Texas may be known as the center of the U.S. oil industry, but the state is also at the forefront of the energy transition.
Over the past two years, ERCOT has seen substantial growth in solar generation and battery storage capacity. And that influx is changing not just where the state’s electricity comes from, but also reshaping when and how power is delivered across the grid.
Between the summers of 2023 and 2024, solar capacity increased by eight gigawatts and battery capacity increased by four GW. “They are significantly and dramatically changing the market dynamics,” said Keith Collins, vice president of ERCOT’s commercial operations, in a recent interview on the With Great Power podcast.
ERCOT’s unique market design has made Texas a proving ground for renewable energy and storage. Unlike other regions in the U.S., ERCOT operates an energy-only market, which relies on price signals during scarcity periods to drive investment in new generation. And increasingly, that new generation is renewable.
The impact of this rapid deployment is driving down the cost of electricity. In 2023, Collins explained, the state had a very hot summer with very high pricing. But by the following summer, when solar and storage capacity jumped, prices decreased by almost 70%. Although demand was not quite as high as in 2023, 2024 “was still one of the hottest summers on record in Texas,” Collins added. “What was behind that price drop was this significant increase in new solar generation and paired with the storage.”
For the full conversation with Keith Collins, listen to his interview on season 4 of With Great Power:
The increasing penetration of solar and battery resources is also reshaping peak demand, presenting challenges for the grid operator. While the peak hour still occurs around four o’clock on summer afternoons, Collins noted that the more difficult and challenging period for ERCOT is the net peak.
During a heat wave, the net peak comes later in the evening, around seven or eight o’clock when the sun goes down and other cheap resources like wind haven’t ramped up high enough to meet demand. That’s where storage comes in.
During the summer of 2024, prices reached a high point of about $5,000 during net-peak hours, when solar started ramping down. In response, ERCOT discharged batteries to meet demand, bridging the gap until wind generation increased — and according to Collins, that has become the habitual change, one that’s consistently “lowering prices during the peak hours.”
ERCOT’s solar capacity and battery fleet is growing at a remarkable pace. According to Collins, storage resources could double within two years and potentially triple by 2029, reaching approximately 27 gigawatts. And solar, currently at about 27 GW, could exceed 50 GW by 2030.
A new type of ancillary service
Similar to capacity markets, ERCOT provides ancillary services that help manage fluctuation in supply and demand during operations. And the rapid growth of storage for ancillary services presents new challenges for the grid operator.
Batteries now provide about 90% of regulation reserves and roughly 50% of responsive reserves. This concentration raises questions about system resilience during extended high-demand periods.
“If your peak demand period turned into…8:00 PM and you’re able to meet that, what about 11:00 PM?” asked Collins. “Are you able to have enough [charge] in these reserves in order to meet that?”
ERCOT is developing a new type of ancillary service called Dispatchable Reliability Reserve Service to address some of these uncertainties. The service will focus on resources that can provide flexibility during changing demand conditions.
“It is actually going to target resources that provide dispatchability to ensure that we have the flexible operational reserves we need to meet changing demands in the system,” Collins said. The initial design will require a four-hour duration capability with a two-hour startup time.
Looking ahead, Collins envisions an increasingly diverse energy mix in Texas, with continued growth in solar and storage, alongside new peaking gas resources.
“We’ve even heard nuclear small modular reactors could also be a part of the equation as well,” he said. “Particularly for data centers that may be interested in obviously clean resources, but also resources that provide 24/7 output.”
As Texas continues its significant buildout of renewable energy and storage technology, ERCOT’s experience may provide insights for other energy markets across the country working to incorporate intermittent resources alongside traditional generation.
This is partner content, brought to you by GridX. It borrows from an interview that appeared on With Great Power, a Latitude Studios partner podcast.
With Great Power is a show about the people building the future grid, today. It’s a co-production of GridX and Latitude Studios. Subscribe on Apple, Spotify, or anywhere you get your shows.
Transcript
Brad Langley: Texas produces more crude oil and natural gas than any other state on any given day. The state’s refineries turn out more than five and a half million barrels of oil. That’s more than the entire country of Canada produces in a day. But in the energy space, Texas is now becoming known for more than just big oil.
Media clip: We have more wind than the next four states combined, and we just passed California. In terms of utility scale, solar
Brad Langley: Wind has been a growing share of Texas power since the 2010s and solar installations have grown fast since 2020. Now, battery storage is also on the rise. In fact, by the middle of next year, once to 12 gigawatts of battery storage in its pipeline is powered up. Texas will actually surpass California storage capacity, population growth, new data centers and even crypto mining are driving this battery boom. But that’s not all.
Media clip: So in Texas, it is going to be pretty much a pure economic play. So all of the batteries being deployed in the state are because they can make money.
Brad Langley: The Texas grid isn’t like those in other states. That’s because the electricity market in Texas is deregulated. The Electric Reliability Council of Texas, also known as ERCOT, which operates a state grid, buys energy on a spot market closely balancing supply and demand each day. Now, that can be a boon for providers when prices are high. But even with its unique market design, ERCOT hans’t always been able to avoid challenges of running a power grid in this new era of load growth and extreme weather. Most notably, their system failed during Winter Storm Uri in 2021, leaving millions without power. The event led to changes in ERCOT leadership and the renewed focus on reliability. That has kept the grid running as the brutal heat of Texas summers continue to break records. Like in 2023 when the grid faced another big test.
Media clip: Fortunately, the system worked. Batteries supplied more stored electricity than ever before conservation helped too.
Brad Langley: Keith Collins, vice president of ERCOT commercial Operations is an electricity market veteran, and he believes in ERCOT’s approach.
Keith Collins: It’s a different market design relative to others, and we need to ensure that we remain reliable and affordable at the same time.
Brad Langley: Early in his career, Keith did something that shocked his friends.
Keith Collins: Oh, they thought I was crazy. Why would you go do that?
Brad Langley: Now, Keith didn’t walk across the US or join a rock band. He went to work for the federal Electricity regulatory commission. That might not sound that edgy, but his peers didn’t think working for the government was a way to launch a career. Keith had studied economics in college and his friends thought he should get more letters after his name.
Keith Collins: You should go get a PhD or a Master’s or something or a law degree. What could I learn from the government? Right?
Brad Langley: But this was 2004 a time when big things were happening at the nation’s energy regulator.
Keith Collins: The California energy crisis was still very fresh. There was a lot of trying to understand and think about how markets would evolve going forward. Bear Stearns, Lehman Brothers, that had significant implications on not just financial markets, but how they impacted what was happening with commodities.
Brad Langley: Keith wanted hands-on learning, not more time in lecture halls
Keith Collin: Because what I saw was they were helping set the rules that governed these new markets that were forming. And so why not go to the place where those rules are being reviewed and approved?
Brad Langley: Right out of college, Keith did some consulting from the New York ISO, and after FERC, his career path, traversed other major electricity markets. He spent seven years at California ISO, and then another seven working for the Southwest Power Pool. All of this informed his point of view in energy markets. Right now, all eyes are on how ERCOT is managing battery storage integration. But Keith is taking the long view on grid dynamics.
Keith Collins: My worldview is you’re never done and there’s always some enhancements we can do. There’s new technologies, and so we solve one problem today and then we will have the next challenge tomorrow. But our faith is that markets can work and will work, but we need to make sure we’re designing them to achieve the results we want.
Brad Langley: This is with Great Power. A show about the people building the future grid. Today, I’m Brad Langley.
Some people say utilities are slow to change. They don’t innovate fast enough, and while that might not always seem like the most cutting edge industry, there are lots of really smart people working really hard to make the grid cleaner, more reliable and customer centric.
My guest is Keith Collins, vice president of commercial operations for ERCOT.
We talk about what makes ERCOT’s approach to electricity different from other markets and how the incredible growth of solar generation and battery energy storage systems have changed the Texas grid. We also cover the role of ancillary services and look ahead to how ERCOT’s energy mix will continue to evolve. I start out by asking Keith what he’d changed about electricity markets, if he could snap his fingers and make it happen.
Keith Collins: I think the top two or three things definitely would include how we evaluate performance, how you measure that and reward that is really important. I think what’s also important is to send signals in advance when there’s lack of information or there’s opaqueness of information that can lead to outcomes that are not as desirable. Just to give you a sense that what we’re seeing here in Texas now is the potential growth of new loads, large loads in particular, it could be hydrogen demand centers. And what we see the market having a hard time dealing with right now is trying to understand what a common vision of that load growth is. And to be honest, it doesn’t exist.
Brad Langley: And why has that common vision been so difficult to attain?
Keith Collins: Well, I think part of it is this lack of good information or trustworthy information. What does it mean? For instance, if a load has come to a transmission provider and said, we want to interconnect a large data center, we might not know that they’re also going to somewhere in Virginia or Ohio and saying the same thing. Hey, we want to connect our load here. And so that lack of clarity and certainty then makes it difficult to say, Hey, maybe you would want to build a generator in ERCOT, but you’re unsure that load will materialize because it could end up in another state.
Brad Langley: So I think most of our listeners likely know about ERCOT and what makes it unique. But just to set the stage, give us a very brief primer on how ERCOT operates.
Keith Collins: Alright. Well, ERCOT is unique in the market designs. Here in the US we are an energy only market design, and even that’s a bit of a misnomer in that we do have ancillary service markets. We do have congestion, hedging market known as RRS congestion, revenue rights. And so as an energy market, we rely on that and periods of scarcity and scarcity pricing in that market to drive the investment of generation. We’re very reliant on the market signals that we see in the spot markets relative to other markets like A PGM, which would focus on a capacity market or a California ISO, which is dependent more on a resource adequacy construct that’s run by the state. And so because of that, we rely on those signals and those scarcity periods to drive the pricing outcomes and then the market participants to rely on those signals to add the generation, to keep the system reliable. So that’s unique here.
Brad Langley: And some markets hold energy in reserve. How does the ERCOT market operate?
Keith Collins: So we also have spot reserves. We also do measure planning reserves, but planning reserves are also something that a capacity region would target. And so I’ll make a distinction there between planning reserves and operational reserves. And so we are similar in the sense of operational reserves. We have regulation reserves. We do have a product that is similar to spin that’s known as responsive reserve service. We have spin like other markets, but we also have a product known as ECRS or ercot contingency Reserve service. And that’s essentially what I would term a resiliency reserve because we are isolated electrically compared to the rest of the country that we carry some additional reserves to allow us to be resilient during periods of stress and tightness. We don’t have the same level of imports that let’s say other regions might have in the event of a regional emergency. And so we do have these operational reserves, but from a planning reserve, we do evaluate them, but we don’t have a mechanism that’s driving that other than the spot market.
Brad Langley: Got it. And this makes ERCOT pretty unique compared to other markets across the country?
Keith Collins: Yes. The other markets across the country either have a combination, either some form of capacity market or capacity construct.
Brad Langley: Got it. How are solar and storage additions changing your market dynamics?
Keith Collins: They are significantly and dramatically changing the market dynamics. I think the last two years, I’ll give you as a good example. In 2023, we had some of the highest demand, very hot summer. We had extremely high pricing, scarcity pricing that was regular. And so sending very, very strong signals to the market to invest. And over the last year, so from summer 23 to summer 24, what we saw was an increase in generation and most of the generation was either solar and it was about eight gigawatts of solar and then about four and a half gigawatts of storage come online between the two summers. And what we saw was a dramatic reduction in price. I don’t recall offhand how much, but it was over 50%. It was closer to 70% reduction in price. Now, the demand in the summer was not as high, but it was still one of the hottest summers that we’ve had on record here in the state of Texas.
And so what was behind that price drop was this significant increase in new solar generation and paired with the storage. And so what we’re also seeing is a shift in the peak period. So there’s still the peak hour around four o’clock in the afternoon in a summer day, but the more difficult and challenging period is what’s known as the net peak, which is occurring more like seven or eight o’clock when the sun goes down during a heat wave. The summer in August, we saw prices reach about $5,000 and that’s when our storage resources were outputting to meet the demands during that period. And so really bridging that gap between the solar period, very strong solar period, able to meet the peak load, but as we’re bridging it from the sun going down to loads coming off in the evening and the wind picking up the storage really played a role in covering that gap. And so we’re seeing this dynamic change and that’s lowering prices during the peak hours. We actually had solar resources charging during the peak load hour because you had enough solar and then the higher prices were during the ramp down period as the solar was coming out. So this has just been a dramatic shift even just over the last few years.
Brad Langley: There is a type of ancillary service in Texas called Dispatchable Reliability reserve service, also known as DRRS. What is that and why was it developed?
Keith Collins: Okay, so it’s actually currently under development right now. And it is something the state legislature requires ERCOT to develop. And what it does, this DRRS, is that it is actually going to target resources that provide dispatchability to ensure that we have the flexible operational reserves. We need to meet changing demands in the system, much like during these periods when the solar is coming off and we need the storage resources. And so it’s initial design will be as an operational reserve. And again, it’s honed in on dispatchable resources. So it does require a four hour duration. It does require a two hour startup time, and hopefully we’ll have it deployed in the next couple of years.
Brad Langley: So maybe hone in on what are some of the challenges related to having more battery storage in ancillary services?
Keith Collins: That’s an excellent question. One of the things that we’ve been seeing is an increased penetration of storage resources in reserves and for instance, regulation reserves. Both our up and down product, about 90% of the reserves are being held on storage for our responsive reserve. It’s more along the lines of 50%. Now, the characteristics of these resources are very flexible. That’s a great thing that we need to meet both regulation and these other reserves. The challenge that provides though is if you were to release the reserve, if you had a contingency occur, and we saw this past summer during our peak load period, we dispatched a lot of reserves during that period. Thankfully we were able to avoid any emergency conditions. However, the challenge then becomes do you still have enough state of charge in the battery to provide the reserve in the upcoming hours? Right? So if your peak demand period turned into let’s say 8:00 PM and you’re able to meet that, what about 11:00 PM right? Are you able to have enough state of charge in these reserves in order to meet that? So it is a growing challenge to ensure that our reserve resources are capable of meeting a future contingency even after having an event where you may have depleted some of the state of charge.
Brad Langley: There’s even some debate around whether storage qualifies for DRRS. Can you explain that?
Keith Collins: That’s correct. Most of the storage we have are one to two hour resources and DRRS is required to be a four hour minimum. And so there’s some debate as to whether a storage could qualify for that. Now, what we do know in other regions such as California ISO, there are resources. Their storage resources are primarily for hours. And again, there’s certain requirements that have driven that. The only requirements that we’ve had thus far have been the market pricing signals and between one to two hours is about what the pricing signal will show. In most cases, that’s true, particularly in the summer. In the winter, the challenges can be longer lived and the reliability issues are a bit different when you’re meeting peaks in the winter that last a little bit longer and the duration can be a little bit different. So this idea of requiring longer batteries and longer storage resources is something that is currently under debate as to whether or not that be included. But the way that the law has been written, it does allow for resources with four hours. And so to the extent that a storage resource can meet that requirement and qualify it would be there.
Brad Langley: Got it. How do you see ERCOT energy mix changing in the next five years? And maybe if we were to get the crystal ball out even further, the next 10 years
Keith Collins: Storage resources have the potential to essentially double in the next two years from where we are today. And in five years, we’d expect it to almost triple. We’re talking about in the magnitude by 2029 ish time period, we’d have about 27 gigawatts of storage on the system, which is quite a bit. We have just over 10 right now. Solar is also, we’d expect that to potentially double in the next five years as well. And we have about 27 gigawatts of solar today that could be over 50 by the time we hit 2029, 2030 timeframe. So we are expecting that now with this potential increase in demand. We’re also expecting that peaker gas resources, peaker resources are likely to also play a role in the mix as well. And then I think as you also said, well, going out a little bit, we’ve even heard nuclear small modular reactors could also be a part of the equation as well. And so again, that’s probably more in that five to 10 year timeframe, and particularly for data centers that may be interested in obviously clean resources, but also resources that provide 24/7 output. These small modular nuclear reactors could be a fit for those types of resources. So I think, as I said, solar storage, particularly in the next few years, we’d also expect some peaking resources – ga. And then nuclear is also potentially in the mix as well.
Brad Langley: With the growth that you’re seeing in storage, are there particular types of storage technologies that you guys are leaning on heavily or that are very well designed for ERCOT needs?
Keith Collins: The duration is the primary element right now, and I understand that there’s obviously the battery chemistry around a lot of that makes that obviously economic to get on board. Obviously to the extent that we value longer term storage that we would also anticipate that would likely change the characteristics potentially. But again, we understand there’s still plenty of development in terms of whether it’s a sodium flow, iron, whatever.
Brad Langley: Got it. We call this show with great power, which is a nod to the energy industry. It’s also a famous Spider-Man quote. With great power comes great responsibility. So Keith, what superpower do you bring to the energy transition,
Keith Collins: I guess? I think there’s a couple ways to answer that. I think obviously my breadth of experience having seen different regions. I think someone who said, Keith, you’re playing the RTO Bingo card. And so I’ve been in lots of different regions, and so I can bring different perspectives to the discussions and the debate. But I think the analytical that we talked about earlier to sort of think ahead and see the problems and identify creative solutions going forward. So I think the mix of those things is my superpower that’ll hopefully help us continue to be successful as we move forward.
Brad Langley: Excellent. Keith, thank you so much for taking the time. Really enjoyed our conversation.
Keith Collins: Thank you. Same here. I appreciate it.
Brad Langley: Keith Collins is the Vice President of Market Operations for the Electric Reliability Council of Texas with Great Power is produced by GridEx in partnership with Latitude Studios. GridX is the enterprise rate platform that modern utilities rely on to usher in our clean energy future. We design and implement emerging rate structures and we increase consumer investment in clean energy all while managing the complex billing needs of a distributed grid. Our production team includes Erin Hardick and Mary Catherine O’Connor. Anne Bailey is our senior editor, Stephen Lacey is our executive editor, Sean Marquand composed the original theme song and mix the show. The GridX production team includes Jenni Barber, Samantha McCabe, and me, Brad Langley. If this show is providing value for you and we really hope it is, please help us spread the word. You can rate or review as with Apple on Spotify, or you can share a link with a friend, colleague, or the energy nerd in your life. As always, thanks for listening. I’m Brad Langley.
