. Super simple to understand. Similarly, in New England, we run programs with Eversource Energy across Massachusetts and Connecticut, where customers get like a very sort of predictable $25 monthly incentive, and that’s paid as cash back to them in their Venmo account at the end of every month. And they know that if they allow the, the automaker to just kind of optimize their charging at home within certain parameters, they’re gonna get that financial incentive. That’s generally what we’ve seen work best.

Matt Boms: Yeah, it makes a lot of sense. And for the typical American EV driver, has that changed since you started working in this industry? Like, when you first set out there, I think there was a certain image of, like, who drives an EV in America. From my point of view, that has changed a lot over the past several years, but how have you seen it? What does a typical ChargeScape customer look like these days?

Joseph Vellone: Yeah, great question. And, you know, having operated in this industry for almost a decade now, it’s been really interesting to kind of see the evolution of the EV consumer across this adoption curve. So, you know, I think when EVs first came to market, we saw these early adopters, right, who skewed very affluent, very tech-forward, tech-savvy, tend to living, be living in single-family homes. But now, I think following the EV tax credit and also just the wave of secondhand EVs that we’ve seen hit the market, EVs have become much more mass market. You know, the average consumer looks a lot more like the median American household.

Matt Boms: Yeah, and I think there was concern around the EV tax credits and thinking that folks would stop adopting the technology. But I think what we have seen is, like something you mentioned, that the more folks use the technology and get used to it, the more they’ll adopt it. I think the same thing with the charging element, which is like you get comfortable with it as you use it. We saw something similar here in Texas, Joseph, with smart thermostats, where there was a concern that Texans wouldn’t give away control of their thermostats because of privacy concerns and, like, not wanting the retail provider to have access to their smart thermostat. But actually, when you look at the numbers, it’s— those programs have been really successful because of exactly what you’re saying, which is if the financial incentive is there, then absolutely folks will be willing to participate if it ends up saving them money at the end of every month.

Joseph Vellone: Yeah. And I think the other critical thing is keeping the consumer in control. So in a smart thermostat program, if it’s hot, it’s summertime, and you start to get warm inside your house, you can override it, right? And you can, like, turn the AC on. Similarly with smart charging, automakers allow the consumer to opt out or temporarily override a smart charging schedule to charge now whenever they need it. So of course, even when managed charging is happening in the background, there are certain parameters that are always respected, right, which no matter what, no matter how little flexibility we may have in a short window, we’ll make sure your car is charged fully to the battery level you specify by the time you need it. But we’ve seen time and again, EV drivers will set a smart schedule, thinking that they have until the next morning, and then something comes up. Suddenly they’ve got to go pick their kid up or, you know, they need to go run an errand soon, and they need a quick charge. And so there is always that button that the automaker offers to override. So maintaining that element of customer control, I think psychologically is so important for broader scale participation.

Matt Boms: Yeah, it absolutely is. And I want to jump into the policy a little bit with you because we talk a lot of energy policy on this podcast, and I think our listeners are comfortable with getting in the weeds a little bit on this. I just want to know, like from a bird’s eye perspective, what needs to change? Like, what are you seeing, not just in Texas, but across the country when it comes to whether it’s utilities that are maybe reluctant to adopt these programs? Is there some policy switch that can be made to really encourage folks to enroll in these programs? Like, do you see it as a policy challenge, or is it more of a cultural challenge that we’re facing?

Joseph Vellone: I think it’s more of a policy challenge than anything, and kind of thinking about the most common issues that I see in, uh, utility regulators across America. Well, it’s a couple. You know, firstly, this has been eye-opening for me. Utilities extract different value streams from managed EV charging. There is value that they extract at what we call kind of like the system level, which is like kind of just keeping the system stable and reducing what we call peak demand so that they don’t need to switch on expensive peaker plants during maybe just like an hour or two in the afternoon or evening. There’s also this additional distribution value that EVs can really deliver. I think what’s really interesting about EVs is that their adoption continues to be clustered. I think we talked about like skewed affluent for a while, so more kind of affluent zip codes. That’s changing now, but it’s certainly clustered in more, you know, residential neighborhoods or areas where like a big EV fleet, whether it’s Waymos or Amazon delivery vans are charging. And the power grid is made up of millions and millions of pieces of equipment and wires, and there are certain pieces of equipment within a utility service territory that might get particularly strained, whether that’s by EVs or because there’s also like a big factory or there’s other sources of demand operating on that feeder or that substation, and there’s an additional source of value there that EVs can unlock. So, you know, maybe you don’t need to do managed charging for all EVs across the state. Maybe in a certain, at a certain time, you just need it in a specific pocket of your service territory. So that’s another value stream that EVs can provide. And then there’s additional kind of energy market services in ERCOT, in CAISO in California. I think what I’ve seen is that utilities, as they’re kind of like planning and valuing smart charging, these different value streams are not necessarily kind of coming together and being comprehensively quantified and considered. And so I think that’s a barrier. Part of that just comes back to the way that utilities are organized and structured, and you have kind of these different teams realizing different sources of the value, but not talking to each other. I think another, you know, sort of like major policy barrier is a little bit more on like the bidirectional side. So as I mentioned, you know, if you’re gonna export power back to the grid, just like with solar, you know, you do need to have what’s called a, a grid interconnection. And I think what we have seen is that interconnection processes and pathways vary widely by utility and state, but do tend to take quite a long time. So there’s currently just like a backlog of EV drivers who want to be exporting to the grid, but who are waiting for their utility to approve it. And look, we hear similar stories as well about data centers and data center capacity. There’s this backlog of power generation that we’re trying to get connected to the grid that’s just stuck in a queue. I definitely would like to see, uh, regulators and FERC, you know, do a little bit better to streamline and speed up that process.

Matt Boms: Yeah. I always say that like the technology moves a lot faster than the policy does, and I think this is a great example of that, right? Because technology’s come such a long way in the last 5 or 10 years, but in some ways it feels like the policy is a little bit stuck in the mud. I want to just double down on a couple of things you mentioned, which is, at least in ERCOT, we have utilities that manage the poles and wires, right? So they don’t get any incentive for the stuff that we’re talking about today, which is, you know, managed charging, V2G, deferring the transmission and distribution costs that we have in ERCOT, which are substantial and necessary, right? But if you can deploy EVs or at least manage that charging a little bit better around a substation that you know is overloaded because of, let’s say, data centers coming to town or any other cause of load growth, then why wouldn’t you take that option, right? Like as... For the rate payer, this is a no-brainer because, um, ultimately it’s gonna reduce the energy costs at the end of the month. Like we spoke with someone from NRG on the podcast a couple months ago who mentioned, you know, there are 3 components of the energy bill, and they only control 2 of them because the third one is the T&D cost, right? So ultimately the retail provider has no control there. So I guess all of this is leading to a very complicated question, Joseph, which is like how do you align those incentives? In another region of the country it might be a lot easier because you have a vertically integrated utility. But in our case in Texas, we’ve got the poles and wires companies on one hand and then the generators and the retailers on the other. So is there a way to make those stars align a little bit better?

Joseph Vellone: I think what those 3 different entities have in common is that they serve the same end customer, and that’s the EV driver. And so that’s like the single, you know, kind of connection point between a power generator, a distribution utility, and the electricity retailer. And so how does that all need to come together? Well, these are independent companies operating independently, right? And still there’s a Public Utilities Commission in Texas that kind of unites some of these stakeholders. But I think just, like, really realistically, those different stakeholders are gonna probably continue to operate somewhat independently, uh, for the foreseeable future. But that doesn’t mean that the consumer can’t receive some sort of financial incentive from each one. It’s a little bit disjointed, perhaps, like a little bit more piecemeal than we would see in a vertically integrated state. Like, we work with Duke Energy in North Carolina, where Duke is the power generator. They operate the poles and wires, and they sell the electricity and bill the end customer. So a lot simpler there. But, you know, I, I know for a fact, I believe Oncor and our CenterPoint to the distribution utilities in Texas do operate managed charging programs and smart charging programs. So, you know, you could be a TXU Energy customer living in, in Oncor’s kind of service territory, and you could be getting free EV charging from your electricity retailer and potentially some additional cash back as well from Oncor. Not ideal, right? You would want those incentives bundled together, and I think there’s probably room for that to happen. But, you know, for the time being, Texans, I think, uh, in particular, are very financially savvy and will continue to seek out, like, the financial incentives and the value wherever it is.

Matt Boms: Absolutely, yeah. And, and most people are not tracking these policy issues as closely as we are. There is one going on at the commission being led by Ford on, you mentioned interconnection being an issue, right? So this one would be like, if the EV is operating in parallel to the grid, then why should the customer need an interconnection agreement with the utility? Like, that’s a low-hanging fruit in my mind because if you’re just using this vehicle for backup power, then you’re not even trying to export to the grid, right? There, there should be no reason to, uh, request interconnection there.

Joseph Vellone: Yeah. And we share Ford’s stance on this topic. I’ve talked about it a lot. This is, as you said, low-hanging fruit. There is no clear safety need for interconnection when a vehicle is operating in what we call grid parallel mode, so not exporting to the grid, but just kind of working in sync with the grid to, for example, maybe reduce the household’s total energy consumption and essentially do what like a smart thermostat program would do times 10, ‘cause an EV is a lot bigger, and just to help the grid when it’s needed, right? Take the home maybe off the grid for a little bit, even when there’s not a blackout, to help reduce demand on the grid. If the household is getting compensated for that, it makes a lot of sense for them, and we don’t necessarily see any pressing need to require an interconnection. It’s causing artificially long lines and delays, and it’s also forcing those customers to get in line with the customers who wanna actually export power back to the grid, where there is a legitimate need for a grid interconnection, and it’s delaying them as well.

Matt Boms: That’s right. Yeah. At a time where speed to power is what it’s all about, right? So you need, you need that speed.

Joseph Vellone: Yeah, speed to power and, you know, every utility in America that you talk to and every grid operator is just, uh, focused on more megawatts. How many more megawatts can we get connected to the grid? You know, we’re seeing load growth in this country for the first time in 20 years, largely coming from data centers, and so there’s this kind of like urgency on the one side to like connect more megawatts, and then on the other hand, you have all these megawatts in a queue that desperately want to be serving the grid, you know, who are forced to wait in line.

Matt Boms: That’s right. Yeah. Well, with the time we have left, I want to talk about how you see this playing out over the next decade. I think we’ve made some significant progress across the country. You’ve spoken to several pilot programs that are currently underway in different states under different models, right? Like the vertically integrated utilities, the ones that aren’t. Where do you see this heading? Like, what is it gonna take to scale these programs and go from, you know, pilot programs to full-scale market participant?

Joseph Vellone: Yeah, I think there’s a few things there. Well, firstly, we need to get more EVs on the road, and I think we’re seeing a lot of progress there. Certainly a recent slump in sales, but we do see— start to see those numbers picking back up. So there’s a supply issue and a demand issue, right? And on the consumer side, managed EV charging just needs to start to feel normal, right, to the typical EV driver. And, you know, I think certainly if I forecast out, I don’t know, 4 years to 2030, I do think that something that feels, like, relatively experimental today, it will start to feel, I think, much more normal for the typical American, the typical EV driver, this concept of just your car earning money for you while it’s parked. And, you know, part of that is just, like, getting the consumer enrolled at the point of EV sale or lease. And some of our automakers, including Ford, is already doing that today in their dealerships, which is fantastic. And then there’s also the kind of the behind-the-scenes optimization and the— just the consumer comfort with it. I always like to use the analogy, if you’re an iPhone user, of Apple’s optimized charging feature. That’s something that has become the default for an iPhone charging, right? And you plug it in at night, it gives you a little pop-up, “Optimized charging. Your phone will be charged by, I don’t know, 3:30, 4 in the morning.” Probably looks at your alarm as well and makes sure it’s charged by then. And it just happens in the background while you sleep, and you don’t really care about it. And in that case, I’m not even earning money from it, but I know that it’s helping my battery health, and as a consumer, I don’t really mind. It just sort of becomes second nature. So I think that’s, like, a really big part of it. I think the other part is, you know, again, just this bidirectional charging becoming a little bit more mainstream. So we’re seeing a lot of automakers now bring new cars to market that are bidirectional-capable or rolling out software updates that unlock the bidirectional capability. Tesla’s made announcements there. Rivian has made announcements about over-the-air updates for its R2 fleet of vehicles. BMW’s rolling out bidirectional-capable vehicles starting with the 2027 model year. And then you’ve got the automakers who have been doing it for a while, including GM, Ford, Hyundai. So more and more vehicles that are bidirectional-capable, I think is gonna go quite a ways in getting more megawatts of flexible capacity on the grid.

Matt Boms: Yeah, it’s becoming more of the norm. And how does ChargeScape view the growing pool of used EVs? But, like, how much do you think about the life cycle of these vehicles as far as how do we take advantage of not just the newer ones that are being released, but the used ones that could also serve the grid?

Joseph Vellone: Yeah. We see this kind of wave of secondhand EVs that’s hitting the market now as a huge opportunity for us. So just to throw out some numbers, Cox Automotive forecasts that about 300,000 EVs will return from lease in America this year in 2026. That number will jump to 600,000 next year in 2027 and 700,000 in 2028. And this is all a result of a lot of Americans taking advantage of that EV tax credit loophole, where no matter your income level or the type of EV, you could get the $7,500 rebate essentially applied to your lease and made for a very cheap lease. Those leases last 2 to 3 years, and those cars now are returning to market. And so we at ChargeScape view this as a great opportunity to kind of reengage that next owner of the vehicle, right? They’re probably gonna buy a certified pre-owned vehicle from their dealership lot. This EV driver is almost certainly going to be a little bit more price-conscious and financially sensitive than the one who bought the new $60,000 vehicle. You now have the person buying it for $25,000 and much more likely to sign up for a smart charging program and earn the financial incentives to further reduce the total cost of ownership. So this is something that ChargeScape and our automaker partners are investing a lot of time and money into, and we’re already starting to see it bear fruit today in our enrollment. We’re seeing quite a few secondhand EV drivers sign up for our platform, kind of getting reengaged at the dealership when they’re picking up the keys to their EV.

Matt Boms: Great. And, Joseph, you mentioned earlier that it’s not just about single-family homes, that obviously there’s the multifamily home experience, and we haven’t talked much about, like, EV fleets. So can you speak a little bit to, you know, whether it’s electric trucks or electric school buses, how much does ChargeScape work with EV fleets in general?

Joseph Vellone: Yeah, I’ll start with multifamily. Actually, a third of US households are located in multifamily dwellings like condos and apartment buildings. This is a huge swath of the country, and again, particularly as EVs become more mass market, more and more of those households have got at least one EV in them. And so this is a really important thing for ChargeScape and for our automaker partners who want EV charging savings to be available to all of their customers no matter where they live. And so we’ve already kind of built out capabilities to serve EV drivers who are living in multi-tenant properties and allow them to participate in managed charging programs and enjoy all the same incentives and savings that their single-family colleagues are enjoying. On the fleet side as well, you know, we see this as, like, a really kind of interesting area. Fleets continue to electrify across the United States as companies are making decisions to go electric, if not based on ESG targets, then just based on pure financial savings and operational efficiency. Fleets are a little bit different, right? They typically have shorter dwell times back at depot, and so there’s a little less flexibility to kind of optimize their charging there. But there is still flexibility, and I think a lot of interesting stuff that you can do, particularly on the vehicle-to-grid side when those cars are sitting idle and could potentially be powering back the grid. As a matter of fact, what we’re doing in Silicon Valley with Silicon Valley Power right now is we’ve got actually a commercial fleet of Nissan Leafs that return to depot and export power back to the grid when called upon. So I think a lot of interesting things you could do on the fleet side. And then there’s also this category of fleet called the take-home fleet vehicle that not a lot of people talk about, but there’s actually a lot of cars like that that are corporate cars that the employee actually drives back home and charges at home. And so, you know, they’re paying for that car’s fuel essentially on their own electricity bill. So there’s a reimbursement service that we provide to the EV driver, but then there’s also the additional savings that we can offer back to the company who owns and ultimately pays for the charging by smart charging that vehicle at home.

Matt Boms: Very cool. Yeah, that’s all really exciting, and I want to leave you, I guess, with one futuristic question before we wrap up. If you could leave our listeners with one idea about the future of EVs and the grid, what would you want them to understand?

Joseph Vellone: I think for a number of years, EVs have been painted as a threat to the stability of the power grid, and I think that’s a fundamental misconception. I think what we’ve seen in the past few years with record levels of EV adoption is that with more and more EVs on the road reaching 6 million-plus, we haven’t brought the power grid down. The power grid is still stable. It’s still standing. And as a matter of fact, part of the reason why it is still stable and still standing is because of EVs. EVs are this great flexible resource. They’re batteries on wheels, and they can actually play a role in helping keep the power grid stable. And if the EV driver is able to save money on their charging as a byproduct of that, even better.

Matt Boms: Awesome. Thank you so much, Joseph. Really appreciate your time today and walking us through all these different concepts and looking forward to having you on again as EVs continue to proliferate in Texas and across the country. So thank you so much, Joseph. Appreciate it. Thank you.

Baseline models from Goldman Sachs suggest $765 billion will be the annual capital expenditure for chips, transmission lines and cooling equipment for AI. And that this will grow to $1.6 trillion annually by 2031. All for something as ethereal as an AI query.

We talk about the infrastructure of AI, but we need to talk more about the data centers, power infrastructure to support the data centers, the water, and how we are having to renegotiate and rewrite what constitutes public use and property rights. We are making permanent physical decisions to satisfy the needs of a business model that we are still trying to collectively figure out.

Utilities offer history lessons

This is not the first time in our history that a technology has come along, and we have had to totally change our property laws to meet the moment. The railroads were an early technology that forced wholesale changes on us. Congress granted millions of acres of public land, and legislatures gave private corporations eminent domain power.

Courts stretched the meaning of public use to enable commerce. This went on until the railroad companies got too big for their breaches and started gouging the farmers they had obtained the lands from with astronomical freight rates. Government had to step back in with the Interstate Commerce Act in 1887. The railroads became the first industry to be subject to federal regulation. The act required fair rates, no discrimination and rate transparency. This is where we started to see regulation of technologies considered utility.

A subsequent rewriting of the rules came about for the electricity industry. Power companies, formerly monopoly franchises who got easements to U.S. farms had to accept the new rules that came with regulation after electricity was finally considered a utility. Power companies had to cap their returns on equity, become transparent about their rate setting and honor their legal obligation to serve everyone.

Read more

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Texas’ Grid Operator Prepares for More Demand Than Ever This Week | Inside Climate News

The Texas energy story this week is record-breaking demand. On Thursday, demand in ERCOT reached 91 gigawatts, shattering the 85 GW record set two years ago. But the grid operator didn’t call for blackouts or emergency conservation.

Three years ago, there was much nervousness about whether there was enough power to meet peak demand, said Michael Webber, an engineering and public affairs professor at the University of Texas at Austin. “We don’t have that same nervousness now,” he said.

Despite Texas’ population and economic growth since 2023, the state’s electricity use has yet to reach the 85.5 gigawatt peak again. It’s a sign not only of how exceptionally hot it was that summer, Webber said, but also how additional solar and battery capacity on the grid and flexibility from both generators and load have been handy tools for managing high peak demand.

Texas ERCOT Grid Holds Beyond 91 Gigawatts in Heat Wave - At What Cost? | Energy News Beat

How did Texas get through the day of record peak demand? Natural gas and solar energy. See a chart from the article below the excerpt.

Natural gas remained the largest single contributor, reflecting its role as the flexible backbone. Solar contributed strongly during daylight hours (often 35–45% of generation earlier in the heat wave and rivaling or exceeding gas at times), while wind and storage filled gaps. By the end of 2026, ERCOT projects more than 45 GW of solar and 27 GW of storage capacity, a sharp increase from ~20 GW solar and 5 GW storage in 2023.

Tom Moerenhout and Tomasz Nadrowski on Fixing the Mineral Supply Chain | Columbia Energy Exchange

As the U.S. attempts to break China’s stronghold on critical minerals, scholars discuss how to develop a critical mineral mining industry in Columbia University’s Center on Global Energy Policy weekly podcast.

Basically the core problem is that governments tend to reach for sort of the same handful of tools regardless of what’s actually blocking investment. So that can be broad subsidy programs, undifferentiated funds, tax incentives and so forth. The problem right now that we have is that we’re spending public money without actually having first identified and treated, if you wish, the binding constraint on why private capital is not flowing.

Read more

A wind lease pays the same in a dry year as a wet one, creating a floor under an operation otherwise exposed to weather and commodity prices. When neighbors saw the turbines going up, the reaction was not opposition. It was a question about how to get their own.

On this week’s Energy Capital Podcast, Joshua Rhodes talks with John E. Davis, a fifth-generation rancher and former Texas state representative who chaired the House Economic and Small Business Development Committee. They talk about the seven turbines Davis hosts from the Cactus Flats project in Concho County. Davis, a conservative Republican, argues that a landowner’s right to host wind or solar is the conservative position, and the politics of renewables have drifted from the economics that drive rural Texas.

Davis says the income is what allows the ranch to keep producing food and fiber, and he calls it “a lifeline for us.”

In the episode, Rhodes and Davis get into:

• The property rights argument, why Davis reads hosting wind or solar as a conservative right, not a Green New Deal one.

• Behind-the-meter power and local storage, how rural West Texas could host data centers that bring their own generation, with batteries as community backup when the grid goes down.

• The Queensland parallel, what a trip to rural Australia showed him about moving power from where it’s generated to where people live

How Texas resolves the gap between the power it wants and the wind it is slowing will shape what rural landowners can build and what keeps their ranches running.

Share

Timestamps

• 00:00 – Introduction

• 02:48 – How Wind Came to the Ranch

• 06:20 – The Jane Davis Check

• 08:35 – Running Sheep and Goats Under the Turbines

• 09:43 – What Landowners Should Know Going In

• 11:44 – What Changed After the Build

• 13:31 – Sheep Royalty and the Committee Chair

• 14:39 – Neighbors, Suburbia, and the Politics

• 16:13 – The Queensland Parallel

• 21:23 – Data Centers, Behind-the-Meter Power, and Storage

• 24:37 – A Recovering Politician's Views

• 27:09 – The AI Race and Stopping Wind

• 31:12 – The Elon Musk Story

• 36:05 – The Menard Station Buildout

Resources

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Webber Energy Group (Website)

  • IdeaSmiths (Website)

• John E. Davis, fifth-generation rancher and former Texas State Representative (HD-129), former chair of the House Economic and Small Business Development Committee

• Joe Straus, former Speaker of the Texas House (Texas Legislature)

• Energy Capital (LinkedIn - Spotify - Apple Podcasts)

Company & Industry News

• Cactus Flats Wind Facility, the 148 MW, 43-turbine project in Concho County where Davis hosts turbines. Developed and built by RES, sold to Southern Power (a Southern Company subsidiary) in 2017 (RES - Southern Power)

• Johanna Wilhelm, the “Sheep Queen of Texas” and Davis’s great-great-grandmother, who ran a large Menard County sheep operation (Heritage Park San Angelo)

• SpaceX, whose founder Elon Musk visited Davis’s committee during a 2013 SpaceX incentives bill (SpaceX)

• The Menard station, Davis’s two-acre development on a former Exxon site (EV charging, a beer garden with Wagyu franks, a farm stand, and a book exchange), funded with wind income

Transcript

Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. Today’s guest is John E. Davis, a fifth-generation Texan rancher and former member of the Texas House of Representatives. John represented House District 129 in the Houston Clear Lake area for about eight terms, serving from 1999 to 2015. During his time in the legislature, he chaired the House Economic and Small Business Development Committee and also served on the Energy Resources Committee, giving him really a front-row seat to many of the energy issues that are, you know, continue to face Texans today. After leaving public office, John devoted more time to ranching and land manage- land management out in West Texas. As a landowner, he’s had experience in hosting energy infrastructure such as wind turbines on his property and has talked to a lot of folks about how that has included additional sources of income while allowing traditional ranching operations to continue. Over the years, John has become an outspoken voice for private property rights and allowing Texans to decide for themselves whether or not to host energy infrastructure, and his unique perspective as a former lawmaker, rancher, and participant in the Texas energy economy makes him the ideal guest to sit here and talk to what’s happening out in rural Texas today. So John Davis, welcome to the Energy Capital Podcast.

John Davis: Dr. Josh Rhodes, I’m glad to be here and honored to be part of this podcast, and my first podcast ever.

Joshua Rhodes: Really? Your first podcast ever?

John Davis: No one wants to podcast me anymore now that I’m out of the legislature. They don’t care anymore. So now I’m glad someone wants to hear what I have to say.

Joshua Rhodes: Well, I feel like that will give you a little bit more, uh, liberty to say more things that’ll be a little more interesting, don’t you reckon?

John Davis: Absolutely. Absolutely. Especially in these days when, um, so many folks are anti-renewables in the administration that I’m a part of. I mean, being a conservative Republican, very supportive of our president and everything he does except for the attitude or tone towards renewable power. I don’t mean to jump into it if I want to, but just being a rancher just kind of hurt- hurts us. But the attitude that’s going on now, I say, “What are they thinking?” You know, they’re hurting rural Texas. But I’ll, I’ll let you ask the questions, and I’ll kind of get at a little frustration and disappointment on my part, so.

Joshua Rhodes: Yeah, no worries, and we’ll get there. I would love to chat about that. Yeah, but I wanted to start just, like, talking about your place out in West Texas, and it’s a beautiful place. You let me come out there once. I really appreciate that. And actually, I still have too much of that axis deer in my freezer. Maybe- Do you think maybe Jane Davis could give me some better recipes, some more recipes on what to do with it? ‘Cause I- I’m running out of ideas, and I’ve still got a whole bunch of it.

John Davis: But you know that axis, it’s really tender. It’s almost like a steak. You just kind of-

Joshua Rhodes: Oh ...

John Davis: slice up a lemon and cook it as a steak, and it’s good salt and pepper, and it’s quality meat, so you can’t go wrong with that.

Joshua Rhodes: That’s true. It is true. Tell us a little bit about your property and how wind energy first came to your place.

John Davis: Sure. It... Josh, I think it was back in probably 2016. My brother, Keith Davis, he’s out of San Angelo. He’s an attorney in San Angelo, and we have a place at the Concho County-Menard County line. And apparently Concho County had engaged with their school district for some abatements to attract a wind farm, and they approached us in 2016. We said, “No, we don’t want any of those ugly old wind turbines, you know, on our place.” Then about a year and a half later, they approached us again, and we said, about 2017, “No” again. And then a third time they approached us ‘cause they really needed us to be part of, uh, it’s called the Cactus Flats Project, and it was developed by RES. And that third time we talked it over and we said, “Yes, we’ll work with you.” And so they, uh, negotiated a contract, and what they did, RES actually paid my brother’s law firm there in San Angelo monies to negotiate a good contract. So they paid for about half or two-thirds to negotiate a contract, because if you don’t have a good contract, you don’t have a good fence, then you have a bad neighbor. So it was in their interest to make sure we had a good contract. So we, we have seven turbines out of, uh, 42 in the Cactus Flats project. And it... So actually the turbines started going up in 2018 and started generating revenue for us about 2019.

Joshua Rhodes: Got it. So it sounds like you weren’t too keen on the idea kinda from at the start there, but eventually you kinda worked it around. You know, said they needed your space to fill out the rest of that wind farm, but what was the kinda the final thing that pushed you over the edge there?

John Davis: Yeah, we were the final one. They needed us. And I know Keith, they did a good job negotiating some minimum royalty payments. Leave us for like 25 years, and it goes up incrementally every five years. It’s readjusted and goes up like 5 or 10%, something like that. I think, Josh, what turned it to us is that we have the ranch land there and we wanna make it productive. We want to be able to produce and to produce and b- basically just send money. Keith and I inherited that portion of the ranch from Dad, and Dad worked for Shell Oil, Shell Pipeline. He was a landman, attorney, and did right of way work and easements.

Joshua Rhodes: Hmm.

John Davis: And Dad was oil and gas. We thought, well, maybe, you know, he would want us to do that. So we talked to Dad about it. We said, “Dad, look, these guys are approaching us. It’s wind. I know you’re oil and gas and Shell,” and we’re pretty proud of that ‘cause that’s put all of us through college and took care... Oil and gas has been good to us, all of our families. I said, “But it’s this renewable power stuff, so what do you think?” And Dad kind of paused and he said, “Well, does it pay any money?” We said, “Yeah, yeah, it pays pretty darn good money.” He said, “Well, hell yeah, we’ll do it.” You know, so we said, “We wanna respect Dad and the land,” and, you know, we are fortunate to inherit that portion of- from the family. So he said yes, so we did it, and it’s just been a godsend because we have a lot of cactus, we have prickly pear, we have rattlesnakes, coyotes, mesquites, and it’s just hard to make a living, to generate revenue to be able to make it worthwhile. And plus my wife is always on my ass to say, “Why are you spending all that money on the ranch? You’re doing this, you’re doing that, and you need to be back in the city.” I said, “Well, hell, that’s my heritage. That’s my heritage, too.” And I said, “No, I enjoy it.” So now we are able to get some regular stable income because it gives me stability, because the price, the cattle market or sheep and goat market, it’s high now, but it can definitely go low. If it doesn’t rain, then you got more feed costs, and it costs money. Then you got fences. I have, like six, about eight guardian dogs that live out with my sheep and goats and protect them from the coyotes and the bobcats, and it’s just a constant work effort, but it started generating revenue. If I can tell this quick story, Jane, my wife, if it’s all right, she, uh, always wants to know, “Well, when do I get anything out of this deal? How’s it work? You’re always spending money at the ranch.” I said, “Well, honey, I found out,” ‘cause my wife and I, “You get half of the income.” And so we got the first check came in, and it was made out, ‘cause since we were married and that’s when it happened, so she gets half of it. But she knew it, it was my family, so she was being very kind and she offered that check back to me. She said, “John, it’s your family, so here it has my name on it, Jane Davis, and here’s the money, and sign it over to you or give it to you if you want.” I said, “Honey, what name is printed on that check?” She said, “Jane Davis.” I said, “Well, give to Jane Davis what is Jane Davis’s.” And so she made that deposit of that check, and she hasn’t offered it one time back to me. So every three months she gets an ACH payment straight in her checking account and she says, “Thank you very much.” And she said, “John, keep ranching.” So I can keep ranching. I can raise my goats, sheep, cows. I got some Wagyu cows. I have a lot of fun with it. But it’s work, but the money, the stable income makes it to where you can pay for your ranch hand, pay for your feed, you know, just repair the windmill, water trough bust. It’s just a constant... But again, I’m producing food with my Spanish goats and my Dorper lambs, uh, Wagyu beef. I have some Rambouillet sheep and some mohair, Angora goats. So I feel like I’m producing food and some fiber, and I think fuel. As I go back, it makes me feel even better that we’re providing energy. Maybe I’ll let you ask the questions, but I was just watching on Stuart Varney- ... about AI and the importance of data centers, the importance of power in rural Texas, and that got me excited. These are potential rural economic development tools for us, ‘cause we don’t have anything to develop. So, you know, I’ll shut up, let you ask the questions, but hopefully that answered what you were asking me.

Joshua Rhodes: No, no, for sure. And I love that. I love hearing that story about running into Jane Davis. What is Jane Davis’s... I’ve heard you say that a couple times. I love that story.

John Davis: It’s the truth. She can be bought off.

Joshua Rhodes: I’ll let you tell us if you want us to edit that part out. Well, you finally got to it there at the end there, but you originally were listing off all the things on your ranch that didn’t seem like they did very much in terms of you had coyotes and rattlesnakes and cactus and other types of things like that. And I guess, you know, it makes sense that the wind farm is called, you know, Cactus Flats, but you run sheep out there mostly, right? Like, that’s what you run out there in and amongst the wind farm, right?

John Davis: Yes. Sheep, goats, and cows. But the goats, I got about 200 nannies and 200 Dorper ewes and only about 30 cows. But the goats, I went to the market three weeks ago, Dr. Rhodes, and I got, I couldn’t believe it, $4.80 a pound. So for a 60-pound mutton little goat is like 280 bucks. I’ve never received that much. That’s a great thing. So the goats are actually providing more money than the sheep, but it’s about, they’re usually about half and half, Josh, on the sheep and the goats.

Joshua Rhodes: Yeah, back in East Texas, we only had, you know, cattle, so I was not as familiar with that, but that actually sounds pretty good in terms of, like, the per pound there, but it’s been a little bit. Well, so what do you wish other maybe landowners might have known? Is there anything you wish you would’ve known kinda going into this that you know now that would’ve helped out?

John Davis: It was new to us. Yeah. Keith and I really didn’t know much about it. I know Sweetwater had been doing a lot. They were up in that part of the world. Nolan County and others, I’d heard about it, that a lot of the other ranchers were doing it. And then we didn’t know much about it, but then as we delved into it, it just seemed like it made sense because, you know, the Lord gave us a lot of wind up here and a lot of sun. And if there’s any way we can harvested the wind before for water, for windmills to bring that water, bring it forth out of the earth, and we have now some wind that can turn and provide some income so we can keep ranching. And nothing really, I think the, the players were very responsible, the developer very upfront, professional. Again, paid for our, a lot of our attorney’s fees because they wanted to be successful. And it just, you know, wind and solar and even these batteries I think are just great, that provide so many opportunities for rural Texans, ‘cause there aren’t many economic development opportunities for us out there, Dr. Rhodes. There’s just not. And if we can combine that with producing our, you know, the regular commodities, the sheep and the goats and the food and fibers, it helps out. And we get income from deer hunters too. We have deer hunters who are at lease part of the land. Between my brothers and me, a little over 3,500 acres, we have deer hunters that pr- help provide some income for us too. So that’s good. But the steady, man, the steady eddy, that wind turns and generates that revenue for us. But there’s nothing really I would’ve, oh, I wish I knew this, I could’ve done something different. Not really. So it’s been positive.

Joshua Rhodes: Well, that’s good. So once the project got built, did anything change in, like, the day-to-day operations or what may have changed or, you know, what didn’t? Did any of the farm-

John Davis: Only thing that changed is I could get across... I used to take, it’s called Stony Lonesome Ranch-

Joshua Rhodes: Mm-hmm ...

John Davis: for a reason. There are a lot of rocks and a lot of stones, and at one time, it would take me about 25 minutes to get from my gate entrance to the top of the ranch, ‘cause sometimes you’re only going one or two miles an hour. But after they came in and put in the turbines, hell, I timed it. It’s three and a half minutes. My gate entrance, boom, to the top. New roads. I was able to get to one end of the pasture to the other, and that was a big help. So that’s been positive. It’s been frustrating. You hear others say, “Well, these turbines, they’re so loud and they kill your birds, and you can’t hear yourself talk.” And that’s a bunch of bull. And I’ve not seen one dead buzzard or one dead dove or those Spanish eagles, Mexican eagles, not one dead bird. And it’s just a lie and disinformation. The hunters, it hasn’t affected all the hunters. It just- it blends in. They do well. That doesn’t hurt our hunting income, hunting lease. On the contracts, you know, do some indemnities and stuff like that. So funny, during the summer, July, August, September, those big old turbines would cast a shadow, and you will literally see the sheep- laying, following like a sundial, following the shade- ... of those turbines or at the base of the turbines. Hasn’t hurt at all. It hasn’t hurt the environment or the birds. You can’t even hear them. It’s just a slight humming sound. You know, they blend in. I think they look angelic, uh, Dr. Rhodes. I think it’s just the way those big beautiful white wings and I think, I thought they were angels at one time.

Joshua Rhodes: Oh, that’s great. You got some goats, got some sheep, got some cattle. But you come from a long line of, like, sheep farmers though, right? You told me a story one time that you were descendant, you’re a descendant from Texas sheep royalty. Is that right?

John Davis: Dr. Rhodes, you shouldn’t have brought that up. I used to be chairman of the Economic and Small Business Committee there in the Texas House under Speaker Straus, and in my committee I would be up there and I’d have someone come testify, but when they got up there I said, “Please, if you don’t mind, don’t make eye contact with me. Please keep your eyes low because I come from royalty.” Johanna Wilhelm, my great-great-grandmother. If you Google it, Sheep Queen of Texas is Johanna Wilhelm. So I have blue blood running through these veins of mine. And so I asked them, “Please don’t make eye contact,” and they usually went along with me, you know? So thank you for bringing that up. I was trying to show some humility. I didn’t want to talk about it, but I do appreciate you mentioning that.

Joshua Rhodes: No worries. I imagine that was a pretty fun thing to say to somebody in the middle of a committee hearing.

John Davis: You gotta have some fun. You can’t take yourself too serious, Dr. Rhodes. Oh, yeah. You gotta be able to laugh at yourself and have some fun with it.

Joshua Rhodes: Oh, no doubt. And you know, I’ve heard other folks say the same things in terms of seeing, you know, wind turbines or solar farm, like kind of a drought-proof crop. Like, you know, you get paid whether it rains or not, or, you know, whatever the price of beef or egg or lamb is. I think it works out pretty well. But some rural communities often have kinda mixed feelings about energy projects. Like, did you get any reactions from neighbors around you when, like, the wind farms started coming into your area?

John Davis: A lot of my neighbors are my family. They’re some kinfolks because Johanna, she had at one time like 35,000 acres. So the only reaction I had was my aunt... So Concho County did the project and that’s where the abatement came forth. That’s where they... Also our ranch is in Menard County, and my aunt’s in Menard County and she saw those wind turbines, so she called me up, said, “John, how do I get some of them?” I said, “Well, I don’t know, Aunt Lou. They have to approach you on that.” So the only thing we’ve had is people wanna know how they can get some of that royalty income. ‘Cause ranches are further apart, spread apart, but I think if you get into more of the urban areas or more retirement communities, there could be more of a issues. You know, some developers may start considering making it kind of community Those that are a larger areas, the landowner w- has the tur- this is just an idea I’ve, I’ve heard, I thought it made sense. If you have your turbines, then maybe those that are visible within distance, maybe the community, they participate too in some of the income. You know, they can have some. And they see it, they may not like the look of it, but if they’re getting a little money from it, they may not complain or won’t see it, it doesn’t look as bad if it’s paying them some money too. So that’s one idea as you get closer to more-

Joshua Rhodes: Yeah, no, absolutely. And I think before we hit record on this podcast, we were talking about how we’re both multi-generation Texan, but we actually met in Australia. Like, we met in Queensland, Australia, ‘cause some folks down there brought us down to talk about how we do things in Texas, and that was one of the big differences between how things are done here versus how they’re done in some other areas, is a lot of that income, whether that’s tax income, other things like that, it kinda stays local. It doesn’t first go to the state and then get, like, distributed back, and that’s a historical artifact of kind of a post-Civil War type how we set up, like, the Texas state constitution that we’re under today. You brought up a good point about, like, folks in, like, more rural, I mean, more suburban areas. And so what do people in cities or kind of in these more suburban areas, if they’re anti-development or whatever, what do they misunderstand about how rural landowners think about their land and property rights?

John Davis: I think most people in suburbia support the idea of renewable power. I think they like the idea of it. I think where it gets to be a political issue, I think that’s where the issue comes in. I think most people agree that if God gave us wind and sun, use it and harvest it and do that. So most of those in suburbia, I think, I don’t think have a problem with it. It becomes political, and that’s kind of where my frustration is, and it may be because of the oil and gas industry. Back in when I was in legislature in, in I think 2001 we passed it. I came in in 1999. In 2001, we set certain, like 10%. I think Bush started it, then Rick Perry kind of finished it. We’re gonna set some goals of 10% to be renewable power.

Joshua Rhodes: Mm-hmm.

John Davis: That time we didn’t have any, and now it’s gotten to where it could be 40, 50% during the heat of the summer that it’s coming from. Of course, most of it’s natural gas, but at, at times it shifts to where it could be 45 to 55% of solar panels or wind. Uh-

Joshua Rhodes: Right ...

John Davis: hey, that’s cool. That’s keeping the electric bills down for everybody because it’s taking advantage of the sun, and it’s set up, and it’s free money. I mean, it’s free energy. It’s set up, the infrastructure’s there, so that’s keeping everybody mama happy in suburban- Hmm ... Houston or Clear Lake or whatever community in San. It’s keeping their bills down, Dr. Rhodes, because that’s renewable. It’s already there. Let it... It’s paying dividends. Why would we want to undermine that?

Joshua Rhodes: Right.

John Davis: Reason why we wanna undermine it, I think some of those in the oil and gas industry are feeling threatened, that maybe, oh, we’re not gonna be able to use enough natural gas. Oh, we can’t do that. Well, hell, make that LNG. Let’s ship it over to Ukraine. Uh, you know, make it compressed. There are plenty of uses for it, but if we can diversify, split it out. Suburbia, they don’t have a problem with it. It’s political when it becomes politicized, and you get the groups, the Michael Quinn Sullivan groups, people that are doing the work for Tim Dunn and Wilks Brothers and oil and gas, and they’re being their lackeys, and they’re doing their bidding. They make it political because it goes to Republican primary politics. They can get that two or 3%, and they got ya. But for real, it’s a lifeline for us because it is economic development, and it’s keeping the electric bills down for Texans. It’s mind-blowing that my conservatives aren’t supporting this or not encouraging it or helping ranchers and rural Texans, and I’m just disappointed, and I don’t get it. Anyway, so

Joshua Rhodes: Well, fair enough. So speaking of like some of the folks that are in Austin or that are in, you know, power now, like-

John Davis: Before you get to Austin, but back to Queensland, when we were there to do that trip, what made... Of course, whenever we were there, we said, “If you closed your eyes and opened it up, you thought you were in Midland, Texas.”

Joshua Rhodes: Right.

John Davis: But except for white-tailed deer, we’re hear- a bunch of kangaroos jumping around. But what made sense to us is most of the population in Australia, 90% is along the coastline. So once you go into the park, the land, it’s all s- desert and sun and wind, that it makes sense for them, and I think they were seeing that, that you can put solar panels when there, and then you just ship it, you just pop it up with the cables over to the urban areas where the population is, and then they have a continuous source of power that’s generated from the rural communities. And I think that’s what we saw, and that’s the same thing that we’re seeing in our West Texas. So it, a lot of similarities there. So I just wanna get that in on our trip to Australia and the Queensland, how that makes a lot of sense that the rural can produce the power and it can be transmitted through transmission lines or cable, whatever, to where the populations are. It’s cheap, cheap form of energy.

Joshua Rhodes: Right. That was definitely one of the takeaways is that Queensland’s kinda like the Texas of Australia, it felt like, in terms of, you know, where the people were, where the resource was, the outbacks. I always had this like mythical idea of what the outback in Australia was. Basically just West Texas with kangaroos as far as I can tell. I mean, it’s just like not too much different. But I mean, they’re trying to build infrastructure, and they were bringing us down there to think about how we might be able to build it or how they might be able to do it like us. I mean, right now, Texas also needs to build some more infrastructure. I mean, since then we’re building some bigger transmission lines. There’s these AI data centers and like other types of things going on. I mean, if we need to build like a bunch of infrastructure to, you know, keep the Texas miracle, the economy going, you know, that you’re a part of shepherding a while back, like what lessons, you know, should policymakers that are in Austin right now, what lessons should they be taking from folks like you that are, you know, actually hosting this infrastructure?

John Davis: You know what? I’m not sure if we were being recorded earlier, but I was listening to Stuart Varney and China.

Joshua Rhodes: Mm-hmm.

John Davis: The threat from China and talking about AI. And kind of the key in order to AI, that’s the future for our children and our grandchildren. If we let China take over that, we’re in trouble From my understanding, data centers is part of the AI, is part of processing that, and that you have to have data centers and you have to have the space to build them and generate and develop your economy, not only for free America, for the free world. And rural West Texas has a unique opportunity to develop data centers that are power then comes behind the meter, not off ERCOT or off the grid, where you have a Google or a whoever that they’re developing these data centers provide their own power, and that’s jobs for rural West Texas and income and economic development and jobs, and we’re diversified and it makes a lot of sense. And another thing, dealing even with wind and solar panels, but also batteries. This whole battery storage system makes so much sense, Dr. Rhodes. And one thing I’ve always believed about one of the data centers or they’re working with the cities, maybe it’s Amarillo or I can’t remember where, but if we ever have ERCOT has a shutdown or you- something goes off and let’s say Google has a data center in Amarillo, and then all of a sudden a freeze comes through or a major shutdown, then you work agreements where they shut down for their data centers, switch it back to their power grid in Amarillo, then boom, Amarillo’s got power.

Joshua Rhodes: Yeah.

John Davis: And all these smaller communities should be able to... Like here in Menard, Texas, they were trying to put in this little small battery storage system, and that’s something that made sense. All right, put in this BESS, and let’s say Eden or Brady, they all go down, but all of a sudden we have a battery s- storage here in Menard, then flip the switch and boom, power is for Menard community. Those are kind of relationships I think they can get to, and it becomes a backup, it’s decentralized, and it just Again, it makes a lot of sense. Those are things that the policymakers need to be pushing in session, is encouraging development in rural West Texas. Because it’s not only rural economic development. Heck, it’s for our future, for our battle against China and Russia and, oh, bad players, that we have a chance to get a lot of winds by being proactive in doing that. So hopefully some cooler minds will prevail, but again, goes back to politics, goes back to primary elections, go back to that 2 or 3% who vote in the primary.

Joshua Rhodes: Yeah.

John Davis: And that’s the world that they’re trying to control. So anyway, that’s my little spiel.

Joshua Rhodes: John Davis, you’re a politician. I mean, I’d be shocked if you didn’t have something to say about just about anything. Speaking on, on that, so, I mean, you’ve been a politician in Texas. You’re a recovering politician perhaps. I mean, but did your views change at all, like, after you left the State House and kinda got more... You left the State House in 2015. You got approached in 2016, if I remember correctly, for the wind. So did your views change at all from when you were in the State House from when you, you know, were mostly coming at this as a landowner?

John Davis: No. No, absolutely not. I mean, the legislation, of course, I think it was 2001 when Perry signed it, or I guess it was Bush, but it would’ve happened. But it takes a while for that infrastructure. Then the CREZ line was being built too, Dr. Rhodes, if you remember.

Joshua Rhodes: Hmm.

John Davis: That CREZ line was coming through. There wasn’t a whole lot of activity. Again, that was my first term and second term. I mean, I’m a roofing contractor, I’m the legislature, and I really didn’t totally understand that, but it was what my party, Republicans, conservatives were supporting and pushing was renewable power. Democrats think they’re progressive, but we are. I mean, we’re conservatives, and what’s more conservative is using wind and sun that God gave us and use that. But I think it was unanimous. Maybe one person voted against it. I can’t remember, but everyone supported it. Democrats, Republicans, conservatives, liberals. It just makes sense. Then they approached us in 2016. That’s about the time I was getting out But we are, hey, someone approached us, great. I mean, if oil and gas came and approached us, yeah, I’ll take it too. I got no problem with... I love oil and gas. I’ll take that. I’ll take oil. I can be bought. It just oil and gas, but we just happened to strike wind, Dr. Rhodes, and it just came gushing out. So when that wind-- I say, “Turn, baby, turn.” Now you saw me in Australia, I had my hand was turning like that windmill, and I was... politician juices were flowing. I said, “Turn, baby, turn, and put that money in my back ass pocket.” We gotta laugh at all the Aussies, but it’s true, you know? If drill, baby, drill, I’ll take that too. But if we got some wind, don’t shoot us down. I mean, that’s private property rights. It’s our land. It’s mine. It’s a way to get grit, to use the land to support your family, support your next generation. Don’t take away what I can use for my private property to sustain my family and to keep the ranch in our family and our heritage. Don’t try to take that away from us or denigrate it because it’s a good diversification. I mean, it’s providing so many winds. Again, lower electricity bill for everybody. It’s just massive benefits. Anyway, the diversification is critical.

Joshua Rhodes: That makes a lot of sense. You know, you brought it up earlier, it does kind of boggle the mind right now that we’re in such a race to power these data centers to try to win the AI race, and they’re stopping new wind farms and things like that getting built in Texas using the FAA to, you know, hold up approvals for things like that. But I mean, I... the math doesn’t add up. You know, it doesn’t add up to me. We want more energy, but then we’re gonna, you know, stop this one particular form of energy that happens to be, heck, it’s one of the easiest ones to build right now, or it has been.

John Davis: And Dr. Rhodes, I’m not sure if I’m talking over you, but it just keeps on giving. Every day, the wind blows, the sun shines. It’s a gift that keeps on giving. Once that infrastructure’s there, it’s not a either/or, it’s all of the above. They all can work in unison. They all can work together. But it’s a gift that just keeps on giving. It should be able to work hand in hand. But again, it’s where you’re getting politics involved, and you get this certain groups that just wanna denigrate something. You know, give me a break. But if you’re gonna compete with China, by gosh, we better get moving on it, ‘cause it’s serious.

Joshua Rhodes: Yeah. And you can tell me if I get this right. Sometimes my read on where kind of the political lines around, uh, particularly renewables in Texas fall is like, if you’re out there trying to actually make money off of the land, like you’re trying to raise crops or raise livestock or other things, like if you’re trying to actually make money off of the land as your primary source of revenue, like is it just a different- revenue stream. Like it’s just a diversification of that. But if like, if you’ve bought land just because you wanna look at it and you’re not necessarily trying to make a living off of it, I don’t know. Does that seem right to you?

John Davis: Sure. That-- As Texas, what, we’re gonna be 50 million in 20 years or so, or more and more people wanna find, buy their little ranch out in their chateau or whatever out in the countryside and will do that, and they’ve made a lot of money, and they’ve done well. Good for them. Bring ‘em on. And that’s a good thing. That’s economic development for these smaller rural communities that do work remote. More people can get online and do it. That’s fine But also remember to produce that lamb chop or that wagyu steak or that cabrito, you need land to do that. You need ranchers to produce that. We don’t wanna all become entertainment industry where all we got a bunch of deer hunters on the land riding around in four-wheelers shooting hogs and having fun and hooping and hollering. That’s great, but there are some of us that are trying to be producers to provide that food so they can sit down and have that lamb chop or that rib eye. It comes from a ranch. In order to have it come from a ranch, you need to have income, and something that’s sustainable, which is what wind and solar or batteries or, heck, geothermal. That’s a new thing too, geothermal. If it’s nuclear, if it’s coal, I don’t care. But these are, these are sustainable by geothermals and some of y- the wind and sun and... That way we can keep producing. We’ll have deer hunters come out, they, we get their money, that’s great, and some people buy little, little ranchettes, 50 acres, 100 acres, and they get their four-wheeler and zip around and that’s fine, but don’t be complaining about wind or solar because that is what allows us to keep doing it, to diversify. And that, it’s so important to understand that. As my pappy said, but Jane likes to take credit for it, it didn’t just happen to get that steak on the table. It takes having an operation, and that wind, that renewable power helps part of the equation to allow us to keep being producers.

Joshua Rhodes: No, that makes sense. That’s the second time you said, you know, about deer hunters coming out there and, you know, paying lease fees. Are you telling me I didn’t... Do I owe you some money for getting that axis deer last year? Oh,

John Davis: no, sir. No, no, no, no. You got a special deal with me, Dr. Rhodes. No, sir-ree.

Joshua Rhodes: That’s right.

John Davis: No, you got a special deal. I also have some red stag now, Dr. Rhodes. Red stag.

Joshua Rhodes: Okay.

John Davis: Red stag and axis are the best of the best, so you gotta bring your little child out there to go hunting with us, and then get a little red stag doe or something.

Joshua Rhodes: Absolutely. I, I will definitely take you up again on that again. And speaking of kids, when you think about your grandchildren, future generations, those that’ll steward the land, you know, after you, like what role do you think the infrastructure you have and maybe other energy infrastructure will play in keeping your ranch going?

John Davis: I’m gonna answer that question, but I’m gonna also tell you another story, if you don’t mind.

Joshua Rhodes: All right.

John Davis: But I think for future generations, it just makes sense. I think it’s in place, Dr. Rhodes, and the only thing that can change is the efficiency of those General Electric turbines that are turning, or the solar panels are more efficient and bring in the wind. The land’s there, it’ll keep growing. But when you mentioned future generations, it reminded me of something, and if it’s okay, I’m gonna s- tell a quick story. Elon Musk came to my office whenever I was chairman of the Economic Small Business Committee, ‘cause we were passing a SpaceX bill, I th- one that came through my committee, I think I actually carried it. So he came to my office- This was a 2013. Came there and we sat down, we visited, and as we were, uh, talking, he was telling me his favorite... I don’t know how the conversation come up, but his fa- “My favorite cartoon as a kid was The Jetsons.” Hmm. He thought The Jetsons cartoon, as a matter, was the coolest thing, ‘cause they’re all zipping. Remember, they’re all in these little-

Joshua Rhodes: Oh, yeah ...

John Davis: automobiles and they’re here, here, they’re zipping everywhere. And it kind of brought me back to where I am. I’m 65, and I know that he’s producing these cars. You can get in that car and there’s no driver, and it takes you wherever you wanna go. It, it’s programmed. What I’m looking at doing, I don’t have an EV, but I’m looking at, I might get one, put it there at my house in Georgetown Have it to where I can just go in with a level two, plug it in at night. But I’m gonna have as I’m getting older and you can’t get around, why not get one of those little jets and cars, little EVs that he dreamt about, and it’s come to fruition. You hop in that car, there’s no driver. I wanna go, take me to H-E-B. All right, I’m ready to go to the ranch, two-hour drive, take me to the ranch, get to the ranch, get in my truck, and do my thing. I can see it as I’m getting 75, 85, maybe 90, jump in that little Jetson electric v- and take me to the ranch now. I’ll just sit back and let’s go to H-E-B or take me to First Baptist Georgetown and then do some worship in there. But you get in, it takes you there, and it brings you back, and you plug it in, and then you do the same, you repeat, just keep doing it over. I’m seeing that as I’m getting older, that maybe in the next few years I may go and get one of those self-driving vehicles that you just get in and it takes you where you wanna go. As I get older, as you age in place, there’s no reason why I can’t stay at home as long as I can and have that little EV. I just jump in it, it knows me and takes me where I wanna go. And you see them on these, was it Waymos in Austin, these cars driving around without... But I’ve heard that they’re doing it now where these Teslas... So that’s what I’m looking doing. I’m gonna try to get one maybe in the next few years and just try it out and say, “Jump in there and take me to Pecan Spring Ranch.” And it keeps giving you independence for the elderly as we age. And I’m thinking that makes a lot of sense, ‘cause most people, they gotta take the car keys away from dad when he’s 85, he’s dangerous or gonna kill somebody, he’s driving too slow on the road. Well, don’t take the keys away from him. Get him an EV and just jump in and go. And that’s what I think the future is, and that’s when I’m trying to fulfill Elon Musk, you know, his dream as a kid watching The Jetsons, and I’m gonna do that in Georgetown, Texas. Jump in my little Tesla, whatever it is, I’m not sure what they’re called, but jump in that and go. And I may have gotten sidetracked on that, Dr. Rhodes, but when you said the next generation, that made me think about, like, I had to take the keys away from my dad, you know, when he was 9-- 88. Well, it’s hard. You don’t have that independence anymore. It’s gone. But if you have a little EV, you jump in it, it takes you to wherever you wanna go, and you still have your independence. You live at home, you age in place, and that’s a positive, good thing for that. Anyway, so I’m gonna do that in honor of Elon Musk, get my little Jetson automobile. It may look like a flying saucer, I don’t know, but I’ll be zipping around Georgetown, say, “There he goes.” Or I’ll be on the road to the Pecan Spring Ranch. Who’s that crazy man in that driverless car? Well, that’s John Davis

Joshua Rhodes: I tell you, there’s plenty of them driving around my neighborhood. I think they use some of the part of town I live in to train some of those, so if you wanna come get a close-eye view of one, we can. Maybe Elon will let you get in one of them rockets too one day while we’re at it.

John Davis: Yeah. Yeah. I think I wanna stay at the ranch.

Joshua Rhodes: Okay. Maybe. We’ll see.

John Davis: I’m gonna stay at the ranch. I’ll watch them go up in the stars, but I’m gonna stay at PSR.

Joshua Rhodes: Oh, fair enough. Fair enough. Keeps, uh, keep your feet grounded. I mean, but in Menard, didn’t you put in an EV charging station at the Menard station? Am I remembering that?

John Davis: I sure did. And that’s another thing, if you don’t mind me just dropping on, adding to that. By me having the wind and that extra income has provided me a little bit of discretional income to where I’ve done a little economic development in Menard. It’s two acres, an old Exxon gas station. We pulled out three of those gas tanks. This has been a three-and-a-half-year project, and the first thing my daughter-in-law says, “Papa Jed,” after I bought it, “this needs to be an EV charging station.” I said, “You know, hell, I never thought about that.” So after three and a half years, and one of the last things we put in was an EV charging station. So I have one there. It’s a Liberty Plug out of New York, and I talked to the manager in San Saba. They have one in San Saba, but there’s the guy, and his name was Denver. But then the Denver said his mentor’s been a guy out of, uh, Fredericksburg. They have three or four of them. So I called him and he said, “John, you gotta go with Liberty Plugs.” And so he gave me their contact. I called them. So they sold me their latest and greatest. So I have... It’s a level two, two plug, two chargers. I was at the station this morning, there was a lady driving through in her Mustang, and she was charging it up.

Joshua Rhodes: Hmm.

John Davis: You know, it’s being used. She said, “I’m-- We’re trying to get to Amarillo. They only have 36 miles. I need to get some more juice.” So she’s charging up to get her to the next stop. But yes, back to my point, I’ve been able to develop the Menard station to where it’s an educational... I have some sheep there and goats there. I have peacocks, chicken, ducks. I have turtles, fish, and we have a music stage. We’re about to start a beer garden. It’s called Range Canning Company Beer Garden, where we’re gonna start that- When you were there, I don’t think the stage was built yet, Dr. Rhodes, but it’s built. We think this next couple months we’re gonna start selling Wagyu. I’m talking to Hudson’s Meat there in Austin. Hudson’s Meat. Anyway, he’s gonna make Wagyu frank hot dogs for me. So we’re making from the Wagyu beef, and we’re gonna be selling them at the beer garden. My point is, with a little extra income from the ranch, from the wind turbine gives me extra disposable income. We’ve done a two-acre development there in Menard. It’s gonna be a music station festival. We teach kids about sheep. It’s a... Laura Bush designated us as Texan By Nature. Then we’re a m- we’re a monarch way station for pollinator. I’m using a guy named Bill Neiman out of, uh, Native American Seed. They, pollinators, they did Lady Bird Park, and then Bill’s in Junction, Texas. So he came over and he personally oversaw the development of that. So it’s a white pollinator, and we got beer going. We got selling native plants. My cousin’s a native master naturalist, so she’s gonna start selling plants, and she’s gonna sell dickey-doo to Wagyu hot dogs, and we’re gonna be selling beer, and we’re gonna have live music on Friday nights and Saturday nights, and I might even have a little church service on Sunday, you know, to get some of those sinners in on a Sunday. It is a cool area, and it’s, we have a family tree there, and we sell our Wagyu beef there and our Dorper lamb there, and it’s also, um, provide free reverse osmosis water and free coffee, uh, for the community, but they give donations back. They come in and we get about four or $500 a month, and they get the water. And it’s kind of a community area, and it’s a book drop, book exchange, and all that. So it’s really pretty cool. But again, a little extra wind money gives me some money where I can give back to the Menard community, and I do have an EV charging station. So it’s been... Sell fresh farm eggs, too. They got eggs there for sale and, you know, onions, jalapenos, eg- We have a vegetable exchange table. If people have extra squ- You know, everybody has so much extra zucchini, drop off the squash. And anyway, it’s kind of a cool area. But again, the wind and all that stuff helps to make all that happen, you know?

Joshua Rhodes: No, that’s great. Hudson’s great. That’s where I took that Axis after I got it off your place.

John Davis: They do a really good jo- I like this guy. I think it was Thompson or Thomas, I think

Joshua Rhodes: Man, but I tell you, I’m gonna have to get me some of them Wagyu hot dogs. I’ve never heard anyone making Wagyu hot dog. That sounds real good

John Davis: He actually make, call it Wagyu franks. I tried one last night. It was excellent. So I’m taking my, I have like 100 pounds. He’s gonna make them into Wagyu hot dogs. And he also said we can make some bratwurst. Is that what you call it?

Joshua Rhodes: Think so.

John Davis: He’s gonna make those for me too. So we’re gonna make, have a, a German theme this stuff too, so. I gotta get you back out to the ranch, Dr. Roe.

Joshua Rhodes: Yeah, no, I’d love to come out there and see what all we’ve done. It sounds like it’s gonna be a hoot out there at the station. So one final question, kind of wrap it up. I mean, you know, you’ve seen Texas from the capital to the ranch. What do you wish more Texans understood about, you know, the people whose land hosts the infrastructure that powers the state and the economic miracle that it is?

John Davis: We take care of our land.

Joshua Rhodes: Yeah.

John Davis: We’re environmentalists. We protect our land. We wanna protect the li- just this morning, I’m at the ranch, I see some bob-whites, and I see about 10 little baby little quail just running around. We wanna protect them. We wanna protect our environment, and I just hate this perception that, well, you’re the Green New Deal. You’re like AOC. You know? That’s all you are, an environmentalist, you know? So I kind of joke around. I had this PhD student from Berkeley who was, came out to visit the ranch to see a wind turbine, and I had her hug a wind turbine. So there you go, hug a turbine. But it’s not AOC. It’s not the Green New Deal. It’s conservative. It’s smart. There are multiple winds, no pun intended, but it’s wind, wind. There are multiple on all facets for the ranch, the landowner. It helps the community. It helps the education system. It provides tax dollars back to the county, and the counties won’t... They should have a, give an abatement because they can have a say-so on what happens to, either it be wind or be it solar or battery or they give a little bit of money, they’re at the table. They can control these projects, and it becomes good for the community. It becomes build roads, build your, your potholes, but it’s just the perception, and it’s the Green New Deal. It’s AOC. Well, it’s not. It’s John Davis, West Texas conservative, landowner, steward of the land, strong property rights, so I can keep being a producer to help, one, feed America, one, provide national defense, diversification, develop AI, encourage these things which helps- Us keep growing as a state, and we’re always very proactive in Texas. We’re always looking for new innovations. We’re not sticking our head in the sand. It was Republicans who came up with conservatives. Speaker Laney was a Democrat there, and George Bush was there too, and then you had Perry and Laney, and we have Tom Craddick has been supportive of it. It’s all, it’s a bipartisan thing. It’s not energy and good clean energy and renewable power. It shouldn’t be polarizing. It’s- should be unifying. But again, primary politics, I’m just really disappointed in my party being so denigrating of... You can still raise your sheep underneath them. You can still run cows. You can still deer hunt. It doesn’t affect it. It just gives us another source of income, and I just wish my party would stop. But again, it’s the moneyed interests. Nothing’s different. It’s Hunt, be the Hunts or whoever, but it’s the Wilks brothers and it’s Tim Dunn, and they just wanna be kingmakers. They’re in the Republican primary politics, and they’re just have bought a lot of lackeys that would just follow along and say, “Okay.” Because I guess their fear, oh, we’re gonna use too much wind, and we’re not gonna have enough for our natural gas. Well, hell, there’s a lot of people want our natural gas. We have ships coming now from, what, the s- Hormuz Straits shut down, so we got ships, containers coming to America. So let’s keep growing, but don’t shut out rural Texas, and don’t denigrate us. We’re just trying to be a part of the solution and be innovative and creative. I’m not sure if I answered your question. I start rambling, Dr. Rhodes, and sometimes you can’t shut me up, you know?

Joshua Rhodes: That works just fine. And actually, that’s a great place to kind of end there. So John Davis, thank you for coming on The Energy Capital Podcast.

John Davis: Honored to be here, and I hope you’ll invite me back.

Joshua Rhodes: Absolutely.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Texas approves grid standards to keep data centers online | E&E News by POLITICO

The Texas Public Utility Commission voted to require data centers and other large loads to stay online during temporary grid disturbances. The goal is to avoid cascading power outages potentially caused when one data center trips offline.

“Without these requirements, events involving [large computational load] loss would increase in magnitude, potentially leading to system frequency and voltage instability,” ERCOT said in an impact statement, according to a PUC staff memo.

Frequency refers to the number of complete cycles electric currents undergo within one second. An abrupt frequency change could lead to localized power outages and, potentially, even grid wide issues, according to electricity experts.

Inside the AI power wars | Latitude Media

The Catalyst podcast breaks down how artificial intelligence procurement works and the differences in chip strategy among tech giants.

I think the action is going to concentrate in Texas. I think the way big data centers, big data center campuses are going to look like in a few years from now. Again, like obviously the scenario is we keep adding tens of gigawatts per year that keeps growing. So we’re in this AI scenario. I’m not religious. I’m not saying it’s going to be a terabot per year. We’ll see. But just if you sort of keep on that trajectory, I think at some point the only path is going to be to essentially build these massive campuses in West Texas. It’s already sort of going up pretty tremendously in West Texas, and I think it’s going to keep going up.

Read more

I shared the above bill with my wife and family. Everyone was blown away. Where could they get the same deal? Several friends and family members signed up for solar right away.

Except for my mother-in-law in Dallas. She waited a few years. So when, right before COVID, she started getting a ton of pushy solar salesmen coming to her door, she was primed and decided to go for it. She detested the sales tactics (they treated her like she was old and didn’t know what she was doing.) But she had social proof of the benefits of solar from her son-in-law.

Things didn’t get better. Every interaction with the solar company from the point of signing the preliminary agreement became the closest thing to the worst customer experience ever. There was roof damage. The bill increased exponentially. Zero responses to customer calls. So she went online to check, and every review of the solar sector was horrible. Horrible enough for enough people in Texas that the Texas attorney general launched an investigation earlier this year.

Read more

The scale explains why. ERCOT estimates up to 110 gigawatts of new large loads could seek to connect over the next five years, more than double today’s system peak of about 86 gigawatts. Before any of that generation arrives, about $37 billion in transmission costs are already baked into the system, pushing rates up roughly 3.5 percent a year for every customer. The open question is how much of the new bill supports the new demand.

Subscribe now

On this episode of the Energy Capital Podcast, Matt Boms talks with Bryn Baker, senior director of policy for organized markets for the Corporate Energy Buyers Association and leader of the Texas Energy Buyers Alliance, the state chapter representing large energy buyers. Baker walks through TEBA’s proposal: charge minimum demand charges on large loads at levels that studies suggest would leave other customers’ rates neutral or lower.

Her bottom line on whether growing demand can cover the cost of system upgrades: “We want them to.”

The conversation also works through:

• Batch zero, ERCOT’s first group study of new large loads, and the chicken-and-egg problem of qualifying. To secure financing, developers must show results of an interconnection study, which requires a non-refundable security deposit.

• The 765 kV build-out, Baker’s case for converting the grid’s two- and four-lane electrical highways to eight-lane highways as the system ages and new demand arrives.

• Energy attribute certificates, the tracking system ERCOT’s board approved on June 2 that would let buyers claim any generation source, from nuclear to storage, not just renewables.

How the PUC sets these charges will decide what the next wave of demand pays and what current ratepayers carry as the grid grows.

Share

Timestamps

• 00:00 - Introduction and who TEBA represents

• 02:47 - The corporate buyer market and Texas' share

• 04:13 - Why Texas beats PJM for large loads

• 06:45 - What data centers offer the average ratepayer

• 10:02 - The batch process and batch zero

• 12:25 - Grading the compromise and the qualification problem

• 15:33 - Transmission planning and the case for 765 kV

• 19:13 - 4CP vs 12CP and who pays for the wires

• 23:05 - Energy attribute certificates: the sleeper story

• 26:54 - EACs and unlocking demand flexibility

• 28:19 - The EAC program: process, timeline, and what's novel

• 30:10 - What makes Baker optimistic

• 32:13 - The real mood in the market

• 35:16 - Renewables, batteries, and keeping costs down

• 37:09 - Rethinking economic transmission planning

Resources

People & Organizations

• Matt Boms (LinkedIn)

  • Texas Advanced Energy Business Alliance (Website - LinkedIn)

• Energy Capital (LinkedIn - Apple Podcasts - Spotify)

• Bryn Baker, Senior Director, Organized Markets Policy (Bio - LinkedIn)

  • Corporate Energy Buyers Association (Website - LinkedIn - X - YouTube)

  • Texas Energy Buyers Alliance (Website - News)

Company & Industry News

• Texas PUC Moves Forward with 12CP Methodology

• ERCOT’s 4CP Mechanism Living on Borrowed Time

• ERCOT Votes to Streamline Process for Data Centers Looking to Join the Power Grid

• Request for Comments on PUCT Draft Report Regarding Transmission Cost Recovery in ERCOT

• Large Texas Customers Seek Creation of Energy Attribute Certificate Trading Program at ERCOT

Filings, Programs & Processes Discussed

• NPRR1264, Creation of a New Energy Attribute Certificate Program (TEBA’s filing, December 2024; Board Report dated June 2, 2026)

• Understanding NPRR1264, ERCOT Stakeholder Education

• ERCOT Board of Directors Meeting, June 2, 2026 (batch zero and NPRR1264 votes; Dallas Fed economic update at Agenda Item 12)

• Rulemaking to Implement Large Load Interconnection Standards, PUC Project No. 58481

• Evaluation of Transmission Cost Allocation, PUC Project No. 58484 (the 4CP to 12CP proceeding, December 2026 deadline)

Books, Articles & Reports Discussed

• CEBA 2026 State of the Market (full report PDF) — the 143 GW since 2014 figure

• Impact of Limiting Solar and Wind Development in the ERCOT Market (Aurora Energy Research for the Texas Association of Business, April 2025) — the 10% household bill increase

• Renewables and Storage Will Save Texans $115 Billion Over the Next 15 Years (TEBA study conducted by IdeaSmiths, February 2025)

Related Podcasts by Energy Capital

• Who Pays for the New Grid, with Pablo Vegas

• How Texas Decides Which Data Centers Connect, with Tiffany Wu

• How Texas Plans to Serve ‘Infinite Demand’, with Eric Goff

• What Batch Zero Settles and What It Leaves Open, with Caitlin Smith and Jason Ryan

Text Transcript

Matt Boms: Hi everyone, and welcome back to the Energy Capital Podcast, where we cover the decisions, data, and debates shaping the Texas grid and the energy future. I’m your host, Matt Boms, and today’s guest is Bryn Baker, Senior Director of Policy for Organized Markets at the Corporate Energy Buyers Association, and the leader of TEBA, the Texas Energy Buyers Alliance. In this episode, we get into who these large energy buyers actually are, how ERCOT’s new batch process for connecting large loads is shaking out, the transmission and cost allocation debates behind it, and a brand new energy tracking program that ERCOT’s board just approved. This matters right now because Texas is deciding in real time how to connect a doubling of demand without breaking the grid or the market that built it. Let’s get into it. Bryn, thanks so much for joining us.

Bryn Baker: It is my pleasure to be here. Thanks, Matt.

Matt Boms: So, Bryn, I wanna start with who you represent because I think it explains everything else that we’re going to talk about today. There’s an alphabet soup here, TAEBA, TEBA, one letter apart, but behind your acronym is a membership buying serious amounts of power in Texas. So let’s get it on the record. Who is TEBA?

Bryn Baker: Well, absolutely. Perhaps the first thing that we should start with is clarifying that you and I actually don’t work for the same organization. I think sometimes people say, TEBA, TAEBA, is that like potato, potato? But your organization has an extra A for advanced. The B in TEBA stands for buyers because that’s really the DNA of the organization. We represent large energy buyers. In fact, some of the largest energy buyers in Texas and in the world. TEBA works with about a fifth of the Fortune 500 and collectively membership is about 36 trillion in market cap. So these are the largest of the large, but we also work with smaller buyers and employers across the state. TEBA is a state chapter of the Corporate Energy Buyers Association, which collectively we work with businesses across every business sector from retail and technology, manufacturing, oil and gas, consumer products, financial real estate companies, but we also work with the supply side of the market in our membership to be able to make all of these energy transactions happen. And so working with small and large employers across the state, we’re working on the basics. It’s reducing energy costs. It’s protecting the state’s competitive energy market. It’s ensuring that our power infrastructure meets the state’s future needs.

Matt Boms: So before we get into the policy fights, I want listeners to have a sense of scale because I think most people underestimate this. When we talk about corporate energy buyers as a market force, how big is that really? And where does Texas sit in it?

Bryn Baker: Well, I think in a short summary, it’s large and growing. We just put out a state of the market report that now tabulates that large corporate buyers have publicly announced contracts for 143 gigawatts of new utility scale clean energy capacity since 2014. That’s nationwide. But fully one third of that is in Texas. That’s about 48 gigawatts. And that’s announced capacity. About half of that is now operating. What’s notable is that despite some headwinds, the pace of procurement is picking up. And it’s picking up particularly in the area of clean firm power, which is any combination of nuclear storage, geothermal, low carbon gas. But large energy customers are actively exercising their demand pull. Which is having a sizable impact in driving new generation into the market. Now that’s the demand side. I think we’ll probably get into the demand additions that we’re talking about and how we think about that.

Matt Boms: Yeah, it is interesting, Bryn, thinking about Texas and PJM, every interconnection queue in the country is swollen right now, but these two are really in a league of their own and they’re competing for the same projects. So help make the case here. Why does a company with a gigawatt scale load pick ERCOT over PJM?

Bryn Baker: I mean, it does seem like Texas and PJM are locked in a duel on who will be able to meet the magnitude of large loads looking to come onto the system. Texas is a magnet for large electricity users. And of course, it’s not just data centers. It’s really important that we recognize that these large loads also include oil and gas expansion, advanced manufacturing. I mean, semiconductor manufacturing, those are huge facilities. But Texas is the magnet because it uniquely combines low-cost power, a favorable, flexible market structure, and fundamentally a pro-business environment in a way that few other states can match. It is the cheap, abundant, diverse power. Yeah. ERCOT’s market design creates speed and flexibility. And it’s that ability to directly contract for power within a business-friendly environment that makes it possible for businesses to move fast, design their own power strategy. That’s what really fundamentally what makes the state attractive for investment. But of course, Texas has a natural advantage in terms of land and scale and siting, you know, the kind of land availability that lets you think in gigawatts and not megawatts. And of course, Governor Abbott has touted Texas as the epicenter of artificial intelligence development. We think about that as fundamentally a generational opportunity for data centers to help finance. A modernized and expanded grid for everyone. Let’s remember that a significant portion of Texas transmission lines, for example, date back to when they were first built in the 1960s. So grid hardening, storm recovery are all significant drivers of increasing costs that will need to be paid for. That’s independent of these large load additions. I hope we’ll come back to that, but it’s about positioning the state to lead in the nation’s ability to lead in the AI race. And whether you like that that’s happening or not, we need to win it. So this is part of a broader national imperative that has national security implications as well as sort of fundamentally the chance for Texas to continue its economic leadership.

Matt Boms: Yeah, you mentioned the AI race and I wanna stay on data centers for a minute because that’s where the public conversation gets really heated. Yeah. Here’s the question I hear from regular Texans. My bill is going up and now these massive data centers want to plug in. Why should I be happy about that? What do these large loads actually offer the average ratepayer? And is their anxiety wrong?

Bryn Baker: I mean, starting with what do the data centers have to offer? There’s a huge amount that we can all capture in terms of broader benefits. The data centers want access to reliable power, they want to be grid connected, they want to pay their fair share. And policymakers and the rest of us can benefit from that because what they’re bringing is capital, load growth that justifies long-needed and long-lived grid assets, and tax revenue that supports schools, roads. Bridges and certainly other local services. I think this often ends up being a black and white discussion. Do you like these large loads or not? I think a big part of this is recognizing that we live in a digital economy. What these data centers enable is banking, hospital services, national security services. If you want your digital payment to go through or find your way on Google Maps or call 911 or stream your favorite show, you’re using a data center. So much of our daily lives now is directly enabled by cloud or data center infrastructure. And it’s those growing needs of the baseline digital economy that are such a huge piece of what’s getting built out. Now, of course, AI training and inference is now the bigger piece of growing data center loads, but this just ties back to that broader and imperative that we win the AI race. And the important opportunity is that the level of investment flowing fundamentally presents an opportunity to have these loads help pay for infrastructure that we all need and benefit from. There’s billions of dollars that are going to flow here somewhere. And both baseline modernization and upgrades on what is needed to serve these new loads are all part of the mix. It’s about the basic math of spreading fixed costs in the system across a broader base. And when you do that. It has the potential to neutralize or potentially even decrease what are otherwise increasing costs for other customers, including residential customers. I think fundamentally, when we think about why did we establish TEBA in the first place, it was because we were worried about at the time legislative action for closing some of the cheapest, fastest generation options to build in Texas. And fast forward to today, storage and renewables are still some of the fastest, cheapest resources to. Provide new power. So we cannot afford literally to cut off options, narrow the market when we need every available megawatt to expand the market to enable speed to power. And just like the grid needs a diversity of generation, energy buyers need a diversity of pathways to meet their own needs. So this is really about preserving flexibility in the market and expanding options across generation, transmission, and certainly. demand side solutions rather than narrowing them.

Matt Boms: Yeah, that history matters because the fight over options is about to run head on into the biggest interconnection challenge that ERCOT has ever faced. So let’s get into the batch process. For folks who haven’t followed this, the old way, ERCOT studied each big new load one at a time and one after another. At these volumes, that just breaks. So ERCOT is moving to studying loads in batches. And the first one, batch zero, is the billion dollar question in this market right now. Who’s in, who’s out, how big it gets. So walk me through it. What is batch zero actually, and how big is it shaping up to be?

Bryn Baker: I mean, first, being a grid operator is probably one of the least appreciated jobs, even though it’s the thing that keeps the lights on and the entire economy going. So it feels like an understatement to say that the stakes are high as ERCOT navigates creating a batch process to study and approve new loads rather than serially processing them, because that’s just unworkable at these volumes. There’s a lot of regulatory complexity here. And it’s been really hard for the loads to figure out whether and how they qualify for this first batch known as batch zero. And y’all had on Pablo Vegas and Tiffany Wu and others on explaining those dynamics and sort of the details of the batch process itself. So that’s required listening to understand sort of the why and the what of the batch process. But literally the billion-dollar question is who. is getting into this initial batch zero. And it’s a bit of a moving target. We heard ERCOT state at the June 2nd board meeting that they estimate that about 35 gigawatts of new large loads are likely to qualify for the base case, which they’re calling firm loads. And then they have the second category known as studied and allocated loads, which they estimated about 65 gigawatts. Rumors were flying for a while that batch zero was much smaller. That amounts to a top end of 110 gigawatts of new loads over the next five years, keeping in mind that that’s roughly doubling the current system peak at about 86 gigawatts, but that’s a significant amount of new large loads. And so I think in terms of where the overall direction is going, that’s viewed as pretty positive.

Matt Boms: So we’re talking about studying enough new demand to roughly double the Texas grid in about five years. And there’s no precedent for that. The rules for how all this works got written really fast. The board approved them after what everyone would agree was a sprint, not a marathon, which is very impressive. And also the kind of process that leaves loose ends. So I talk to member companies as well, and what I hear is a mix. There’s some relief that there’s finally process at all and a lot of nervousness about what the fine print means for their projects. So I want your honest grade now that the rules are approved, is anyone actually happy with where this landed? And on the load side specifically, what are the open questions your members still have about how you actually qualify for a batch?

Bryn Baker: Yeah, I mean, I suppose a mark of a compromise is that everyone leaves a little unhappy. And I think that’s what happened here. There was a rapid, turbulent process, but Texas is at the tip of the spear here. And so I think starting, there are some congratulations just for moving fast that are in order. We have a process to work within. It came together remarkably fast. I think there are a couple things that we’d like to see some ongoing attention and discussions to. Transmission is a big one. And how do we do that better and in a more integrated way? I think the top line point coming out of ERCOT’s approval of the rules around batch zero is that fundamentally there are still some real questions from the load side on how you qualify for batches, because even if you have your initial studies to qualify for batch zero and project developers can post the financial security and demonstrate site control, there are these other criteria. Like projects have to have a general contractor, contracts with a tenant, zoning approval. And you end up with a little bit of a chicken and egg situation. Large loads can’t determine project viability without the interconnection study results, and transmission planning can’t move forward without viable real projects. Developers may be asked to post significant, increasingly non-refundable security to enter studies, but they can’t secure financing without the cost and the timing certainty that those studies provide. So there are projects that technically qualify for batch zero, but then there is a question of can they meet the other upcoming deadlines this summer without actually knowing what amount of capacity they could get? So we’re likely to see that top line number sort of shave off, perhaps significantly. It sounds like we’ll know who qualifies by August 7th. And some will say that that’s the process of weeding out speculative projects as intended. It does do that, but we also know. That it is cutting out real viable projects, some that have had long-standing interconnection requests. So I think there are some outstanding questions of how objective the now approved standards are. And of course, capital depends on trust and that the rules are applied consistently. And so clarification as we continue to go through this and refine it and gather learnings is going to be needed, especially as we go into batch one.

Matt Boms: You’ve now mentioned transmission twice as the thing that needs attention. So let’s go there. And I want to ask about the big wires specifically. ERCOT’s been talking about the 765 lines, the biggest transmission build in the state’s history, converting the backbone of this grid to a completely different scale. So let’s make the case here. What do these new large loads have to do with it?

Bryn Baker: Yeah. And so if I may, I might just back up a little bit and do a little bit more of the setup for why do we need those particular transmission lines? Because I think when we think about the batch process, the second piece of this that is gonna need some ongoing attention is how do we do better transmission planning in this much more dynamic environment than we’ve ever seen before? So you had Eric Goff and others describing the amount of demand driving all of this as effectively infinite. Yeah, of course it isn’t, but the point is that the constraint. Is really how fast the supply side can meet that demand. How fast can we build infrastructure? And so the biggest thing that we think ERCOT could have done to add more load and still achieved reliability and lower transmission costs would have been to include loads that were studied under the existing transmission planning process known as the regional planning group. And what we understand is that some of those loads are included in batch zero. ERCOT Had about 40 gigawatts in a bucket of loads studied in recently approved RPG transmission projects. But there’s overlap with the loads that they estimate will qualify via large load interconnection studies. So it’s likely that some of the transmission capacity linked to loads studied in the RPG process will be reallocated to different loads that qualify for batch zero. And we argue that those projects should be included because transmission capacity is being planned for them. And transmission capacity is the infrastructure bottleneck. So we would argue that you would not energize those loads studied under RPG unless or until that transmission capacity becomes available, sort of addressing any underlying reliability concern. Now, of course, there’s broader concerns about sufficient generation coming onto the system. We can talk about that because there’s a huge queue. And this is one of the success stories of Texas as a whole: the ability to bring on huge amounts of new generation quickly. But sort of the broader point is that much more comprehensive planning is going to be needed to connect these anticipated loads with generation and with transmission, because it’s all interdependent. And you know, the good news, I think, is ERCOT is now saying that they plan to overhaul how transmission is planned and put it all within the batch process, which is an important opportunity for us to do all of this in a much more integrated fashion. So that’s sort of this batch process coming into how we have been talking about transmission as a whole. So what are the needs driving 765? You know, back to your core question. I think starting with transmission and cost allocation is one of the most consequential policy debates in energy right now. Transmission is the bottleneck to getting more loads onto the system. But we also are making significant investments in this aging system, both for general grid updates and for grid hardening, for storm recovery due to extreme weather. And so before we even get into large loads, We should be looking at what are the most cost efficient and multi-value solutions. And so that’s a big part of why we’ve made the case that we need to convert the electrical equivalent of two and four lane highways to eight lane highways with these 765 lines. And so now you bring in these large loads in the batch process. And so that gives us the opportunity for us to talk about all of this in a much more integrated way.

Matt Boms: Two lane highways to eight lane highways. That’s the clearest version of the transmission case that I’ve heard, Bryn. So now we’ve arrived at the fight I promised we’d get to, which is who pays for all of this? And I want to slow down here because this is the part where the acronyms start flying and normal people tune out. And this fight, maybe more than anything else we’ve talked about today, really lands directly on people’s bills. So let me try the plain language version and you correct me where I get it wrong. Today, Texas divides up its transmission costs using something called 4CP, four coincident peaks. Now, the grid looks at the four highest demand moments of the summer, one in each month, and your share of the transmission bill is based on how much power you were using in those exact moments, which means if you’re a big sophisticated load and you can power down during those peaks, you can shrink your transmission bill dramatically. And the costs you avoid. Get picked up by everybody else, including residential customers who really can’t play that game. So that’s the cost shift worry. And now the commission is looking at moving from 4CP to 12CP, 12 peaks spread across the entire year. So 4CP versus 12CP. 90% of our listeners just heard the alphabet soup, but this fight decides who pays for $30 plus billion dollars of wires. So help break it down for us. What’s the debate and where does TEBA land?

Bryn Baker: The commission staff in recommending moving toward 12CP were certainly searching for a middle ground compromise in addressing the core underlying concern that there was a cost shift happening where residential may be paying more for transmission than they should. And so what 4CP does is it favors consumers that can actively manage their peak and it incentivizes flexibility. But fundamentally that there’s a Really important element to that because having large loads respond when the grid is stressed is a service that we all benefit from. 12CP shifts toward more average consumption based allocation. And so this does help residential consumers. The more CPs you add, the more you’re just moving toward an energy consumption based allocation. And so this was sort of in the middle, but the thing that we generally agree with is that the proposal is to create tiers so that. Large loads over 75 megawatts also now have an element of their bill that is made up by minimum charges. And this is actually a really important concept because as I mentioned, there’s a huge amount of transmission investment headed toward Texas just in the base case. In fact, it’s about 37 billion in transmission cost just baked into the system. And so that means that costs are going up about 3.5% per year on average for all consumers, just without the new large loads. And so TEBA was the first organization to proactively propose when this regulatory proceeding opened last September that large loads should pay transmission charges according to their approved capacity. So essentially minimum contract demand charges. And so this idea has gained some traction. We’re sort of midway through a study trying to answer the question of how should you set those charges and for how long. What I can say is that initial results suggest that. a minimum demand charge sort of in the 85% of contracted demand is where you hold other customers harmless, meaning it’s rate neutral. You make it higher, you could reduce rates for other customers, but you would not want to set it too high and not at 100%, because you still want to incentivize some of that demand response benefit that you get from having a CP component. But the overall takeaway is that not only can growing demand take up the slack in terms of paying for system upgrades, we want them to.

Matt Boms: Yeah. Now for the sleeper story of that June second board meeting, everyone covered batch zero and that was the big story of the day, but almost nobody covered the other thing that ERCOT approved that day, which is something that we’re both very excited about, the new energy attribute certificate program. Can you tell us a little bit more and where did this program come from?

Bryn Baker: Sure. As you said, I’m actually quite excited about something that is as technical and mundane sounding as an EAC or energy attribute certificate. Because about a year and a half ago, we proposed to ERCOT to create this broader energy tracking system for the state’s electricity generation resources. And so EACs fundamentally are about creating greater transparency and credibility for buyer-driven transactions. And that’s what we need more of. They also create a revenue stream that can help bring new buyer-driven energy generation onto the system. And ERCOTS board just approved this program on June 2nd. The new EAC system provides essentially more granular accounting than other registries, including the existing one, which exists for renewable electricity certificates or RECs in the state. And that fundamentally unlocks opportunities for both large and small energy customers to invest in. Innovative energy resources and market products, which means it provides a mechanism to unleash all of this growth in advanced energy technologies, pulling those things like nuclear, demand flexibility, carbon capture and other low carbon gas, higher impact battery storage, a variety of other solutions, and pulling those things into the market because you have a way to track and credit and claim those transactions.

Matt Boms: Okay, I wanna make sure nobody’s lost because you’ve said certificate a few times now and I know some folks are picturing a diploma, but back up to the basics for me. What exactly is an energy attribute certificate and how does it actually work?

Bryn Baker: Yeah. So an EAC is essentially a tracking instrument that tells you when, where, how electricity was generated with the option to produce that information on an hourly basis. So think of it as a little bit like a digital banking system. So electricity goes into the system here and it gets taken out or consumed over here. You can’t track an electron, just like you don’t track a physical dollar in a banking system, but you know that dollar belongs to you. And so in today’s market, electricity can be tracked and claimed through these certificates. But the key limiter today is that RECs can only be issued to renewable generators. This is about creating a technology neutral system for any generator because buyers want to buy any type of generation. They want to buy all of it. And so a certificate being issued to that generation means that you have a way to track and claim and validate those transactions. Because especially as we’re building nascent markets and products for new technologies. Validation and trust in the market has to happen at the front end, not on the back end. And so what these EACs do is gives the market that kind of transparency that builds trust and credibility to do a whole bunch of things. So nuclear is a big priority for the state. Today, energy customers can’t claim that. And therefore they aren’t fully incented to buy it, but it also can carry that revenue stream, which allows the market to scale. The more you can build vibrant secondary markets for these products, because it’s a tradable instrument, the more you can grow the market. This is also true for things like energy storage or even carbon capture, where you need methodologies that tell you how to tabulate the full range of attributes. But a certificate is the way that you can do that and allow energy buyers to really claim and pull those technologies further into the market. It’s also just over the horizon that EACs could help enable demand flexibility.

Matt Boms: help pull that thread, how does a tracking certificate end up making a data center more flexible?

Bryn Baker: Well, you know, it starts with what are the cheapest, fastest ways to get new loads onto the system? And it’s how do we use the existing headroom? We know, for example, data centers are generally not inherently flexible. They can only flip to diesel backup so often. So how can they source flexibility elsewhere, including by sourcing megawatts from other perhaps distributed resources? And so we’re seeing constructs emerging for this elsewhere, but also here in Texas, where data centers but other loads essentially could pay for things like neighborhood energy systems, distributed battery and solar. That sounds like a win-win because neighborhoods get greater resilience, including to extreme weather, paid for by users that need that power. That’s a tangible benefit out of all this growth. Now, what the loads need to make all of that actually work is a capacity credit, which would come through the retail electricity provider, but the EAC. is the instrument that would track and validate the transaction and its attributes and benefits more transparently to the rest of the market. That’s a huge opportunity that we could take advantage of in trying to figure out how do you create the right incentives and market products to allow these large loads to buy flexibility and incent it across the whole system. That feels like the innovation edge.

Matt Boms: All right, bring us down to earth on the logistics. How did this program actually get built? And what has to happen before real certificates are being issued?

Bryn Baker: I mean, so first this was built through a multi-month process with 60 plus market stakeholders. It was modified quite a bit through the process. Following the ERCOT board approval, this now goes officially to the commission. Following the commission’s approval, ERCOT will go ahead and issue an RFP to select a third party vendor, because the construct here is that a third party administrator will build and run this new system. So the RFP will select that vendor through a process throughout the fall. And I think the ERCOT board would expect to approve whoever that vendor is no earlier than December of this year, which then would kick off sort of the building of the new system and starting to run it and issue certificates into next year.

Matt Boms: Wow, December of this year, that’s extremely fast. But the registries already exist. So what’s actually novel about this one?

Bryn Baker: Well, I think what’s novel about this is there are energy attribute certificates that are starting to be created in other voluntary registries, but not in as comprehensive a form as this is. And they’re independent. So what’s unique about this is that the data down to the watt hour is coming from ERCOT. It is being run through a third party, but it’s a more integrated system and it’s a more comprehensive system. And there are folks who look at this and say, This is the building block to where we ultimately really need to get to, which is an all-generation tracking system. And so over time, I think the hope is that the registries will consolidate and this will sort of become the gold standard for how do you do energy resource tracking across all generation resources in the most comprehensive way in the country.

Matt Boms: Wow, the gold standard for tracking every megawatt hour in the biggest competitive energy market in the country, built here first. I want to take a step back, Bryn, because we’ve covered a lot of ground today. Batch process that’s brand new and already oversubscribed, transmission fights, cost allocation fights, qualification rules with real open questions still hanging. And it would be easy to hear all of that and conclude that Texas is overwhelmed. But that’s not the read I get from you. You’ve been in these rooms in the stakeholder meetings, the board meetings, the commission workshops. So when you step back from all the technical detail and look at where this is headed, what feels most hopeful to you? What makes you optimistic about where Texas ultimately lands?

Bryn Baker: I think what feels most optimistic is that we didn’t get stuck in a cycle of analysis paralysis. I mean these numbers are huge. It’s daunting. But if anything, stakeholders and even the commission had to say, let’s take a couple more months to have a stakeholder process to develop, for example, the batch process. I think that points though to the fact that things are moving. Maybe not everyone’s happy, but things are moving. And so if we keep that sort of can do spirit pro innovation, pro-business approach. It means that we’ve got a lot of the ingredients to rapidly redesign some of these core planning processes. That is not a small undertaking, but that’s a door that we both need and want to walk through. And it seems like there is good momentum across the entire Texas community to say we have a huge opportunity to figure this out and get it right. It’s sort of a lone star-sized opportunity to prove that Texas has all the ingredients and the formula to. not just maintain that economic leadership that has sort of defined the Texas miracle, but taking it to a whole new level that a lot of other regions in the country can take advantage of and learn from. There’s probably 49 other states that would love to be in Texas position right now.

Matt Boms: All right, last big question, Bryn. And I want you to be honest with me because there’s the official version of how everyone feels about this in the press releases, in the board meeting thank yous. And then there’s what people actually say when the microphones are off. You talk to the buyers, the developers, the companies posting security deposits and waiting on the results of these studies. Some of them just found out that the rules that they’ll live under for years got written in a matter of months. So How would you describe the actual mood in this market right now? Is there a real acceptance of where things landed, a sense that the framework is workable and everyone refines it from here? Or is there still a lot of uncertainty sitting underneath the surface?

Bryn Baker: I think it’s probably still a bit mixed in the sense that people are still trying to parse really what are the implications of some of these rules. But I think the most important thing is that the building blocks are there. We have a construct to work within. And so there’s acceptance that we’re figuring this out. And a lot of it’s just about clarification and refining those rules as we go along. The tell is, I think, more how this plays out over the next couple of years, which is really critical. Are we actually building out the significant transmission that we need as the backbone of the grid? Are we taking advantage of the whole suite of solutions and building a much more integrated system where you’re integrating that demand and supply side in a flexible way that takes advantage of all of these things that can create, you know, the future grid that’s utilizing the full suite of solutions? And that we haven’t maybe unintentionally engineered our way out of a competitive energy market. That is still the bedrock of Texas success. And so making sure that near term pressures and emergencies make sure that we’re not just trying to preserve the way we’ve always done it. This is the time for innovation, expansion, and growth.

Matt Boms: Yeah, that’s what you hear the most from these companies is their number one preference is to connect to the grid because that’s the cheapest electron available. But if they have to, they’ll build the backup gen that they need to keep their operations running. So you’re completely right. And I think what’s the worst possible scenario for the ratepayer would be to build a parallel grid where all these large loads are running behind the meter, right? Like that’s not good for anyone. But I think, you know, only time will tell if we’re able to build out the grid that’s needed over the next few years.

Bryn Baker: Yeah, can we align these incentives up though? Because there’s no question that going behind the meter is a very expensive proposition for the large loads. But is the opportunity cost actually greater for the rest of us in not having a way of building an integrated system where they’re also paying their their fair share fully and getting the full grid interconnection that they want?

Matt Boms: Exactly. That’s the bonus content. Yeah.

Bryn Baker: But I think, you know, like that behind the meter dynamic is concerning right now because I don’t know that folks would say, We’re definitely gonna go figure out a way to island, but the longer that that becomes their only path, the more they’re gonna get pretty good at it. And then for you and me, like that locks in a lot of infrastructure. Potentially for the long haul.

Matt Boms: Bryn, moving forward, how do you see the role of renewables and batteries on the market? Are they gonna keep driving costs down for consumers? Or how do you see the next five to ten years playing out for solar, wind, and batteries in Texas?

Bryn Baker: I think the good thing is that year over year, grid performance is showing just how crucial this whole diversity, the whole array of technologies is to not just reliability, but keeping costs down. And that particularly highlights the role of renewable energy and storage and the growing value that they have, not just in setting capacity and generation records. Batteries have clearly been crucial to a number of grid reliability and weather events, but it really comes down to cost, this question of how are we going to meet the moment of building out a diverse array of resources and keep costs low. There’s already a good amount of research out there, including, you know, the report from Aurora from a year ago that found that restricting renewables could raise power bills 10%, renewables and storage reduce wholesale costs by about a billion per month. We did our own study that found if you cut some of these resources off, wholesale power costs rise by $15 billion over the next 15 years. The Dallas Fed, interestingly, presented at the ERCOT board meeting recently and highlighted the fact that power prices are rising a lot slower in Texas compared to other big data center markets. And a huge piece of that is that Texas is benefiting from this array of low-cost resources that are keeping costs down. And so what that amounts to is that Texas competitiveness and affordability really depends on keeping the market open to all of these resources.

Matt Boms: How do we start planning our transmission and distribution differently moving forward in ERCOT? Right? Because historically, the way that we build out transmission here is through reliability lines, but we have built only one or two economic planning lines ever, right, in ERCOT. So do you have any solutions for fixing that moving forward?

Bryn Baker: We do. We think that revisiting this idea of an economic planning framework is a really important way to open the aperture. Basing transmission around reliability violations is the bedrock, but it’s missing opportunities to consider a broader array of factors that would help us identify the most cost efficient transmission projects so that we are and consumers ultimately are assured that we are. Fully justified in these additional transmission costs because we’ve looked at all the alternatives, we’ve weighed multi value benefits. And ideally, looking out over a longer period of time. The way that we do transmission planning today is you take those future benefits and sort of collapse it down into one to three year horizon of benefits, but these are multi decadal projects. So first and foremost, a big part of doing more comprehensive transmission planning is looking out over a longer horizon of benefits. So that’s sort of a cornerstone to a broader economic planning framework that says reliability is a piece of a framework. And it also gives transmission entities an incentive to actually look at the economic implications to customers. And that’s frankly one of the reasons why we’re not fully evaluating advanced transmission technologies. So things like, software solutions on the grid enhancing technology side to advanced conductors. And that whole basket of things in it, the advanced transmission technology bucket, is clearly in the vein of what are our tools that are the cheapest, fastest things that we could deploy to expand transmission capacity in the next, say, five years, while we’re also building these much longer-lived multi-value transmission assets like the 765 lines.

Matt Boms: Bryn, this was great. Thanks so much for walking through all of this with me. And thanks so much for being on the podcast today.

Bryn Baker: Thank you for having me.

Matt Boms: Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make sense of the energy world, share the episode with a friend and hit follow on your podcast app. You can find us on Apple Podcasts, Spotify, and all the usual platforms. For deeper analysis each week, subscribe to the Texas Energy & Power newsletter at TexasEnergyAndPower.com. That’s where you’ll find every episode, every article, and all of our latest updates. We’re also on LinkedIn. X and YouTube, where we post clips, insights, and ongoing commentary. Big thanks to Nate Peavey, our producer. I’m Matt Boms and I’ll see you next time. Stay curious, stay engaged, and let’s keep building a stronger, smarter, energy future.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Behind the Backlash: Understanding Opposition to Data Centers | Milltown Partners

Milltown Partners surveyed more than 6,000 registered voters about data centers and got some surprising results. The chart below is from the report.

Opposition to data centers is more than a political phenomenon. It’s driven by anti-tech sentiment more than NIMBYism or environmentalism and underpinned by populism on both sides of the political divide.

The permit is not the license | The Edge

Harvard professor George Serafeim uses the example of Blackstone walking away from QTS data center development to make a crucial point. Just because a project has local permits to build doesn’t mean it has the social license from the community to move forward. Neighbors of the QTS project fought the development and won legal decisions that made the project untenable.

Mining, oil, and gas already paid tuition on this lesson across decades of blocked projects and burned capital. Tech and finance are now enrolling in the same course, and QTS just paid the first installment. The permit was never the license that mattered.

Attitudes toward data centers in Texas are shifting | Dallas Morning News

The Dallas Morning News editorial board throws its support behind Gov. Greg Abbott’s position on firm data center regulations.

Abbott is right to push for a framework that reduces the impact data centers have on their neighbors because as Texas attracts more data center development, especially in rural areas, the state is confronting a new reality.

Read more

China mines over 60 percent and processes over 80 percent of the world’s rare earths, and produces around 90 percent of the world’s high performance rare earth magnets. Those magnets sit at the center of modern energy infrastructure. They are used in wind turbine generators, electric vehicle motors, battery systems, industrial robotics, defense technologies, and increasingly the cooling systems and power equipment supporting AI data centers.

While certainly not new, that dependence has become harder to ignore in 2026. Despite the high profile Trump-Xi summit in Beijing this May, little progress was made on China’s restrictions on heavy rare earth exports. Chinese licensing requirements remain in place for critical materials such as dysprosium, terbium, and yttrium, among others. Business leaders say certain materials are becoming nearly unobtainable with U.S, company purchase orders going unfulfilled. For an industry that has spent the last decade building energy infrastructure predicated on reliable access to these materials, that concentration poses a significant problem. And it is the opening that Texas has been preparing for.

Read more

ERCOT’s latest reserve-margin forecast goes negative in 2029 and 2030. To close that gap, ERCOT and the Public Utility Commission directed utilities to build a high-voltage backbone from West Texas to the Interstate 35 corridor. Smitherman puts the cost at $33 billion, rising toward $40 to $50 billion by completion. Under the monopoly model, that cost lands on ratepayers.

Subscribe now

On this week’s Energy Capital Podcast, Joshua Rhodes talks with Barry Smitherman, the only person to have chaired both the PUC and the Railroad Commission of Texas and now chairman of Texans for Affordable Transmission, about bidding transmission out to non-incumbents under cost and timeline caps. Smitherman led the PUC during the Competitive Renewable Energy Zones transmission buildout, Texas’s early-2000s CREZ program that erected power lines to move West Texas wind to market. He saw competitive bidding for transmission work firsthand.

Retail and wholesale competition worked, Smitherman says; transmission he calls “the last remaining monopoly.” The conversation covers:

• The CREZ precedent, when four non-incumbents built parts of the project on or under budget, and why the PUC then declined to repeat it when they handed the Permian Basin Reliability Project back to incumbents.

• Senate Bill 1938, the 2019 law reserving Texas transmission development for incumbent utilities, which the Fifth Circuit likened to requiring someone to own an oil well before drilling a new one.

• Private lines, the model NextEra used two decades ago to run its own line from West Texas wind to the grid, and why Smitherman would let generators and large loads do the same today.

How the PUC and the Legislature settle whether ERCOT transmission must be built by incumbents will determine what ratepayers pay to build the backbone.

Share

Timestamps

• 00:00 - Introduction & Texas Energy Landscape

• 05:31 - Permian Basin Load Growth and the 765 KV Lines

• 12:11 - Data Center Demand: Real vs. Speculative

• 14:09 - Texas Energy Fund and the Energy-Only Market

• 21:28 - How Texas Transmission Gets Built Today

• 23:13 - The Case for Competitive Transmission

• 31:46 - The Eastern Backbone and Cost Accountability

• 33:54 - Private Lines and Large Load Options

• 43:04 - Repealing SB 1938: The Path Inside ERCOT

• 44:34 - Getting Transmission Right: Future Tech and Landowners

Resources

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Webber Energy Group (Website)

  • IdeaSmiths (Website - LinkedIn)

• Barry Smitherman (LinkedIn)

  • Texans for Affordable Transmission (Website - LinkedIn)

  • Texas Geothermal Energy Alliance (Website - LinkedIn)

Books & Articles Discussed

• It’s Time for Texas to Get Competitive on Transmission Development — Barry Smitherman, RealClearEnergy

• Need for Speed: An Analysis of Speed to Market and Cost Results of Competitive Transmission — R Street Institute

• ERCOT Capacity, Demand and Reserves Reports — ERCOT

• Texas Energy Fund — Public Utility Commission of Texas

• House Bill 5066 (2023) — 88th Texas Legislature, origin of the Permian Basin Reliability Plan

• Senate Bill 1938 (2019) — 86th Texas Legislature, the right-of-first-refusal law at the center of the competitive transmission argument

• FERC Order No. 1000 — Transmission Planning and Cost Allocation — Federal Energy Regulatory Commission

Related Podcasts by Energy Capital

• How Texas Plans to Serve ‘Infinite Demand’ — with Eric Goff

• How Texas Decides Which Data Centers to Connect — with Tiffany Wu

• Transmission Takes a Decade, Load Doesn’t — with Raina Hornaday

• How Will Data Centers Pay for Power? — with Travis Kavulla

Transcript

Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. I’m really excited today to have Barry Smitherman to talk a lot about Texas energy topics. Barry’s been in a lot of different seats, a lot of different chairs when it comes to Texas energy, and I think he’s got a really unique perspective in terms of being able to share what’s going on and kind of what we might be looking forward to. So Barry has a BBA from Texas A&M, an MPA from Harvard Kennedy School. And is JD from the University of Texas at Austin. So Barry, like me, you are also a person internally conflicted. I also went to A&M and UT and catch no end of flack for that. But after that, he was Assistant District Attorney for Harris County. And then he’s been chairman of both the Public Utility Commission, the Regulator for Electricity, and the Railroad Commission of Texas, the regulator of oil and gas, which to my knowledge, there’s not that many people who have been on both of those commissions, let alone the chair of both of those commissions. Is that right?

Barry Smitherman: I’m the only one.

Joshua Rhodes: Well I couldn’t find anyone else, so it’s either so that’s good to know. Barry’s now the president of Smitherman and Associates, the chairman of the Texas Geothermal Energy Alliance, managing partner of Success Capital Group, and the chairman for the Texans for Affordable Transmission. Barry Smitherman, welcome to the Energy Capital Podcast.

Barry Smitherman: Thanks, Josh. Great to be here.

Joshua Rhodes: I think one of the things is like there’s a lot going on in Texas Energy. There’s never not been a time when there’s been a lot going on in Texas Energy, but it feels like right now, in particular, post Winter Storm Uri, post market restructuring, data centers, electrification, like all these things, there’s a lot going on in Texas Energy. And you’ve sat in both chairs, like at the electricity, at the public utility commission, and in oil and gas at the railroad commission. When you look at the energy landscape right now, what do you think that most people who are only looking at one side of this are missing?

Barry Smitherman: Well, I think people don’t realize how complementary the two sectors are to each other. I’ll give you a couple of examples. One, if we can use wind and solar as a component of our electric generation, that frees up some of our natural gas to be put on a ship and sold internationally. Yeah. And the price of LNG delivered in Europe is about four to five times what you could sell it for at Henry Hub. Wow. So there’s a complementary nature there. Secondly, when wind and solar are not available, say it’s nighttime and the wind isn’t blowing, we need natural gas to back that up. So it complements wind and solar. The transmission infrastructure, and I know we’re gonna talk about this a little bit later in more detail, out in the Permian Basin, beginning with the CREZ projects back in the two thousands, were originally designed to move wind energy from west to east. But the reality is because of where it was placed in the Permian Basin, it actually provides electricity to the oil and gas sector out in the Permian, because we have open access transmission. Right. And there are many other ways that are less direct. You know, for example, oil and gas throws off millions, if not billions, of dollars in tax revenues, revenues to universities. That keep our taxes low, which encourages business to come to Texas, and those businesses then consume a lot of electricity. So I think we need to stop thinking about it in a tribal way, which we have for a couple of years now, particularly after Winter Storm Uri, and think about being complimentary.

Joshua Rhodes: Yeah, no, I think that’s right. I think a lot of our electricity does come from natural gas. I think for the past twenty years or so it’s been about forty five percent. It seems to be the most stable in terms of percentage. And in absolute terms, that’s grown because we’ve consumed more electricity. But one of the things like the electricity sector and the gas sector are inherently coupled. You know, having served on the railroad commission, how do you assess kind of like those industries are coordinating today? I know there’s gas and electric coordinating. Groups and things like that, but how well do you think that they were talking to each other when you were on the commission and how well are they talking to each other today?

Barry Smitherman: Well, I think they’re talking to each other a lot better today, certainly after Winter Storm Uri, when it became obvious that part of the reason that we couldn’t provide electricity to everyone twenty four seven was because some of the natural gas was not being delivered to the power plants. And there are a variety of reasons for that, but it was an issue. Yeah. And so I know that the railroad commission, the PUC and ERCOT They communicate with each other today, I think, better than they did in the past. I know when I was on the PUC, I had a great communication line with Michael Williams, who was chairman of the railroad commission. So in 2011, when we had a seven-hour outage, and when Michael and I were on the phone continually talking to both power generators and to pipelines to make sure we were getting gas. Flowing to the right place at the right time. So I think it’s a lot better. I’m sure it could use some improvement, but there is clearly a recognition that those two have to work together.

Joshua Rhodes: Yeah. No, absolutely. So getting more into like the electricity side is a lot of what we talk about on this podcast. A lot of the conversations we’ll have later about transmission and all these other types of things are kind of being driven by large increase in electricity demand that is coming down the pike. And while data centers kind of take up most of the airspace these days, we were talking about load growth in Texas well before we taught the internet how to talk and my students to cheat on their homework. But essentially You’ve mentioned like electrication of the oil and gas out in the Permian and Delaware basins. Can you talk about that coupling there? Like I think one of the issues right now is we’re actually having the siting issues around those seven sixty-five lines right now, but and they’re coming at a time when data centers are all the rage. But these lines were put in place well before that. Isn’t that right?

Barry Smitherman: Well, the original beginning of these lines was House Bill five six six, which was passed in two thousand and twenty three session, I believe. Yeah. Because the oil and gas industry had been demanding more power out in the Permian Basin for a long time. And they were having some problems getting power from Dallas or from the I-35 corridor into the Permian Basin. And so The legislature directed ERCOT and the PUC to sort of like we did back in the CREZ days, come up with a plan to provide more electricity to the Midland area, the Permian and the Delaware, solve any kind of local congestion problems that you had out there. And so ERCOT took about six months to come up with the Permian Basin Reliability Plan. And that plan has three important 765 kV from West Texas to the I-35 corridor. That was all premised on the load growth out in the Permian and Delaware basins, which was estimated between twelve and twenty-four additional gigawatts by twenty thirty-eight. Right. Then on top of that, we’ll layer in the data center growth, the hyperscalers, crypto. And suddenly ERCOT is looking at a load profile over the next five or six years that goes from eighty-five gigawatts of demand, which is our peak now, to I don’t know, you picked the number, 120, 130, 150. I read the other day 400 gigawatts of projected demand. So it is on top of what we already were estimating. To happen in the oil and gas patch.

Joshua Rhodes: Yeah, I think the latest numbers, the highest numbers that I’ve seen are about four hundred and forty five gigawatts of large loads. Personally, I was going for five hundred because you know, why not? We’ve had folks on the podcast call it infinite. We’ve had folks on the podcast push back against it being infinite because infinite in the sense that we can’t five X the grid in five years, but there is a lot of that load growth coming. And so I think it’s an important distinction there in terms of the infrastructure that’s looking to be cited today versus what people are thinking about the electricity sector. ‘Cause I remember a couple of years ago I was doing a project I was doing a consulting project for someone we were looking at load growth and they were trying to get me to figure out how to discount the amount of data center load that was coming because the numbers were large and they were also asking me to do the same for the oil and gas load and I really said I think the oil and gas load is real. Like I mean, I think that’s real. There was that S P report that, like you said, was twelve plus gigawatts in an area that had eight hundred megawatts of load. I mean, it feels like to me that that load is really real. We’re talking about how do we discount the data center load, but that oil and gas load feels really real to me. Is that your take on it too?

Barry Smitherman: Yeah, I do think it’s real. And it’s amazing what has happened over the last decade in Texas and the oil and gas patch, particularly out in the Permian and the Delaware. You think about this, 20 years ago, Texas was producing less than a million barrels a day of crude. Yeah. I mean, being a railroad commissioner back then was probably a boring job because you were doing only a few permits and There wasn’t a lot of activity. Then with the shale revolution, suddenly we figured out how to crack the coat and get oil and gas out of this shale rock. So in the Permian, it has gone from a million barrels a day to almost six million barrels a day now. I mean, that’s an incredible growth over the last, I’ll call it decade. We talk a lot about oil, but natural gas growth has been yeah almost as much. It’s gone from fifteen MCF to thirty-four in the last year, just in Texas. Texas supplies over one third of all of the natural gas produced in America. Yeah. So the Permian and the Delaware, these are critical national security assets, they’re critical for the economy of the state of Texas. I don’t see that slowing down at all, particularly when we’ve seen the disruptions in the Middle East. Yeah. The ability to deliver reliable, confident, projected oil and gas out of the Permian in the Delaware is something that I don’t think is gonna slow down in the near future.

Joshua Rhodes: Yeah, that’s a good point. I mean, I guess like I flippantly say the comments sometimes like, you know, okay, we taught the internet how to talk and now we need electricity for everything. I mean, figuring out how to combine hydraulic fracturing with horizontal drilling, I mean, that’s almost as well, probably just as big in the natural gas sector in the whole sector, right? I mean, it’s just different bits, but it was, you know, this technology unlock that really allowed these sectors to grow. That’s really interesting.

Barry Smitherman: Absolutely. I think about it. We were planning to import natural gas. We were building natural gas importing facilities along the Texas coast. Now we retrofitted and converted those to exporting. And from Brownsville to New Orleans is probably the most prolific area of natural gas export in North America. So we’re putting a natural gas on the ship. We’re selling it to our allies. We’re selling it at prices that are higher than what you pay domestically. It’s a great story for America.

Joshua Rhodes: No, absolutely. Absolutely. So beyond the oil and gas load, there’s this other driver of electricity out there, mainly the data centers, the four hundred gigawatts we were talking about. So I mean ERCOT is planning around like a level of future demand that would have sounded impossible a few years ago, maybe still sounds impossible today. But from your view, how would you assess what is real versus what is speculative in the electricity sector right now?

Barry Smitherman: You know, that’s a great question. There’s a whole building over at ERCOT of people that are trying to figure out that exact answer. Yeah. I don’t have much input on it, but let’s say that we’re gonna haircut it dramatically. We’re gonna haircut it fifty percent, seventy percent. It’s still over a hundred gigawatts of demand by twenty thirty. So that’s four years from now. Yeah. And if you look at ERCOT’s CDR their capacity demand reserves projection, the latest one. It’s got the reserve margin going negative in 29 and 30. So that’s an issue that’s got to be addressed. And I think that that is trying to be addressed, but we could make some really, really conservative assumptions about how much load we’re going to have. And currently We’re not gonna meet that load.

Joshua Rhodes: No, for sure. I mean the numbers are what the numbers are. Like I’ve, I think I’ve said I haven’t believed them for two years. But I think this Batch Zero process, I think, is trying to inject some discipline in that, figure out what that might look like. We’ll see if Batch One or Batch Two become are similar to Batch Zero. And we’ve done a couple episodes on the Batch Zero process. Even before kind of that, I mean, you know, Texas is putting like real money behind, you know, new dispatchable generation through things like the Texas Energy Fund, which provides low income loans for new or expanded, mostly natural gas, I think is what is taking up that offer. Yeah, dispatchable. I just open to, you know, dispatchable generation. I guess from your point of view and the way you’ve seen like ERCOT’s market design alter and change from from both of those chairs, was that a necessary correction for the energy only market or was it a sign of a failure? Or how did you view the Texas energy fund?

Barry Smitherman: Dispatchable. You know, it’s a great question and a very complicated question. Right. And I’ll try to answer it quickly. But free markets require a couple of things. One, a clear price signal, two, low barriers to entry, and three, minimal government intervention. And that’s the way we began the market back in 2002, when we had a thousand dollar price cap, and that price cap eventually went up to nine thousand. So the theory of the model was During periods of scarcity, we have temporary high prices. Those high prices inform generators to build new generation in order to take advantage of those high prices. That was the idea. And I think it worked pretty well. I mean, there were periods of time when we had projected negative reserve margins, but the industry always responded to those projections by building new generation. But a couple of things happened. One, Because of environmental regulations put forward by certain administrations, you couldn’t build a new coal plant. So that was off the table. Then after Fukushima, it became increasingly difficult and expensive to build a new nuclear plant. So that was off the table. So suddenly we’re left with natural gas. And as natural gas prices were rising in the 2007, 2008 time frame, I think everyone, including Texas, was looking for a way to diversify the portfolio. Yeah. So we embarked upon capturing the wind out in West Texas. At about the same time, the federal government decided that they would provide subsidies for wind and solar for renewables. So we got a whole bunch of that. You know, right now we have forty gigawatts of installed wind, we have forty gigawatts of installed solar. It’s more than any other state. Right. And we have twenty gigawatts of battery. So that’s a hundred gigawatts ostensibly of zero carbon. Resource. So all of that was proceeding until Winter Storm Uri. And I think as a result of that, the fact that a lot of people died who didn’t have power during certain periods of time. Billions of dollars of property damage, billions of dollars in lost revenues. The legislative leadership decided that they needed to do something. And part of that is because we were not Getting the price formation that we needed in the ERCOT wholesale market to incent someone to build another billion-dollar natural gas plant. So they came up with the Texas Energy Fund. This was really before the data center craze hit us. And instead of a hundred gigs of demand in a couple of years, we’re looking at, you know, whatever, 150, 200, 400. And The need to get speed to power, I think, underscores the value of the energy fund. Now, Senator former Senator Phil Gramm always said if you tax something, you get less of it. If you subsidize it, you get more of it. So we’re gonna get more thermal generation. I think they’ve committed something like four billion dollars already for projects, six or seven projects mainly being done by the incumbents, NRG, Vistra, Calpine. Constellation. So they’re building the units. So probably get the rest of it committed in the not too distant future. Even if all seven and a half billion gets built, that’s not enough to meet the future demand that’s being projected. So generally I think in our state we try to avoid government intervention and putting our thumb on the scale for certain types of technology. But I think when our leaders looked at the future and the past, in particular the consequences of URI, they said, okay, we’re gonna violate that principle a little bit here.

Joshua Rhodes: I mean, hindsight’s always 2020, right? You’re doing the best you can with the information that you got at the time. I mean, maybe if we had seen these demand numbers and, you know, forwards and electricity prices, we would have thought twice about that. Maybe if we’d have seen hydraulic fracturing, you know, coming around, we would have thought twice about, say, the CRES lines or whatever they were. But you can tell me if you agree with this. I mean, I think one of the things that Texas has done pretty well is recognizing that. You know, increasing that sandbox for everybody to work and to play in does well. The electricity sandbox. And so whether that’s the CREZ lines, which, yeah, we’re going out to get the wind to diversify the electricity space, but ended up providing electricity out to oil and gas. And then, you know, now these like Permian reliability projects, which ostensibly to electrify provide more electricity for oil and gas, but I look at the maps out there and I see the best solar regions we’ve got kind of at the end of these lines and some land that You know, otherwise is maybe five dollars an acre scrubbage fee or something like that, you know, all of a sudden can go to a couple hundred bucks per acre for solar leases. I mean, I think in general these tranches of transmission lines end up doing well for Texas, even if the conditions change, as they do in the future. Yeah, I don’t know. Do you have any thoughts on that?

Barry Smitherman: Well, I do think that building transmission is a no regrets policy. Yeah. I think you’ll never feel bad about building the grid out more. I mean, that’s the approach that we took with CREZ. Yeah. That this would be utilized by some resource, whether it was wind or solar or the oil and gas industry. We needed to move power from the west to the east and we needed to move it in such a way that it didn’t get stuck in the Dallas Fort Worth area. Which was the path that it would take in the past. So building these seven sixty-five kV lines is the right decision for a variety of reasons. One, ERCOT and the PUC cannot compel anyone to build new generation. That’s not our model. Right. So if that’s not your model, you have to move the existing generation around more efficiently to get it from where it’s produced to where it’s consumed. Now, that’s not to say we shouldn’t put these lines in the right place. I’m involved in some of those cases on behalf of some landowners, full disclosure. I just want to make sure that when we site the lines and we’re following the statute and the PUC’s rules. And secondly, it doesn’t mean we can’t do them as inexpensively as possible. But they should be built. Yeah, we are the leader in North America in building transmission infrastructure, smart meters. All the tools that we can deploy to bring out the most power that we can from our generation fleet.

Joshua Rhodes: No, absolutely. Yeah, I guess full disclosure I have to say I’ve been involved in some of those siting

Barry Smitherman: That’s right. I think you and I were involved in one docket at the same time.

Joshua Rhodes: I think so. I think w you us and about five thousand others. That’s a pretty big docket. All right. So that brings us to transmission. So our audience is pretty technical and pretty savvy, but maybe let’s just start explain and explain transmission maybe for a non technical audience. Like when the ERCOT or PUC determines a major line is needed, what happens today? Who gets to build it? Who takes the risk? How do the utilities earn a return on this investment?

Barry Smitherman: Yeah. So in a normal cadence, the utilities would go to ERCOT and they would say, We need to build a line from this point to this point. And here’s why. It’s needed for reliability or it’s needed for economics. And then ERCOT has something called a regional planning committee, and they do all their magic, they work through it, and then they recommend it to the board and the board approves it and it goes to the PUC. Okay. And Assuming the PUC agrees that the need is there, you have to establish the need and the fact that the current system is inadequate, then they award that project to the incumbent. Generally, that is the utility like CenterPoint or Oncor that owns the substation, okay. From which the line will either leave or arrive. And so they go out and build it, and it’s all cost plus. The mathematics of utility rate regulation is that. A utility gets back from ratepayers all of their reasonable expenses plus a return on their invested capital. So when you add those two numbers together, that creates what’s called a revenue requirement, which is a fancy way of saying this is how much money I can extract from my customers in a given year. All right.

Joshua Rhodes: Okay. So you wrote an article called It’s Time for Texas to Get Competitive on Transmission Development, where you argue Texas has competitive generation and retail markets, but not competitive transmission. So what would competitive transmission actually look like in the state of Texas?

Barry Smitherman: Yeah. So, you know, I think everyone would conclude that retail competition has been beneficial for the consumer. I mean, you can go to any number of websites and you can pick your term, you can pick your price, you can decide if you want a hundred percent renewable, you don’t care about it. Tell me exactly what you want. And there are probably a hundred different providers who will give you that product. And I think generally wholesale competition has been successful as well. The entire burden, the entire risk is placed on the generator to make money or not. There’s no guaranteed return. But this part in the middle, the transmission and distribution is still a monopoly. Yep. It is still owned by one company that gets all of their money from ratepayers, regardless of whether they come in on budget or on time. So we’ve actually done this before. During the CRES process, we needed some additional transmission companies to build out parts of CREZ. So we selected four non incumbents to build parts of this. And they did a great job. These were companies that had built transmission in other parts of America and done it well, but had not done it in ERCOT. So those four were given big pieces of the pie. And each of them at the end either came in on budget or under budget. So that’s a great example of how we’ve done it previously. Now in other markets, PJM, MISO, SPT, California, they have been bidding out projects for a long time under FERC Order 1000. Okay. And there’s a group called Electric Transmission Competition Coalition, big phrase, ETCC. And they are advocating that we do more competitive bidding of transmission with Cost caps, which is a great idea, and timeline caps. So if you go over time or over budget, the developer eats that, not the rate pair. And I think this is what we need to do here in Texas. We love competition in Texas, but back in 2019, the utilities passed a law called Senate Bill 1938, which said that unless you are a Texas utility already. Essentially, you can’t build anything here. That was challenged in court. It went to the Fifth Circuit. And I love this. The Fifth Circuit slapped it down and said it was a violation of the dormant commerce clause and said, imagine if Texas said in order to drill a new oil well, you had to already own an oil well. That would be considered heresy in Texas, the free market state. And to them, this restriction was along the same lines. So that got thrown out. Now you cannot restrict transmission projects from Texas to another state by only giving them to the incumbent. But the opinion did not address the intrastate part of this. In other words, can you still only give a project in ERCOT to an ERCOT utility? So we think that’s bad policy. We think that consumers would benefit from competition, particularly given how much money we’re gonna spend, Josh. I mean, we’re talking about spending thirty three billion dollars to build out the entire seven sixty five kV backbone. I think it’s probably gonna be forty or fifty billion when it’s all said and done. That’s real money that ratepayers are gonna have to pay for. So let’s introduce some competition.

Joshua Rhodes: So in that context, are you envisioning like open solicitations for all large projects, only certain voltage classes, backbones or anything over a dollar threshold? How does that work out directly in your mind?

Barry Smitherman: Yeah. So I think if we take distribution off the table, let the local utility continue to do distribution. I’m just talking about the T part of this. Yeah. And you could say that it’s over a certain voltage, so higher than two thirty, for example. So that’d be three forty five and seven sixty five kV voltage. You could say it has to be over a certain distance, so you know, fifty miles, a hundred miles, something like that. Okay. I think it’s easy to put parameters around it. Mm-hmm. And of course these have to be qualified. Companies to build this. But you think about the utilities that don’t operate in ERCOT. You have utilities like NextEra, which is the biggest utility in America, out of Florida, Duke, Constellation, Exelon, Southern Company in Atlanta. I mean, they’re all over America, but they’re not operating in ERCOT. And for the most part, they have more capital than our local ERCOT utilities do. So why don’t we give them an opportunity to bid on these projects. And by the way, if the incumbents put in the best bid, they get to build the project. Yeah.

Joshua Rhodes: What does the handoff of that look like? I mean, once projects are built, they have to be operated and maintained and all of that. And so is the competition part really just for the building part? So say if a non incumbent comes in and builds a line in Oncor territory, it goes from one Oncor substation to another Oncor substation. Like what happens after that line gets built in this paradigm?

Barry Smitherman: Yeah, again, you know, we suss this all out through the CREZ process. So for example, you know, there was a company called Cross Texas Transmission which got some lines up in the panhandle. Okay. They’re responsible for maintaining that. Every year, as that project depreciates, then the rate base goes down. So over time, it basically gets to the point where unless they add to it, they’re not making a return on it anymore. I mean, they would be free to contract with any number of service providers to do maintenance, to inspect the lines, to do repairs. I mean, a lot of the current utilities do that as well. So I don’t think it’s an issue. Okay. Really what we’re focused on initially is the build out of the lines and the poles from the beginning. That’s where the big capital cost is. Gotcha.

Joshua Rhodes: Okay, that makes sense. See, you’ve mentioned other grids, you know, advocates for competitive transmission point to PJM and MISO as evidence that it can work and Brattle’s estimated that, you know, competitive transmission savings in the twenty to thirty percent range. I guess your opponents will argue that you’re all using the same equipment vendors and solicitations might add delay, litigation, routing risk, and maybe unrealistic bids. Like as Texas is looking to consider if we should do competition, it looks like there’s a bunch of competing information in that space. Like what’s your pitch to Texas lawmakers to overturn the rover and let it happen?

Barry Smitherman: You know, think it’s really simple. Competition’s good for the consumer. I mean, we compete in purchasing and producing all kinds of goods and services. I mean, you go to H-E-B and you see a hundred different varieties of bread. So the consumer gets an opportunity to purchase that. And I think that those same principles can apply here. We’ve always been a competitive state. We’ve always loved competition, whether it’s in sports, in politics, in business. So why should this be any different? It’s the last remaining monopoly. And I think we can point to a lot of different studies. You mentioned one that was done by R Street recently, think tank, sort of pro competition think tank. They basically say that in California, SPP, and in MISO, the competitive projects come in faster than the incumbent projects. And the cost is either lower or the same. PJM was the only place that had some issues and I think you can explain those away. So I think we can point to our experience in CREZ, where we have four new entrants that delivered on time and on budget or under budget, and experiences in other markets and just the fact that who’s afraid of competition? I mean, why should the incumbents be afraid? They can compete and if they can win the project, they get to build it. Got it.

Joshua Rhodes: Yeah, you mentioned a couple of different folks coming in for CREZ. Is that happening in the Permian Reliability Project or these step lines? Or is there It’s not it’s not? It’s

Barry Smitherman: And those have been awarded to Oncor, AEP, LCRA, and San Antonio CPS. Okay. So I think that ship has sailed. Okay. But there is a second component of the Permian Basin plan that’s called the Eastern Backbone. I don’t know if you’ve seen that map, but it basically would be a seven sixty-five kV map that would go from Fort Worth to East Texas to Houston to South Texas, back to San Antonio, and back to Fort Worth. And when I mentioned thirty three billion before, that project is twenty billion of the thirty three and probably a lot higher by the time you build it without straight lines on a map.

Joshua Rhodes: Yeah, no, I think that’s one of the things you learn. Well, I th one of the things you already knew and you learn going through this process is that straight line on a map actually has to turn into a lot of straight lines and they go in a lot of different directions. Okay, so say we did this either for the eastern line or just for new transmission beyond this, if this ship has sailed. What performance metrics would you want to see five years later? What would you want to see that shows that competition’s working?

Barry Smitherman: Well, certainly cost caps and timeline yeah restrictions are important. So cost cap would be the first one. You put in a bid and if you go over that, your shareholders eat the cost of the overage, not ratepayers. So that’s an important one. Timelines, if you say you can get this project done in four years and it goes to five years, then you’re gonna incur some penalties and you have to put that into the contract as well. So I think there are ways that we can do this, but if we’re principally trying to hold down the capital cost, which again make their way into rate base, which makes its way into every consumer electricity bill in ERCOT, then this original amount ought to be the thing that we should focus on.

Joshua Rhodes: Yeah, that makes sense. And I’m gonna go a little bit off script here, so feel free to not answer this if you don’t want. I know a lot of the talk around like the current transmission infrastructure needs that are going to serve kind of these new large loads, everything is being thrown against the wall right now to figure out what’s gonna stick. And so everything from getting these new large loads to pay for the upgrades, either the deep network upgrades or whatever that are needed, that starts to feel kind of like a invest and connect approach versus our connect and manage approach. But some of that is also trying to figure out if we have this large new customer class coming in that needs a lot of infrastructure, like how do we not put those costs on the existing industrials in the state of Texas or the residential consumer in the state of Texas? And so is there also a parallel here on like instead of postage stamp uplifting this to load, is there a parallel here with competitive transmission and getting certain industries to pay for it? Maybe they’re willing to pay for it, wanting to pay for it to get it built faster.

Barry Smitherman: Yeah, I think that is something to consider. And I think the legislature of this last session thought about this. Okay. And I think the governor’s recent proclamation about data centers bringing their own power and probably their own interconnectivity is an element of that. Yeah. So you know, one of the things that we have done in the past and not a lot of recently is build your own line. So let’s say that you are a data center. And you don’t wanna wait until the Permian Basin lines are built and energized. The eastern backbone is built and energized. You wanna build a twenty five mile three forty five kV line to a power plant or to the nearest interconnection point that can deliver your power. But we ought to allow that to happen. And that probably means that the incumbent doesn’t build it because they got so much else on their plate right now. So you contract with some other qualified party to come in and build it in accordance with ERCOT specs, there shouldn’t be an impediment to that.

Joshua Rhodes: Yeah, because I mean I’m thinking, you know, a lot of these data centers are looking to try to build behind the meter generation. You know, speed to power is like the name of the game. I mean, we’re measuring megawatts not served in the tens of millions of dollars per year and the gigawatts in the billions of dollars per year. And so it feels like there’s a massive gravity pull of like, you know, capital that maybe can’t get spent just because of the regulation that we kind of have around the system. Cause, you know. Maybe a good place to put a data center is not necessarily where you could put a power plant. Maybe it’s not next to a gas pipeline or the appropriate topology. Yeah, I mean I guess like well

Barry Smitherman: Remember this, yeah. Let me remind you that probably now twenty years ago, NextEra built a private transmission line from their wind farms in West Texas to interconnect with the grid close to San Antonio. Okay. They got tired of waiting for the incumbents or for ERCOT to put them a line on the map and they built their own. That was a Incredibly complicated project. They had to acquire the right of way through private negotiations. They had to design the line. They had to clear the right-of-way. They had to pay the landowners. They had to build it. I don’t know if you ever saw it. It was built with fairly low profile poles. The right of way width was more narrow than the normal public project. Okay. And they got it done. And so they could put their wind on the grid and get it injected into a point where they could actually sell it on the market. I think we ought to let that happen. I think Oxy did that in the past when I was on the PUC. They needed to build a private line from a power generation resource to one of their plants and we signed off on that. So that ought to be an option and probably one that we’re going to see more of because no hyperscaler is going to wait four years to get power delivered.

Joshua Rhodes: That’s interesting. Is that possible to still do, or was that taken away by the twenty nineteen Rofer Law?

Barry Smitherman: I think it’s possible to still do because that line, that next era line, was not put into rates. It was all privately financed and privately procured. And so for all intents and purposes, it took the power generation spot and moved it right next to the load.

Joshua Rhodes: Okay, that’s interesting. I don’t know that I’d really appreciated the ability to do like a private line. Again, you can correct me if I’m misunderstanding this, is like so generators typically build in ERCOT what we call the driveway, like their gen-tie, but they don’t generally directly build the highway part. They don’t do deep network upgrades like they do in others. We allocate that to load. And it’s my understanding that even if a generator wanted to, say they wanted to make some deep network upgrades. Because it would reduce curtailment or whatever, that they actually can’t do that. Am I understanding that right?

Barry Smitherman: Say I don’t know the answer to that. Okay. All I can think about is we actually referred to that NextEra project as a gen-tie. Okay. It just happened to be a two hundred mile gen-tie. And so I don’t see any reason why that couldn’t happen again. Yeah. Again, it’s all privately financed. The right of way is privately procured. Okay. I’m sure they had to work with ERCOT on the interconnection to make sure that that was sound. Right. But if you could figure that part out, if this is where I want to terminate the power and inject it into the grid, I ought to be able to do that. But think about it, if you’re doing power to a data center that’s behind the meter, then you’re not injecting any power into the grid. You’re basically just taking it from the generation node and delivering it to the consuming load. Right.

Joshua Rhodes: Okay. Do you know of any projects like that that are happening? I mean, maybe they’re just not in the public discourse or not in any docket because they’re not gonna be put into rate base. Are you familiar with any?

Barry Smitherman: I think there are discussions that are happening right now. Okay. And some of it has to do with co ops and munis as well. Yeah. Because you know, we have those scattered throughout ERCOT. Okay. So if you had a load that was located in a Muni, a municipal utility, then you’re gonna have to work with them probably to figure out how to get that done. But if it’s genuinely behind the meter, to me, it doesn’t matter if the load is right next to the generation source or on the other side of the state, I ought to be able to build a pipe, a transmission line to get my electrons from where they’re generated to where they’re consumed.

Joshua Rhodes: Yeah, I’m wondering if we’ll be seeing more of that. I mean, right now it feels like, you know, there’s so much demand for electricity. It’s kind of like we’re squeezing the balloon, right? And it pops out in other areas. And so that’s very well be like a spot where that’s it’s interesting. I feel like I haven’t heard that much more of it, but maybe some of it’s also coming from, you know, ERCOT has these well, not new, but they’re, you know, kind of borrowed constructs for large loads going into the Batch Zero process, like the WL pun, which is based off of a private use network. Which, you know, has behind the meter generation, but can also interact with the grid a little bit there. I wonder if we’ll see kind of more of that as we go forward in terms of some of these more things like private lines. I guess that would be a place for non incumbents to really play in this market and to really understand Texas, I guess.

Barry Smitherman: Yeah, it would be. I mean, I think we’re gonna see a lot of different models try to be deployed as yeah, these data centers come in and say, Okay, I want power in twelve months and the lines are not gonna be built in twelve months. So yeah. Let’s say for example, they either build their own power plant in an area where they can get the permits to build it, but that’s not necessarily where the data center is gonna be located. So they gotta figure out how to get the power to the data center, or Conceivably, and this has been an issue in some of the other organized markets. You take a large generation resource like Three Mile Island in Pennsylvania, you re energize that as a nuclear plant, you put an Amazon facility next to it, and that power does not go on the grid. It goes directly to the data center and that should be fine, right? It wasn’t producing before. Now it’s producing. And it is taking a load that normally would be on the grid and powering it. Now, I think there probably will be some provisions that say in an emergency, you’re gonna have to provide backup power in three mile and you’re gonna have to put some of that power on the grid. And so we gotta figure that part out. But I think the mechanics of it can be sussed out.

Joshua Rhodes: Yeah, I mean, I think even one of the benefits of having kind of that behind the meter generation that’s still electrically connected to the grid is the grid basically gets the inertia for free. And that can help with high levels of inverter based resources or other other types of systems. So I mean I think it’s a good trade off. So you mentioned that the courts have pushed back against Texas right of first refusal law to the extent of but not necessarily within interestate, so within ERCOT. What would be a realistic path to get it there? Is that litigation, is that PUC rulemaking? Does it have to go to the legislature? Like what’s the fix there?

Barry Smitherman: Yeah, well I think we have to eliminate Senate Bill nineteen thirty eight. Okay. Totally. So it does not apply to the ERCOT only region. And just take it off the books. And that will be one of our legislative agendas in our group, Texans for Affordable Transmission, to try to do that. So that then the PUC has the flexibility, then begin to award projects to non incumbents.

Joshua Rhodes: So if that law were gone, then you think the PUC would have the authority to do that?

Barry Smitherman: I do I don’t think there would be anything restricting them at that point. I think they could take projects, I mean probably do some pilot projects. Let’s take one or two, maybe one or two lines of the eastern backbone. And let’s say, you know, Houston to Lufkin. Yep. And we can divide it into two pieces or three pieces and let’s bid it out. Let’s see who comes in with the lowest price and let’s run the experiment. Okay.

Joshua Rhodes: All right, so last question. Texas deregulated much of its electricity market in nineteen ninety nine and that decision has, you know, shapes the state for a generation and will continue to. If Texas gets transmission wrong over the next five years, what will people in twenty thirty five wish we had done differently?

Barry Smitherman: Well, I don’t think we’re gonna get it wrong. Okay. I think that we are gonna build a lot of transmission, not only the Permian Basin pieces, but also I think the eastern backbone will get built. I have seen maps where we have a backbone that goes up into the panhandle. Okay. And one that goes down into South Texas. So I think the momentum is to build a big seven sixty five K V backbone. Yeah, we have to do it the right way so that landowners don’t March on the Capitol with pitchforks, you know, in protest to these projects coming through their two hundred year old family farm. But let’s assume we do it the right way. Yeah. The question is, can we do it cheaper? Yeah. Can we do it at a cost of seventy-five percent of thirty three billion? And that would be real savings to consumers. It might also introduce some more creative ideas about how we get more power out of existing infrastructure. What do we do at substations? There’s some technologies that we could be doing a little bit differently. So I think the question is, what’s it going to cost? Not are we going to build it? And it’s a no regret policy because it is impossible to predict what kind of generation resource we’re going to have on the grid in ten years. Can we get small modular nuclear? Maybe. As you said, I’m also chairman of the Texas Geothermal Energy Alliance. We’re seeing some great advances in accessing the heat of the earth to turn it into steam to make electricity. In East Texas in particular. So in ten years, could that be a meaningful part of the grid? Battery technology. Could we have batteries that last longer than four or five hours? Let’s say four or five days. That’s a game changer right there. Yeah. So we can’t predict that, nor can we predict what AI is gonna do for behind the meter applications or empowering consumers to be smarter consumers of electricity. None of that we can predict, but we can build out the backbone.

Joshua Rhodes: Yeah, no, I mean I think that’s smart. I and sorry I lied about that being the last question. One more. If you don’t wanna comment on it, that’s fine. I you mentioned, you know, the landowners coming at with pitchforks and all that kind of thing. We are building or looking to build this backbone of transmission, the seven sixty five transmission, that I think would benefit the entire not just for the electricity sector, but it makes manufacturing of goods cheaper. It just makes using more electricity and cheaper. In the long run. The question is, how do you disentangle that right now? It seems like a lot of folks are upset about this. And I’m curious if you have a feel for how much of it is a pushback against AI, because like data centers right now don’t have that many political friends and they’re not polling very high. We’re not necessarily building these lines for data centers, but it’s happening at the same time. And so I don’t know, how do you disentangle that?

Barry Smitherman: Yeah, I don’t think it’s an AI perspective. I think it’s like the old joke about which one contributes more to your breakfast, the chicken or the pig. The pig makes the absolute sacrifice the chicken gives one or two eggs every day, day after day. So we’re asking landowners to sacrifice their property for the benefit of the rest of Texas. And many of them are going to be willing to do so.

Joshua Rhodes: Okay.

Barry Smitherman: What we have to do though is we got to follow the rules, follow the statute, which says let’s take into consideration the values of the community. Let’s not fragment rural properties. Let’s be sensitive to the environment. Let’s try to parallel existing right-of-ways wherever we can. Yep. Because if you do that Then that legitimizes the process. And I, as a landowner, can say, you know, I’m not particularly happy about this, but I know the PUC followed the law, followed the rules, and so I can live with it. So that’s the important part of it. I mean, we were able to do this with CREZ, Josh, and at the end of the day, we had landowners that were not thrilled, but I didn’t receive one letter. From any landowner over the three thousand miles of CREZ lines that said, I’m really mad at you because you didn’t follow the law. Okay.

Joshua Rhodes: I think that’s a great spot to end. Barry Smitherman, thank you for coming to the Energy Capital Podcast.

Barry Smitherman: Yeah. It’s been fun. Thanks for having me. Thanks.

Joshua Rhodes: Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make better sense of how the energy system actually works, share the episode with a colleague and hit follow on your podcast app. You can find us on Apple Podcasts, Spotify, and all the usual platforms. For deeper analysis and context each week, subscribe to the Texas Energy and Power at texasenergyandpower.com. That’s where you’ll find every episode, every article, and our latest updates. We’re also on LinkedIn, X, and YouTube. Where we share clips, insights, and ongoing commentary on energy policy, markets, and the grid. Before we go, a quick note. The views expressed on this podcast are my own and do not represent the official positions of the University of Texas, IdeaSmiths, Austin Energy, or Columbia University. A big thanks to Nate Peavey, our producer. I’m Joshua Rhodes. Thanks for listening, and we’ll see you next time.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

For our 250th, let’s declare American energy independence, Texas-style | Opinion - The Houston Chronicle

For this July 4th weekend, Michael Webber gives a great overview of the fracking boom that began in the Lone Star state. He argues that though the world of energy has changed, Texas’ ability to put the U.S. at the center of innovation is constant.

It shows that if we prioritize the use of our domestic resources, build infrastructure and lean into innovation, we can free ourselves from foreign control, make a lot of money and even reduce emissions along the way. It’s no accident that the Nobel Prize for developing the lithium-ion battery was awarded to a professor at the University of Texas or that the state is home to at least 10 solar panel manufacturers alongside innovative battery, geothermal and nuclear startups. We can also use Texas minerals to reduce dependence on China for the raw or refined materials necessary to develop all of these energy resources.

FERC Was Already Losing Its Independence. Now It’s Gone. | Heatmap News

A Supreme Court decision this week leaves leaders of independent government agencies vulnerable to federal firing without cause. And that includes the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.

“There’s a bigger risk that they’ll have to ultimately yield to political pressure because they’ll have this very overt threat that they’ll be fired,” [Harvard Law School professor Jody] Freeman told me. “We’re going to see decisions that look more political, that look less expertly driven, and they probably will wax and wane with every new administration, which undermines stability.”

Doug Arent and Robin Millican on What’s Really Driving Electricity Prices | Columbia Energy Exchange

Columbia’s Center on Global Energy Policy podcast breaks down new research on why data centers aren’t the whole story behind rising electricity prices. And ERCOT gets a shoutout for why Texas isn’t sweating the load growth surge as much as other states.

So there’s some evolving set of practices I think Texas, in their self-determination mode, is really pushing on pieces that they think can really work for their system. And then frankly, the interesting takeaway from the roundtable that we had down there was, one, they aren’t concerned about price increases because they know how to build generation, they know how to build transmission. They’re very confident that they can build low-cost resources to meet the load growth.

Read more

The conventional wisdom is that residential users will suffer as rates go up and reliability goes down due to a surge in data-center load. Large-loaders, however, are not freeloaders. Electricity rates are likely to rise in the coming years as utilities make long-delayed grid updates, but new Texas law and regulations are designed to ensure data centers pay their own costs. The extent of the rise in costs will depend on two factors: whether generation demand and capacity are matched and how transmission costs are divided.

Forecasts for long-term load demand are still in flux. In its most recent forecast, the Electricity Reliability Council of Texas estimated long-term load growth will rise fourfold from the 2023 peak of 85,500 megawatts to 367,000 in 2032. Texas regulators have asked ERCOT to revise that estimate, however, arguing it’s inflated by the inclusion of speculative large-load projects unlikely to materialize.

Texas Senate Bill 6 is intended to deter highly speculative projects and to prevent residential customers from carrying more than their fair share of infrastructure costs. The bill intends to make data centers and other large load users bear the lion’s share of the electric-infrastructure upgrades their scale requires. (By most reckonings, about 70 percent of large-load user connection requests in Texas come from data centers.)

Analysts are divided on whether the bill can achieve its goal of managing the additional demand without a sharp increase in electricity prices.

“Why are people coming to Texas for data centers?” said Tom Seng, a professor specializing in energy markets at Texas Christian University’s Neeley School of Business, in an interview. “Vast available land, preferential tax treatment, no state income and low electricity prices.” Seng argues electricity markets work just like property markets. When house-hunters from California and the Rust Belt moved to Texas for the cheap housing, home prices soon rose. Why would electricity be any different?

Read more

Subscribe now

Already projects are sitting in the interconnection queue as new regulatory deadlines loom. ERCOT figures show more than 445 gigawatts of large loads in the process, and the rule sorts them into base load, studied load, and excluded load. Developers have until July 10 and July 24 to meet certain filing deadlines, and the full batch study is targeted for early April. The policy also shifts more of the analysis from individual utilities onto ERCOT.

CenterPoint has been connecting large loads in Houston for decades. That experience drives a question the design phase mostly deferred: does a 75-megawatt cutoff for loads to participate in the program fit the manufacturing and industrial loads that move at the speed of business?

On this episode of the Energy Capital Podcast, Joshua Rhodes talks with Caitlin Smith, chair of ERCOT’s Technical Advisory Committee and senior vice president at Jupiter Power, and Jason Ryan, executive vice president of regulatory services and government affairs at CenterPoint Energy. Smith walks through how stakeholders developed the rules on a compressed timeline. Ryan presses the forward question of whether the 75-megawatt threshold and an annual batch process fit the loads Houston routinely connects.

Ryan’s concern is timing. When the batch becomes “the long pole in the tent,” he says, developers with real projects start to walk. The conversation works through:

• WL-PUN and PCLR, the withdrawal-limited private-use-network and provisional controllable-load resource programs ERCOT is repurposing to fit more load onto the current grid.

• The 75-megawatt cutoff, why Ryan questions whether mid-sized manufacturing loads belong in the batch at all, and the risk of projects sizing themselves at 74.9 to stay out.

• Non-firm service and reliability, how a load that agrees to curtail differs from the century-old obligation to serve, and what testing CenterPoint needs before it trusts the switch.

• What is permanent versus triage, which parts of batch zero survive into batch one and beyond as the Texas Legislature returns next year.

New to the batch zero mini-series? Start with Eric Goff on how batch zero took shape and Tiffany Wu on the mechanics.

How ERCOT sets the threshold and batch cadence will determine which loads get power on their own timeline and which wait for the next cycle.

Share

Timestamps:

• 00:00 - Introductions: Caitlin Smith and Jason Ryan

• 02:43 - What Batch Zero is and why ERCOT needs it now

• 05:14 - Houston's diverse large loads, not just data centers

• 08:13 - Timeline: the July 11 effective date and key deadlines

• 10:44 - Base load, studied load, excluded load: winners and losers

• 12:55 - Inside TAC: compromises, new stakeholders, and fairness

• 16:10 - Does the queue mean a transmission build-out?

• 19:01 - The real number: CenterPoint's 40 to 50 GW prediction

• 23:18 - New constructs: WL-PUN and PCLR explained

• 28:13 - Non-firm service, reliability, and trusting curtailment

• 32:01 - Tracking success: what is permanent versus triage

• 36:07 - The 75-megawatt threshold and how often to run a batch

• 43:38 - Data centers, the final timeline, and what comes next

Resources:

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Webber Energy Group (Website - LinkedIn)

  • IdeaSmiths (Website - LinkedIn)

• Caitlin Smith (LinkedIn)

  • Jupiter Power (Website - LinkedIn)

• Jason Ryan (LinkedIn)

  • CenterPoint Energy (Website - LinkedIn)

• ERCOT (Large Load Integration)

Company & Industry News

• ERCOT Again Revising Large Load Interconnection Process

Books & Articles Discussed

• Texas Senate Bill 6, 89th Legislature

• PGRR145, Batch Zero Process for Large Load Interconnections

Related Podcasts by Energy Capital

• Batch Zero, Explained with Tiffany Wu

• How Texas plans to serve ‘infinite demand’

• Open Season vs. Batch Zero with Travis Kavulla

Transcript:

Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. I’m really excited today to have not one but two guests to talk about kind of what’s going on in the ERCOT Batch Zero process and kind of how that may continue to play out. So today on the podcast, we’ve got Caitlin Smith. Caitlin has a BA in econ from University of Texas and a JD Law from Penn State. She’s a policy consultant for CLEAResult for going on counsel at Jewell & Associates. She’s a vice president of AB Power Advisors and is currently the Senior Vice President for Federal and Regulatory Affairs at Jupiter Power, one of the largest pure play energy storage companies in the US. But she also is the current chair of ERCOT’s Technical Advisory Committee, the highest committee comprised of stakeholders, which makes recommendations to the ERCOT board. And that’s going to really come in handy today as we talk about one of the biggest policy shifts that’s working its way through the system. We also have Jason Ryan. Jason Ryan has his Bachelor’s of Business Administration and JD from the University of Texas. He was a Global Projects Associate at Baker Botts, managing partner at Ryan Glover LLP. And he’s also the information dominance warfare officer for the US Navy, which I kind of just want to stop and talk about that. If you can, you may not be able to talk about that. But now he’s the executive vice president of regulatory services and government affairs at CenterPoint Energy. Caitlin and Jason, welcome to the Energy Capital Podcast.

Jason Ryan: Thank you for having us.

Caitlin Smith: Thanks, Josh.

Joshua Rhodes: I’m really excited. So I’ve got two lawyers and two government affairs folks here today. So we’ll see how bad I do at managing this. Great. It’s gonna go great. But I know we’re under a bit of a time crunch, so we’ll get started because Caitlin, you’ve got a date for Elmo’s Got Moves. Is that right? Elmo’s Got The Moves. Okay.

Caitlin Smith: Almost got the moves. Almost got the moves. I’m seeing it tonight. I don’t know when this will air, but it’s in Austin Friday in San Antonio Sunday.

Joshua Rhodes: That’s some free advertisement there for almost got moves. But anyway, so we’ll go ahead and get started. And so the arc of this podcast is really I want to kind of catch up with what’s going on with the batch zero process. We’ve done two episodes, which we’ll link in the show notes, one with Eric Goff and one with Tiffany Wu, where we kind of looked at the overall kind of structure of the batch zero process and then with Tiffany got into kind of some of the details. But one of the things that it really was brought out, at least for my knowledge, during those podcasts, was We really had a framework for how things were going, but we hadn’t filled in all the details. And so I was just curious, Caitlin, if you could kind of refresh us on what batch zero is, where it stands, and why do we need it right now?

Caitlin Smith: Sure. And the impetus for me coming on, or one of them was Eric Goff said that the demand for load is infinite. I don’t believe it’s infinite. So I wanted to come on and correct. But maybe Jason thinks it’s infinite. So we could debate that. So batch zero, previously in ERCOT, there was not a uniform process for load interconnect. You know, before, I don’t know, six, seven years ago, nobody was really thinking about. Connecting these large loads when I was consulting, you know, we would have a call about a gigawatt hydrogen load or something that wanted to come online. This was starting in 2020. ERCOT hadn’t really heard about it or contemplated it at that point. So in the last five or six years, we had a major change to the system, which was ERCOT was actually seeing these applications for very large loads to connect and a lot of them What happened then was for the utilities, it was just either too much to process or they didn’t really know how to process it. Jason can correct me. And I think the other thing was there was not a uniform way amongst utilities on how to process these studies. And so they would study a load, another load would come on in their area, or maybe not even in their area. And ERCOT would say, No, we have to restudy. So people were getting caught in this infinite loop. So we are changing from that serialized process to a cluster or a batch, as we’re calling it, process where you can study a whole group of loads to make sure the system can accommodate the whole amount or the whole allocated amount of it at once and you can have a clear study. The other thing that does is really shift more responsibility to ERCOT. Before this was really each TSP. Was performing these studies and now there is a much larger ERCO component. And so batch zero is our way from transitioning from the status quo to the batch

Joshua Rhodes: process. Got it. And Jason, I guess the old process, like large loads were coming to transmission service providers like CenterPoint. Can you give us a feel for like when did the problem start to feel intractable in terms of like you going from having maybe one load at a time to dozens or hundreds of loads at a time? Can you give us a feel for when that started to come along to push this new process or to push talking about getting a new process?

Jason Ryan: Yeah, and so maybe I can answer it from a general perspective and then I can answer it from my company’s perspective. Sure. Because I think those timelines are a little bit different or the experiences are a little bit different. Between two years, you know, eighteen months, two years ago, I would say it started to become clear in many parts of ERCOT that something had to change. Okay. And yeah, we started talking about the batch process towards the end of last year and obviously the process has played out, got built this year and we now have more certainty on exactly what that looks like. And so I think the batch process has come together relatively quickly. Yeah. Once that problem was identified. I’ll speak to my company’s perspective. Yeah, in Houston we’ve been connecting large loads to the grid since before it was cool before everybody was talking about it. So we didn’t have the same challenges that you saw in other parts of the state. And in fact the current ERCOT study process for us continues to be very efficient, even through this transition into a batch way of doing things. Okay. Because like I said, we’ve had large customers on the grid down here in Houston for a long time, both transmission and distribution system, even we have large loads on our distribution system down here. The pace has obviously picked up. The size has expanded and gotten bigger. But for us, it’s business as usual at a faster pace. Okay.

Caitlin Smith: I think there’s a big some policy questions come into play for CenterPoint’s territory. I think a lot of those are things that need to be in the territory, right? Close to the shift channel or things that are kind of integral manufacturing businesses. That’s right. And so you also have these data centers or Bitcoin mines that come on maybe in other areas of the state that Some people maybe think don’t need to be there. Or maybe they can locate in a bunch of different places, right? They don’t necessarily need to be in the one spot. So I think not all of these loads have the same characterizations. And I think we tend to right now be solving for the data centers, which is something that’s new for us.

Jason Ryan: Yeah, I think that’s right. I’m glad you raised that too, Caitlin, because you we’ve got the largest petrochemical complex in the world here at Houston, the largest medical center on the planet, a significant amount of advanced manufacturing. And so it’s important that I share that view of a utility in a area that has a very diverse set of drivers of growth with large loads. We also have data centers, but I think you’re right. We shouldn’t over rotate on data centers and have unintended consequences to manufacturing jobs and energy and simply growth of populations that we have here in Houston.

Joshua Rhodes: totally. And I and I want to get to this new concept of well, a borrowed concept of the WL-PUN in terms of like getting through the batch zero process. CenterPoints obviously has connects a lot of the private use networks already. So you already have a lot of experience with that. I want to get to that in a little bit later, but first I want to like setting the timeline. So we’re recording this in kind of like late June. And at this point, the batch zero process has made it its way through TAC. It’s been approved by the ERCOT board. The Public Utility Commission accelerated its approval. Of batch zero and I think I got an email from ERCOT yesterday saying that the process is gonna start on July eleventh, if I’m correct, or something to that effect. Did I get that timerine right, Caitlin?

Caitlin Smith: Yes, that’s correct. I believe the rule becomes effective the eleventh, but there’s a lot of deadlines between the eleventh and the twenty fourth. Or the tenth and the twenty fourth.

Joshua Rhodes: Okay. Got it. All right. So whenever the rule becomes effective, well now that the batch zero is approved, what’s no longer theoretical here? Like what’s the process going to start to look like on July eleventh or maybe the twelfth the next day?

Caitlin Smith: That may be a better question for Jason. You know, I think a really different thing about this as opposed to some of the other policies stakeholders pass is you’re kind of immediately left with winners, kind of winners and losers. Or maybe not losers, but maybe you have to wait a little while. And so we have people who will be firm load in batch zero, right? They’re getting their studies are valid. They don’t need to be redone. They’re getting The allocation of everything they wanted, things that need to be studied in batch zero. So they’re good to go into batch zero. And then they will find out what their allocation is. And then we have people who are out of the batch who will have to wait till batch one. And so we know the criteria for that. I think by August, we will know who’s in those. The requirements are due. I think it’s mostly. The loads have to get it to the TSP by the tenth and then the TSP has to kind of affirm that to ERCOT by the twenty fourth. So we’ll know who those people are or I don’t know if that will be disclosed, but we’ll know the amount and they’ll know who they are in August.

Joshua Rhodes: So is the process, Jason, is it like are the large loads still gonna come to you first? Are they still gonna come to the TSPs first and then there’ll be a handoff to ERCOT or something like that for the big study? Yeah.

Caitlin Smith: Yeah.

Jason Ryan: That’s right. So, you know, what we’ve got now is we’ve got certainty over timeline and we’ve got certainty over requirements. In a couple of weeks you’ll know which loads are fall into what bucket. You’re either base load or your studied load, or you’re not either one. Then from there it’s the new part is ERCOT spap study, which we the utility would have provided the studies to ERCOT. ERCOT will continue to ask questions back and forth, right? We’ll provide answers, they’ll ask questions. That’s very typical even today. So the different thing is the batch study that Caitlin has laid out for us and you know, that is likely to take the balance of the year into next year. Early April is the target for the batch to be complete. And so there’s a lot of certainty now that we’ve got these rules in place, as opposed to January, February, March of this year when it was we were making the airplane as we were flying it. So a lot of uncertainty. You now have that certainty.

Caitlin Smith: Agree with that. We didn’t really start using the word batch, as Jason said, until the end of last year. And even though we did this on, I would say it was a very aggressive and kind of phenomenal timeline, it caused a lot of confusion, right? If you’re sitting there in January and you have some load projects and you just heard this word batch two months ago, but you’ve had loads in process for a couple of years. That really freaks you out, right? Even from January to today is sort of a long time to wait and have that certainty.

Joshua Rhodes: When we talked to Pablo Vegas on the podcast, I you know, he mentioned that this process was ongoing and we probably weren’t gonna get it exactly right, but it was gonna be basically building the plane kind of as we were going. I guess like the first step of that process, Caitlin, I guess went through TAC, right? Went through the technical advisory committee that you’re chairing, or at least that was kind of the process before it got handed off to the ERCOT board. And you had to take a pretty big contentious, you know, large load problem with a bunch of different stakeholders with a bunch of different wants and needs. And turn it into like a streamlined or a process. In that process, what do you felt like was the biggest compromise like y’all had to make or that everyone had to make?

Caitlin Smith: Yeah, I’ve been thinking about this because I think I may have used the word contentious or contested before. I don’t know that I would characterize this as extremely contentious, but I would characterize it as extremely important. Yeah. There was a lot of money on the line and extremely large, right? We’re sort of changing the entire system of load integration onto the grid. And we had a lot of new players. So as you said at the beginning, I chair what’s called the technical advisory committee. I can’t speak on behalf of a group here, but I have a lot of experience chairing that committee. And that committee is comprised of stakeholders, you know, from every segment, generators and Jason segment and municipals and everything. So I sit on the Committee for Jupiter Power. I happen to chair it. So I facilitate the meetings. These low developers have not been part of the process to date. So there was a lot of learning for them, right? They’re not even really voting members yet. And so they were sort of coming in from the outside to a process like this. So there’s a lot of learning. As I said, this was a little bit unusual and they’re kind of immediate commercial winners and losers. And so that gets contentious, but I don’t know necessarily that the policy things we discussed were contentious, but it was hard to differentiate sort of a policy cut versus what is a fairness issue. Is it appropriate to pick a winner and a loser? Because I think there were some issues that came up that were sort of fairness issues that people were very sympathetic to. You know, we talked a little bit with Jason already about the differences between the loads that an IOU might have, right? They might have a lot of data centers in their territory or they might have a lot of critical industry and manufacturing in their territory. And so I think there are a lot of specific to them things that load developers brought to the table. And it was sort of hard to kind of pick what needs to be in batch zero, what’s fair or not, that kind of thing.

Joshua Rhodes: Yeah, I think another word that maybe got overused a bit was when we were talking about the large load queue, we I started talking about it like there was a process. Like, you know, there was no real queue. It’s kind of more like a list, the thing, you know, and with the individual TSPs where things would kind of work their way through. That makes sense. I mean, it’s like if you’re staring down kind of the barrel of like, I think the latest number is like four hundred and forty-five gigawatts of large loads in the process and like ninety percent of that being data centers, it’s like it’s either create a process or just get paralyzed by the fact that you know, you can’t move forward. So it’s like, yeah, hats off to y’all for coming up with something so quick. That was pretty impressive. And I think the rest of the country is watching, particularly other other grids like maybe PJM and stuff. So Jason, in this process, ERCOT’s gonna allocate transmission capacity. It’s like, so we’re gonna go through this process, projects are gonna get either their full allocation or they’re gonna get like a staggered allocation. But that means that utilities actually have to build the stuff and connect. Given how much is going through the queue, is that gonna mean a like a substantial acceleration of transmission expansion in the next five or six years?

Jason Ryan: Well, not to connect to these batch zero loads, most likely. Okay. But you then have to replenish the capacity on the grid. Right. And so if you assume that we will continue to do batches, you know, if we run out of capacity on the current grid in batch zero or batch one, then obviously you have to build more capacity, which gets to maybe Eric’s point of the infinite growth. Whether it’s infinite or not, it certainly is relentless right now. And you see it’s a fair amount of transmission projects being constructed today with early twenty thirties in service dates. Yeah. I think you will continue to need that infrastructure for the future batches. But if you’re in batch zero and you want energy in twenty eight, twenty nine, you’re gonna have the existing grid that you’re counting on. There obviously will be some upgrades that are needed, but you’re not talking the hundreds of miles of transmission line. That’s gonna serve growth end of this decade, early next decade. You know, it is interesting. I think I mentioned this to you, that things will slow down for us so that it’s an unintended consequence of the batch process is that we won’t be able to move as quickly as we otherwise would. I think that will work itself out of the batch process over time, I suspect.

Joshua Rhodes: But the new classification framework, it creates base load, study load, and excluded load. Do we know how much is going to s at least start out in each one of these buckets? And do we have a feel for like what might make it out the other end of the batch zero process?

Caitlin Smith: I don’t have one I’m willing to commit to. I think we’ve heard various numbers from ERPA along the way, but sort of big ranges. And I think a big part of this process is for baseload and for studied load, there are requirements, eligibility requirements. So I think we know based on by all accounts ERCOD and the TSPs have been doing a really good job on their end of what studies are done to say who’s firm load, who studied load. But there are these criteria now for the loads to meet, right? Certain development criteria, a significant financial security posting. So I think we don’t know how many of those loads are going to meet those criteria or choose to meet those criteria. And if they get allocated less than what their project is, do they then drop out? I think what’s been hard about load and the data center load in particular is just the lack of historical context. So certainly for batch zero, we don’t have any historical precedent to say, well, about 80% of the loads, you know, end up hosting their financial security. And with the load forecast, we don’t have kind of historical data to say, well, this is a huge number, but about 60% of these aren’t real or 30% are real. We just don’t have that yet.

Joshua Rhodes: Yeah, I guess we had that for the generator interconnection queue. I remember doing a kind of a study, kind of a longitudinal, we could figure out what percentage would make it between to each stage and f at the other end. But yeah, like I said, I don’t think we even really had a queue. We called it a queue, but we didn’t really have one for large loads. Jason, are you able to offer up any numbers for CenterPoint? Like what numbers are y’all looking at when it comes to kind of what’s trying to get in bash zero at these tranches?

Jason Ryan: Yeah, so I you know, the number if you unpack what ERCOT released earlier this year informs my view of what the ultimate number will be. Okay. So of the more than four hundred gigawatt number, we were a little more than four gigawatts of that. And we have since then had additional load that I believe is real come into the batch process. So, you know, that is not Currently my number that I’m predicting. Okay. But yeah, if you want my entire queue, I can see how you can get to hundreds of gigawatts. But yeah, we meet literally every day to go through our list of potential customers. Yeah. And have only submitted the projects that we believe are real. It’s one of the reasons why our review with ERCOT continues to be relatively straightforward and on historic timelines, and we’re not getting bogged down with a lot of unreal projects. As an aside, I do think that to some extent this is a creature of the utilities making. I’m not being critical of the utilities in saying that because we didn’t have any tools to help figure out who’s real or not beyond just our judgment. Yeah. But we do have to exercise our judgment in terms of what we bring forward. And so that’s why you’re not seeing eye popping numbers out of the Houston area because we’re not turning in, you know, our entire queue. That said, I think that we’re about twenty five percent of ERCOT’s load down in Houston today. Yeah. If you assume that I’m growing at roughly the same pace as the rest of the state and that I have about the same amount of available capacity on the system today as other parts of the state, maybe I have a little bit more. I think that drives me to I think realistic number coming out of that zero base load is forty, fifty, something like that. Again, it depends on what the timeline for those projects are. If those projects are needing power in the twenty thirties, then sure, perhaps that’s not an issue. But that’s my prediction. By the time this airs, I’ll probably be proven super wrong. Because we’ll know. But you may be right. But that’s my prediction just based on what we think is real among the customers that we interact with. You know, the utilities are the closest to these customers. Right. We have to do our job. Of vetting these before we just throw them into the machine of ERCOT. And so I do think that I’m not critical of how we got to the batch process. I think it’s needed across the state, but I think when you throw around numbers that are hundreds of gigawatts, we know that that’s not going to happen in this decade, right? But like I said, the utilities were kind of without a process to make the decision on well, who does get to go forward and who doesn’t. So that’s why I think batch is good. But we also have to be more realistic on the numbers that we put out there.

Joshua Rhodes: Well Kaylin, hopefully that helps tack there to figure out kinda maybe what’s going on.

Caitlin Smith: to the number. I’m not figuring out the numbers.

Jason Ryan: Yep. Forty or fifty gigawatts of baseload growth is mind boggling. But I think the grid could actually digest that in a relatively modest period of time. Then we should talk at some point about potential unintended consequences of the batch process because I think there are some that are worth talking about, especially down in Houston where all of our growth is not data center growth.

Caitlin Smith: Is a lot. Yeah.

Joshua Rhodes: totally. Yeah, and we’ll get to that here in a little bit. I did want to so you’ve talked thrown around a few numbers. I mean I think all of them are kind of wags at this point. Yeah, maybe but okay, between zero and in less than infinity, which mathematically is still inf whatever you

Caitlin Smith: They’re not infinity. Should do Twitter game like Russell Gold used to do. You should have people

Joshua Rhodes: we have to bet the price of oil. Yeah, next year. Okay.

Caitlin Smith: Yep, you should have people bet the gigawatts and batch zero.

Joshua Rhodes: Okay, I didn’t do it for batch zero, but I think I did this years ago. But when the numbers were like 100 gigawatts, not 400 gigawatts. And so it’s I’ll be honest. The last study I was hoping for 500, just you know, why not? Okay, but there’s a couple different to get a lot of these large loads in there, ERCOT has come up with a couple new constructs. Well, not new. They’re borrowing existing constructs to kind of help some of these. There’s the PCLR, the provisional controllable load resource, which, you know, essentially will have some firm service, but if the grid can support it, might be able to go above that during certain times, but they may be curtailed down to their firm. And then kind of this WL-PUN, which is a withdrawal limited kind of borrowing from the private use network that we kind of already have in a lot of like the high industrial loads in the CenterPoint region in the Gulf Coast region. So Jason, starting with WL-PUN, can you kind of explain just how a private use network works, like how it interacts with ERCOT and kind of how y’all see that when you’re doing your planning?

Jason Ryan: Sure. So, you know, as you mentioned, it’s not maybe the acronym is new. The concept isn’t super new of having generation sided with load, either literally right next to it or in close proximity to it. And you know, you look at a lot of our historic large load customers, many of them have their own generation. And sometimes they are using that generation for their processes and sometimes they’re selling that back onto the group. So we’re super familiar down here with how that works and how that’s engineered and those customers are super familiar with the economics of it as well. And you know, as it relates to you know, the move to more of that, it doesn’t cause us great concern because of that historic precedent. And as you talk about the controllable load resource, it’s again not super different. Then what we already see, again, the acronyms may be different and maybe everybody doesn’t have the same kind of experience that we have with these large loads that, you know, for various reasons might have to change what they’re doing, change their use of the grid in the moment, or even put extra power back on the grid for a moment. We understand how to build the infrastructure for that and how to take that into account when we’re interconnecting on

Joshua Rhodes: And Caitlin, I is my understanding that some of the acronyms are kind of new, but we’re borrowing from existing constructs that exist. Is my understanding, and please correct me if I’m wrong, that a lot of these new larger loads were actually wanting a new construct, like a point of interconnection netting, like with generation kind of behind the meter. If I got that right or it got it partially right, can you explain like what they were asking for and kind of maybe why we didn’t want to tackle it here with the batch zero process?

Caitlin Smith: I think that’s right. I think these are old concepts. You know, certainly the private use network. CLR, same thing as what I was talking about in the beginning with these loads, us not having seen this really until six years ago. I think the concept of CLR existed, but it wasn’t really being used until these data centers, maybe, I don’t know, four or five years ago. It’s basically a software solution to be able to respond to the grid as fast as a or faster than a generator would be, right? You’re a SCADA-dispatchable load. So it’s still a new concept. And I’ll want Jason to weigh in. I think what we’re talking about maybe since SB6 is more a concept of non firm service. And so these loads say, well actually I don’t need firm service all the time because I’m a CLR. Or because I’m a generator and I’d actually prefer not to have firm service if it increases my speed to market. And I think that that is a new thing, right?

Jason Ryan: Yeah, certainly newer in the electric space. We’ve been doing that forever on the gas utility side of our business though, right? That is how large users of natural gas get connected to a system that has limited capacity only in certain times. Right? So think about in the wintertime when all of us at home are turning the heater on using natural gas, we’re using more capacity. Especially here in Texas, that’s a limited period of time. Right? There are a couple of days in the year. Where we’re consuming a lot of natural gas, that capacity is there. And on a normal day, you know, the other three hundred and sixty days of the year, that gas is available to large users, but they know that they’re curtailable in the tails of the probability curve and they curtail their usage of the system. So it’s perhaps being applied in a different way, but the concept has been around to consume energy for a hundred years, right?

Caitlin Smith: Yeah.

Joshua Rhodes: Yeah, no, totally. I guess like but I guess maybe for like the electricity sector, it is like a bit of a different, you’ve always kind of had the obligation to serve, like four or five nines, you know, reliability. Whether it’s like a PCLR or just a different reliability class of something, I know that’s something I didn’t wasn’t fully aware of that we were having that particular conversation outside of the PCLR construct here in ERCOT. I know they’re doing that in PJM. They’re talking about different levels of reliability. For different customer classes. But like, I guess, Jason, say you got a project going through the batch zero process, they’re signing up as a PCLR, a provisional controllable load resource. Do you trust them enough? I guess right now? Do we have the solutions in place? Like Caitlin said, CLRs have only been around for a little while, and I think mostly have been used by Bitcoin mines, if I’m correct. But what do you need to see to be able to trust that, okay, you need to go down to your hundred megawatt firm limit? I mean, what do you need to see to make sure that your system stays stable?

Jason Ryan: Yeah, so I think it’s fair to say that we’ll have to do a fair amount of testing to make sure that we understand how this works, what impact it may have on our system when we need it to work. Yeah. And to ensure that we engineer a solution that works in all kinds of scenarios, not knowing exactly what the scenario is that would require them to trigger that feature of their site. And so I have no doubt that we will be able to work through that. There are things to work through though, right? We don’t have all the answers as we’re sitting here today. Right. I trust that we will be able to figure out together with those customers. And I suspect the answer is gonna be that you test various scenarios along the way. Not super different, more complicated, but not super different than what we do today with our load management customers. We test it periodically to ensure that they’re able to drop their load on the timeframe that they need to. This is a bigger scale. But it’s not super different than what we do already with some of our other programs. Okay.

Joshua Rhodes: Are you also concerned about one of the things when we saw this happen in PJM a little while ago? So we had a large data center, like a gigawatt worth of like data center load, like trip offline. And that created a lot of like local instabilities in the system. And when I teach electricity markets, I generally used to brush past the frequency going too high because we have like too much generation and not enough demand. And like it’s easy to turn things off. Like this is no big deal. But apparently, maybe is a big deal. And so like as you’re seeing more of these. Larger loads, what are you thinking about in terms of making sure that, you know, that side of a trip is covered? Caitlin Smith (00:30:51) I think batteries can help with that, Josh. Just I love the plug there. That works great. It’s a softball right for you.

Jason Ryan: In addition to batteries, I think again, we’ve had to consider this for a long time down here in Houston. Now again, the so take a large L and G terminal tripping off or, you know, any other kind of re large refinery type load or even some of the large manufacturers that have a significant amount of load, especially if you’re talking on the distribution system, we will need to work through that as the size of these facilities start to become multiple gigawatts, not just a gigawatt. Yeah. And so it is a consideration that we’re working closely with our engineering teams and our customers to ensure that we think through all of those scenarios and think through how we need to design a system to withstand that. By the way, it’s not super different in concept to designing a system to take that into account in terms of loss of large generation. Right? Yeah. All of these large contingencies that happen, you have to plan for and design the system to withstand them.

Joshua Rhodes: Got it. So Caitlin, TAC has handed off like the batch zero process. It’s been again been voted. ERCOT board, public utility commission, it’s getting started. What are y’all looking to track between now and I guess kind of the fall of twenty twenty seven is when this process is like supposed to end up with a plan for the regional planning group to say, Okay, here go build this stuff. What are you tracking between now and then to know whether or not the batch zero process is working? What’s success or what’s an issue?

Caitlin Smith: That’s a good question. I haven’t really thought about what kind of reporting we’ll want. I’ll defer to the other members of TAC. I should have said at the beginning, this really started with ERCOT staff and with commission staff. We did our part as stakeholders. We did, I think, more than our partners as much as we could. This was a highly collaborative process, which is an achievement on a short timeline. But the commission staff and ERCOT staff to their credit has been very hands-on and involved. I don’t think that there’s a world in which we say this is a failure, right? It’s what we’re doing. We’re moving to a new process. I think it was necessary. We’ve harped on a couple of the Things that were maybe problems before. Maybe studies were working in some areas, but there’s sort of a lack of transparency, right? Because there was no process. There wasn’t a standard interconnection agreement for load. So you couldn’t go online and see what other people were doing. Okay. You couldn’t go to a dashboard anywhere and see what your status was or if ERCOT was gonna need a restudy because some other load came online. There’s just a lack of transparency that I think needed to be. Remedied. So I think we have a lot more transparency and certainty. I think there are things that we will need to change, but there are probably things we’ll continue to want to change. You know, after batch one and batch two, we sort of always keep working on our rules for the market and for interconnection.

Joshua Rhodes: Yeah, that was gonna be my next question. Is you know, batch zero has often been characterized as kind of a triage of this big large load list or queue or whatever you wanna call it, you know, trying to inject some discipline into this process and like get things moving and get a process. But like as batch zero is kind of a triage process, presumably as we’ve mentioned, there’ll be a batch one, a batch two, a batch three, a batch in, who knows how many of these batches we’ll need. Do you have a feel for like what parts of batch zero should be treated as permanent versus what part of it is just the triage right now, kind of the emergency scaffolding here?

Caitlin Smith: You know, I think it’s a really good framework. I think people are going to have more asks, right? You brought up two of the big ones, the WL Han and the PCLR. Yeah. I think people are going to have more asks on those things. I think more people will start to weigh in, right? The legislature’s back in town next year. I think we’ll hear more voices, as I mentioned before. One of the challenges, but it was Don’t get me wrong, it was very good they were participating, but these load of developers were new to the ERCOT process. Yeah. They’re not new anymore, right? So we’ll continue to hear from them, which I think is good. But with more time, we also know more. I think they’ll just be continue to be more and more asks as we do batch one, batch two, batch three.

Joshua Rhodes: Got it. So kind of similar question to you, Jason. Kind of like we’ve got batch zeros, we’re gonna build the plane as we’re going, but you know, before we get to batch one, like is there anything in particular that’s CenterPoint?

Caitlin Smith: We built the plane. It’s great.

Joshua Rhodes: Well maybe we’re putting seats in the plane. We have engines, maybe. We’re taking off. We haven’t painted it yet, maybe? Something like that.

Caitlin Smith: I think putting seats on it is right.

Jason Ryan: We’re about to have passengers, right? So yeah.

Joshua Rhodes: There are about

Caitlin Smith: But not infinite passengers, a finite amount.

Jason Ryan: That’s fair, yeah, yeah.

Joshua Rhodes: Not infinite passengers. But Jason, so like before batch one gets going, like is there anything in particular like the CenterPoint is already looking to like get or caught the change or fix or to alter?

Jason Ryan: So I think I’ll talk maybe conceptually the things that we should be asking. Yeah. I feel like we should be asking ourselves is seventy-five megawatts the right cutoff to go into a batch? And that’s gonna depend on the answer to the other kind of high level question I think we should ask ourselves. But it’s not uncommon for us to add a hundred megawatt customer down here, especially on the manufacturing side of things, and the timeline to win a project like that whether it’s a new customer or an expanding customer, is not going to line up well with the batch process as we see it today. Okay. What I mean by that is we’ve got customers that have options. They could build a manufacturing facil they could expand their Houston facility or they can expand their Mexico facility. They’ve got contracts and obligations with customers to make stuff. And they are going to make that stuff wherever they can get the power quickest. And they’re not gonna be gigawatts of manufacturing facilities, right? So that’s why I say maybe that seventy five needs to be looked at and have some kind of stratification for what is still large load, but I’m not sure it’s the large load that’s causing the need for the batch. Okay. So I think that’s a question. And then the second question is how often are you going to run a batch? Yeah. And you could design a batch process that works even for manufacturing expansion where you can move at their speed of business, but maybe not if it’s only once a year. Okay. You probably could if it was twice a year. And so as you get past batch zero and you know, one through end, yeah, can we at some point get to the point where the batch process is not the long pole in the tent. If I have available capacity today There is no batch process that’s the long pole in the tent. It’s getting the studies through ERCOT, which is relatively efficient for us down here, and then connecting to the customer at their speed. Right. When you have the batch process be the long pole in the tent, not whether I have the capacity to serve them. Mm-hmm. That’s where I think you have unintended economic development losses. In Texas, we don’t accept those outcomes. I am confident we will figure this out. But I think those are the questions that we have to ask ourselves post batch zero. What do we want this to look like forever? And I think those are the top two considerations from my symbol.

Caitlin Smith: Is there a solve for that?

Jason Ryan: I think that if you don’t want to change the seventy five megawatt threshold and if you don’t want to increase the frequency of the batches or don’t want to or can’t, then you know, perhaps there’s a separate track where there’s clearly available capacity. Yeah. So again, if I’ve got a hundred megawatt facility that they just wanna employ a couple thousand Houstonians, I’ve got the capacity, everybody agrees there’s the capacity. Yep. Why should they wait? For a batch to be run. So you could maybe create that kind of exception. I don’t like having an exception to a brand new process. Exception. That’s why I think that we have to ask ourselves, are we concerned about the hundred megawatt loads? Because if we’re not and we’re concerned about you have a super large loads, then perhaps you create some kind of different process going forward.

Caitlin Smith: That’s interesting. You know, the seventy five megawatts, I’ve been wondering about that. Like, do we see a bunch of seventy four point nine? Like you see the nine point nine generation.

Jason Ryan: Hundred percent. We are seeing it today. Yeah. In terms of the distribution interconnection requests that we’re getting. So I think you are absolutely going to see that because when the process becomes the long pole in the tent, business is gonna wanna move at their speed still. And if the only option to move at their speed is to stay below that cap, I think you’re gonna see a lot of projects that stay below that cap in order to get speed to power. That’s why I raise the question if Is that the right threshold for a longer process? And the answer could be yes, right? I just think we need to ask that.

Joshua Rhodes: Yeah, no, that’s fair. I think that’s one of the questions I was wanting to ask is like, okay, how many 74.9 megawatt data centers are you seeing? Cause I think this’ll be get more clear as kind of like the needs of AI actually play out. So 90% of these large loads are data centers. Gonna presume, given the CapEx spin, that most of this is AI at this point. And we presume we need big data centers for the training of these models to create the new near next frontier models. But for the inference, the actual my students cheating on their homework or, you know, everyone asking kind of how things go, like you don’t necessarily need gigawatt scale data centers kind of for that. And there’s a lot of people talking about we may we’ll start to see a lot more inference data centers that are smaller that are popping up. I may have misunderstood you, Jason, there bit. It sounded like you were arguing for the cap to go up. I’ve heard most people argue it to go down. Like the original was 25 megawatts or something, but it sounds like you’re arguing for the cap. To go up for the batch process. Is that what I’m hearing?

Jason Ryan: I mean that’s the question that I would like to have a debate on. And again, maybe this is the exact right number. Maybe it should go down. No. I think the unintended consequence though of a batch process that is not more frequent than once a year is not going to be consistent with non-data center large loads business plans. Yeah. Especially if they just want to expand an existing site. I think the unintended consequence is that we could lose out on those projects. That’s what I think we need to have a debate about. You know, again, it is not uncommon for us to have a 75 or 100 megawatt facility dropped into our system. We’re quite used to that. It could be unusual in other parts of the state that aren’t used to that kind of large industrial manufacturing load. And I would dare to say that I don’t think those are the ones that are causing the need for the batch. If all we had was a lot of hundred megawatt load, not that that’s small. Right. But I don’t think that we would be in the So why are we scooping them up as well? Right. And again, we may decide that we need to. And I’m always happy for that to be the answer once we have the debate. Yeah.

Caitlin Smith: You know, the lower number, I think it’s confusing, but I don’t know that it’s a real problem. I think ERCOT, FERC, and NERC all have different numbers for what is the large load. So I think that will get confusing. But what Jason raised about raising the megawatt threshold, I think maybe makes sense. The exception point is something I’ve been thinking about a lot because we can get to a n great outcome. We can pass something through TAC that everybody loves policy wise. But what if something critical to Houston’s economy wants to interconnect? You know, what if yeah the governor has a press release about a hyperscaler load? You know, what about all these things that are really critical to our economy? How are we going to accommodate those? Or how are we going to say, well, now that’s on hold for eighteen months, even though we got everybody excited about it or we need it in our city. And it’s just really hard, I think, to provide for exceptions. So maybe the idea of raising the threshold is one that could help with that.

Joshua Rhodes: Yeah, I mean, I I wonder how politically salient something just putting us a particular customer class in the batch system, like the customer class maybe that’s kind of like maybe causing the need for the batch system to come around. I mean, I know that other regions are also looking at separate, either like we were talking about earlier, a little bit reliability standards or different rate classes or different transmission cost allocation mechanisms and things like that for particularly data centers right now that are kind of driving a lot. Of this. And so maybe that’s some of the debates and things like that that we’ll be having. But Jason, I have heard that concern from like non-data center loads about, you know, being kind of caught up in this kind of whole process. But we’re going after the same thing, electricity. Right. So it’s like a tough process. I guess like one final question is we kind of touched on this a little bit, but like the timeline is is we’re going to start the rule takes effect mid July. And, you know, there’s a roughly a five step process kind of coming out the other end. Are we still expecting that we’ll be able to have transmission plan handed to RPG at the late to the end of 2027 that would allow for the output of the batch zero process to then start to take effect, which then won’t get built out for the next like five or six years, kind of depending on how it kind of lands.

Jason Ryan: You raise a good point that I also think raises the question of unintended consequences because the timeline that you just laid out is quite long. Right. And if you think about it, this process is designed in part, maybe in large part, but at least in part, to kind of weed out speculative projects. Yeah. The question you’re raising that talks about all the steps, even once you get past the July tenth and July 24th dates of this year, you’re going well into the end of next year for even more process. I think that customers that are the most real are going to have a problem with that timeline. Okay. Right? So if I am a real customer with contracts with other real customers to deliver something to them, whether I’m a data center or I’m building something, and my contract with that customer has a timeline associated with it. That the more process and longer the timeline to get power, the more you are weeding out the most real projects. And I think that’s the reason why once we get past batch zero, batch zero kind of is what it is. Yeah. But once we get past batch zero, we have to start asking some of these questions of how do I make sure that we maintain the reliability of our system and affordability. Of the rates of that system, but also move at the speed of business. And I am confident we’re going to figure that out. But I think these are the critical questions we have to start asking. Because again, if you start then saying, well, what’s the timeline for batch one? Mm-hmm. You’re talking about timeline for batch zero that goes through the remainder of next year. If I get asked by a customer, what’s the timeline for batch one, when do you think I can get power? It’s very uncertain right now. Okay. And I think the more That the utilities who are kind of on the front line with those customers every day have to shrug their shoulders and say, I don’t know. You know, the more we have the possibility of losing out on development. And that’s why I’m encouraged that ERCOT’s going to turn their attention very quickly to batch one so that we’re not in a phase of having to shrug our shoulders because we don’t know. And again, I have great confidence that we’re going to figure this out and be able to meet this moment. ERCOT, do you see? All the stakeholders have worked super hard to get to this point. I know we’re going to work super hard to understand batch one. And the more we can have certainty over that future batch and what it’s going to look like, the more we as the folks that are talking to the customers on the front line can exude that confidence that Texas is open for business. We want their business. We want the benefits to existing customers of this growth that’s going to reduce costs. Not add to them. Right. But we have to get started on batch one and I’m excited that we’re gonna start those conversations soon.

Joshua Rhodes: Well it sounds like you’ll be there to ask a lot of questions of Caitlin in the intact and as soon as we get this photo. Someone will be there. So it sounds like we need more podcasts later on about this process as Infinite Podcast. That’s exactly right. Caitlin and Jason, thank you for coming on the Energy Capital Podcast.

Caitlin Smith: Infinite podcast.

Jason Ryan: Thanks for having me.

Caitlin Smith: Thank you.

Joshua Rhodes: Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make better sense of how the energy system actually works, share the episode with a colleague and hit follow on your podcast app. You can find us on Apple Podcasts, Spotify, and all the usual platforms. For deeper analysis and context each week, subscribe to the Texas Energy and Power at texasenergyandpower.com. That’s where you’ll find every episode, every article, and our latest updates. We’re also on LinkedIn, X, and YouTube. Where we share clips, insights, and ongoing commentary on energy policy, markets, and the grid. Before we go, a quick note. The views expressed on this podcast are my own and do not represent the official positions of the University of Texas, IdeaSmiths, Austin Energy, or Columbia University. A big thanks to Nate Peavey, our producer. I’m Joshua Rhodes. Thanks for listening, and we’ll see you next time.

PUC staff had already filed a proposal to update transmission cost recovery methodology and introduced a new minimum billing demand requirement for large load customers. At their June 18 open meeting, PUC commissioners asked staff to revisit the proposal in project 58000 and return with an update on July 9. ERCOT currently allocates transmission costs to customers based largely on how much electricity customers use during four of the highest 15-minute system peaks in the summer, known as the four coincident peaks, or 4CP. I previously wrote about the proposal in Grid Roundup #93. Commission staff will need to determine how much revenue different minimum demand requirements would generate and whether those revenues would reduce costs for residential customers.

Batch zero financial obligations remain unsettled

Data center investors face a major unresolved question of how ERCOT will use or hold financial security during its batch zero study of large loads in the queue for grid connection and eventual energization. The batch zero process requires significant financial commitments from large load developers by July 10, before the batch study begins (see timeline below). The PUC proposal in project 58481 has not been updated since March.

Read more

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Subscribe now

Texas landowners seek pause in $2B, 765-kV transmission line case over notice concerns | Utility Dive

As we noted last week, the PUC paused its approval process for the Bell County East to Big Hill 765-kV line upgrade. Now hundreds of Central Texas landowners have filed a formal petition alleging they weren’t properly notified after route changes. Utilities, meanwhile, are pushing back on any slowdown:

“Load in West Texas, specifically, is growing much faster than local generation is able to provide, and even if local and on-site behind-the-meter generation resources come online, they’re all still needed to maintain a reliable system for Texans,” said Andrew Clark, an Oncor spokesperson, in an interview.

PUCT staff recommended the 765-kV lines based on a 2024 ERCOT study, citing their ability to move more power over longer distances with fewer losses. Despite higher upfront costs, planners [maintain] the lines are better suited for the region’s expanding load.

How data centers are complicating transmission expansion | Latitude Media

Latitude Media’s Catalyst podcast this week explored how opposition to infrastructure such as transmission lines and data centers can become a channel for broader concerns.

If you’re in a community where a data center is getting built, you’re also hyper aware of all of the infrastructure that is going on around that… And I think there is sort of the negative sentiment around data centers and AI in general, but it’s all snowballing with all of these other concerns that folks have about costs and again, like property value and pace of life and the views out there front windows, all of these things kind of coming together into just a generalized opposition.

Federal regulators tell electric grid operators to fix their rules on data centers | Inside Climate News

Earlier this week FERC gave the nation’s six major grid operators 60 days to propose reforms, or justify their existing rules, governing how data centers and other large customers connect to the grid.

The purpose of the order is to expedite connections between large customers and utilities, but with some proposed protections for residential and small commercial customers…

The order also requires grid operators to examine how they accommodate co-location agreements, which allow data centers to be built at or near power plants, and “behind-the-meter” energy supplies, in which the data centers themselves build their own power plants…

Additionally, within 30 days, grid operators must submit a detailed report describing how they intend to ensure that adequate generation will be available to serve existing and new large loads.

Inside Climate News covers the specifics of where grid operators have flexibility, including in the definition of what large load is, in their piece.

Read more