Load growth forecasts in Texas are both unrealistic and unlikely to be met, according to a new report published today by energy software and analytics company Ascend Analytics.
Ascend expects that ERCOT, the state’s grid operator, will increase its renewable capacity from about 66 to 97 gigawatts between 2025 and 2027, with solar in particular almost doubling from 27 to 52 GW. Meanwhile, they estimate that peak demand, exacerbated by the rapid expansion of data centers, will increase by about 34 GW by 2030 to 119 GW; this is well below ERCOT’s own forecast of 209 GW by the decade’s end.
In the near term, this new generation is predicted to outpace load growth. But in 2027, that is expected to change as load growth accelerates. As a consequence, Ascend expects that 71% of the new load awaiting interconnection in ERCOT will not be able to find a matching new supply by 2030.
Brent Nelson, Ascend’s managing director of markets and strategy, thinks it’s simply not viable to meet the energy demand of all the new data centers hoping to come into the Texas market.
“We just won’t be able to build enough supply to meet that much load,” he told Latitude Media. “You can’t build an unlimited amount of stuff, buy an unlimited number of transformers, or wave a magic wand and create an unlimited amount of labor to build things.”
Barriers to generation
The hurdles encountered by new gas deployments illustrate Nelson’s point. Driven by the exacting energy demands of the AI boom, gas generation has become an increasingly popular option to increase capacity, including by renewables developers like NextEra.
But gas is also facing hurdles. Demand for new turbines vastly surpasses current manufacturing capacity, and high costs are expected to persist into the 2030s; meanwhile, equipment procurement constraints are slowing things down further. The Texas Energy Fund is a $5-billion program that offers low-interest loans for new or expanded dispatchable (namely gas) generation. But already a number of the finalists have dropped out; some have cited concerns like equipment constraints, while others have said the math just doesn’t add up.
To add to these practical limits, federal and state policy uncertainty could also slow down new generation. The potential phaseout of federal clean energy tax credits, for instance, could reduce the development of new renewable energy resources. And Texas specifically has become the theatre for a high-stakes energy showdown, where some lawmakers are trying to place restrictions on renewables even as they flourish in the state.
‘Riding the razor’s edge’
To overcome the challenges of this mismatch of load growth and generation growth, Ascend found large loads are likely to embrace flexibility strategies, such as the development of on-site generation and storage to reduce their dependence on the grid at times of high demand.
“We certainly expect that to be a key strategy that some of these new large loads are going to deploy,” Nelson said, adding that ERCOT already relies on a demand response program to encourage large loads to reduce consumption during tight conditions. “In its own load modeling, ERCOT is assuming that something like 85% of the new load will be able to [be curtailed] during peak conditions.”
But Nelson sees that assumption as “a little bit aggressive”; Ascend’s research would instead suggest that the most likely outcome is that load will not grow as much as ERCOT’s forecasts suggest.
“Some of that load is going to have to shift to somewhere else. And I don’t see any way around that reality,” he said. “If there’s no supply to meet new load, then that new load won’t materialize.”
As this dynamic plays out, the Texas market will keep “riding the razor’s edge,” Nelson said, with sensitive reserve margins, and high volatility dependent on weather conditions. In practical terms, that means that some years will be great for consumers and bad for generators, and others will be the opposite, depending on how the wind blows.
“ERCOT is going to be very sensitive to subtle movements in weather, whether you get heat waves and whether those heat waves coincide with wind or not,” Nelson said. “These little things make huge differences on whether you fall on one side of the razor’s edge or the other.”
Editor’s note: This story was updated on May 28 to clarify that the anticipated increase of renewable capacity in ERCOT is based on Ascend’s data, not ERCOT’s.
