Energy Capital Podcast

In ERCOT’s new interconnection process for large loads, a data center can connect sooner as a provisional controllable load resource. That is, ERCOT can curtail power above an agreed firm level. A study from Base Power and Piq Energy shows batteries near the transmission lines to a data center could stand in for most of that curtailment.

In the study, 80 megawatts of batteries would clear every transmission constraint created by a 100 MW data center near Burleson, Texas, on Oncor’s system. A battery beside a strained line relieves it about one-for-one, while curtailing a more distant data center may relieve half as much. Any battery near the line has that edge.

On this week’s Energy Capital Podcast, Joshua Rhodes talks with Chase Dowling, head of market operations for Austin battery company Base Power. The business model is Base Power retains ownership of the batteries it installs for retail customers, and homeowners subscribe to the service.Dowling puts the batteries’ reach at “80 percent, 85 percent of all of the constraints.” The rare failures that sever part of the system, he says, still need new transmission or generation.

* The limits: the battery fleet needed grows faster than the load, and West Texas lacks enough homes for large fleets. No market yet pays batteries to act as transmission.

* Who pays: Dowling proposes that a data center facing curtailment fund a battery fleet near its constraints, and the host homes get outage protection.

* Utility fleets: for El Paso Electric and CoServ, Base builds co-branded fleets and hands control to the utility. It now installs in Chicago, in PJM.

* Backup: Dowling says a portable generator can stretch a Base battery through a multi-day outage like Winter Storm Uri.

Dowling says the challenge now is getting ERCOT to model these fleets at the transmission substation, where planners can see them.

Chapters

00:00 – Chase Dowling and the new Base Power study01:01 – What Base Power has built since 202302:22 – Manufacturing home batteries as a grid resource05:10 – The homeowner value proposition07:50 – Base Core's generator port and extended backup11:43 – Deployment speed and what limits it14:43 – Regulated utilities and who controls the batteries16:28 – Lessons from Texas for PJM18:23 – Flexibility Without Curtailment: the paper's premise22:32 – Why location matters: 100 MW at Burleson Switch26:52 – How 80 MW of batteries hosts 100 MW of load28:47 – Bigger loads, the long tail, and the 80/20 rule35:13 – Batch Zero, curtailment risk, and who pays38:17 – Data center PR and how big this can get

Resources

People & Organizations

* Joshua Rhodes (LinkedIn)

* Energy Capital (Podcast - LinkedIn - YouTube)

* Chase Dowling (LinkedIn)

* Base Power Company (Website - LinkedIn - Base Core)

Company & Industry News

* Base Power raises another US$1 billion in Series D financing for US residential BESS

* Base Power brings cheap batteries to residents in power-starved PJM

* Base Power to launch 100-MW home battery network for Texas utility

Books, Articles & Filings Discussed

* Piq Energy and Base Power - Flexibility Without Curtailment

* ERCOT - Aggregate Distributed Energy Resource (ADER) pilot project

* ERCOT - Trending topic: new batch connection process for large electricity users

* Texas Legislature - SB 6, 89th Legislature, enrolled bill text

* El Paso Electric - El Paso Electric and Base Power install first home battery in El Paso as part of new reliability pilot program

* Farhad Billimoria and Conleigh Byers - The value of compute load: what cloud markets reveal about the potential for flexible data centers

Related Podcasts by Energy Capital

* Creating a Distributed Battery Network with Zach Dell

* How Load Flexibility Could Unlock Energy Abundance with Tyler Norris

* What batch zero settles and what it leaves open

* How Texas plans to serve infinite demand

* How Data Centers Can Strengthen the Texas Grid with Camus Energy CEO Astrid Atkinson

Related Posts by Texas Energy & Power

* $6.5 billion in transmission projects, batch zero closure, and the questions that follow: Texas Grid Roundup #93

* Flexibility and Speed to Power, Reading & Podcast Picks, December 7, 2025

Transcript

Joshua Rhodes: Hey everyone, and welcome back to another episode of the Energy Capital Podcast. I’m really excited to have Chase Dowling here from Base Power Company to talk about what the company’s been doing, as well as a new study they’ve put out looking at the impact of distributed energy resources on the ability to unlock firm load for places like large loads, data centers.

But yeah, really excited to have Chase here to talk about it. Chase has a PhD in electrical and computer engineering from UW, University of Washington. In and around there, he also worked 10 years at the Pacific Northwest National Lab, ending as a senior applied scientist before switching over to machine learning at Tesla.

Very recently, actually, as of recording this podcast, he’s a founding power systems engineer at Base Power Company. Chase, welcome to the Energy Capital Podcast.

Chase Dowling: Thanks, Josh. Sorry for the mouthful. Yeah. Ten years at DOE and then a couple years at Tesla working mainly in energy.

Joshua Rhodes: Yeah. Yeah. Well, energy’s kind of the thread that brings us all together these days, right? It’s like energy is AI, is transportation—

Chase Dowling: Is everything.

Joshua Rhodes: —is now politics too, which we won’t get into. So it’s been a while since Doug originally interviewed Zach about Base Power, and so, you know, a lot has happened since the last time we checked in. You know, you started as a pretty novel combination of retail electricity and batteries in Texas, but now you’re manufacturing your own hardware, working directly with utilities.

Kind of before we get into kind of the specific study, what’s going on at Base right now? Like, what are y’all working on?

Chase Dowling: Yeah, no, it feels like a while, but it’s crazy to say founded at the end of 2023 that we’re scaling up. We’ve got 600 MWh of batteries in the ground, and we’re just now speeding up.

We’re installing all over Texas, and we’re now entering our first new markets outside of Texas, installing in Chicago and trying to get at the capacity problems in PJM. But the biggest changes maybe since you talked to Doug or since Doug talked to Zach was we’re installing in deregulated territory as a retailer, but now we have a lot of regulated utility partnerships as well, where we come in and help facilitate the construction of a large distributed peaking resource for these regulated utilities.

But that’s the story since then, is that we’ve been scaling, growing, and installing resources faster.

Joshua Rhodes: I mean, you’re manufacturing these units in Austin. I know you’re looking— you’re also building a new facility out by the airport, but, you know, you’re currently in the old, you know, Austin American-Statesman building.

I actually took a tour of the place, I wanna say, like 7 months ago, and you had, like, you know, half of a line going. But I was there last week. I mean, you had multiple lines going, robots following magnetic tape all around, and lots of folks putting stuff together. Tell me about the manufacturing process and kind of what you’re doing, you know, here in Austin.

Chase Dowling: Yeah. So this is a big piece of being a vertically integrated designer, manufacturer, developer, and operator of an energy resource and how we build our kind of like technological advantage that we’re providing to the grid. And so manufacturing is like a key piece to the advantage here. If you look at distributed resources, and this is what we do as a company, we go and we install batteries on homes, residential batteries on homes, and we can talk more about like how this model works or what the value proposition to the homeowner is.

But we’re manufacturing these home batteries to be a grid resource first. If you go out on the market today and you look at, like, what are your options, you could buy a battery from Enphase, you could buy a Powerwall. These are very modular, very flexible consumer products that carry a margin for that manufacturer.

But we’re a grid resource first. And so to be a grid resource, you need to be robust, you need to be easy to install, you need to be capable of certain functionalities that you don’t necessarily need on, like, a consumer home battery. You need to be thinking about it here, like in Texas. You may have noticed it’s hot in Texas.

Batteries don’t like super hot and super cold, and so we have designed a battery that is exceptionally good at rejecting heat, and is gonna be available when the grid needs support from that peaking resource when it’s super hot outside and load is super high. And so in order to build such an effective resource, you need to control the destiny of the hardware that you’re deploying with.

And so by manufacturing, we’re able to assure that the batteries that we put out in the world are gonna be able to stand up to the Texas summers and the Texas winters, and now the Chicago winters. It’s like an important key piece of why manufacturing is so important. And what’s really cool about it being in the Austin American-Statesman building right across the street from the offices is that, for example, I work a lot on the software that does the grid coordination and the grid participation of the aggregate resource.

But whenever we notice a problem of like, oh, an inverter maybe derates under certain conditions, we just walk across the street and say, “Hey guys, check this data streams that we’re seeing. What’s going on?” And we can fix that problem right then and there. It’s a super incredible advantage to building a really performant resource.

Joshua Rhodes: Let’s talk about the value proposition to the customer, right? ‘Cause like you’re a grid asset, but you’re chasing a totally different interconnection than, say, you know, a multi-hundred megawatt battery that has to get maybe its own substation and its own gen-tie, maybe has to do all these different kinds of studies like on the system.

So like you’re chasing interconnections that already exist kind of at the home, and so what’s your value proposition, the Base model of getting those Base batteries into those connections at homes?

Chase Dowling: This is the best question. So I like to think of Base from the homeowner’s perspective first, either in a place with retail competition or on like a vertically integrated utility, like say here in town in Austin Energy.

So if I’m a homeowner and I look at Base, what is Base doing for me? In areas of retail competition, Base Power is a retailer, and we go to the customer and say, “Hey, sign up with Base. You can get a discounted time-of-use rate on your energy costs, and for an extremely low cost to get the battery installed, you don’t pay for the battery.”

Base pays for the battery. We install it on the home, and then the customer pays a monthly subscription fee. I think it’s like right now it’s like $12 a month in certain deregulated territories. But it depends a lot on where in the country you are. But a customer pays like a subscription fee to have that battery in their home, and it’s a very large battery.

Base retains the operations of the battery to offset the customer’s cost to serve, our cost to serve that customer. But then that battery’s quite large, where our Gen 3 Ma— our, our Base Core that we’re manufacturing at the factory is a 20 kW, 40 kWh battery. You know, a lot of consumer batteries that you see on the market today, they’re like 7 kW, 14 kWh.

This is a pretty sizable battery. You’re looking at like a small EV in terms of energy storage capacity. So it’s much larger than a typical single-family home that we would install on. A typical single-family home’s peak summer load is on the order of 4 to, 4 to 5 kW when you level out like the AC’s duty cycle. It’s a really big battery.

When we put it on that home, all of the members of the Base coordinated network, whether or not you have a battery, say, if you’re a Base energy customer, we use those batteries to manage cost to serve for everyone in that coordinated network. And so the value proposition to the customer that gets that Base battery is, “Hey, I’ve got a really, really low-cost backup solution, and I’m getting cheaper energy.”

And then what we do to make money as a business is we go and make that resource part of a coordinated network to manage our costs as a supplier.

Joshua Rhodes: Nice. One of the things I noticed different in, I think you said Gen 3, but you’re calling it Base Core. Is that right?

Chase Dowling: Yeah. Yeah. Yeah. A little slip of the tongue. We— our, like, product name, Base Core. Yes.

Joshua Rhodes: Okay. It was interesting seeing a little mock-up there as we were walking in. We actually got a tour from Justin and Zach, so it was like we got the C-suite tour, which was great. But one of the things that Justin was really interested to show, it had, like, a generator port as well, and it also connected to solar, right?

So if, like, you have a multi-day outage, like, he was basically saying, he’s like, “You can buy, like, you know, a cheap couple hundred dollar generator on Amazon that will charge the battery, that will then allow the battery to kick 20 kW out if it needed to or whatever,” which was really cool. It actually sounded like the concept for, like, an extended-range EV, but you were using it for, like, the battery for, like, the house. Did I make that connection right?

Chase Dowling: This is an excellent connection. I love this feature of the Core battery. It actually exists on a lot of our prototype hardware as well. This is such an important feature, so I’ll take a step back for a moment. So there is a generator port on the battery, and why? The value proposition of the battery to the customer is home backup, is peace of mind.

Texans lived through Winter Storm Uri, and the power was out for 4 days. And no matter what you do with a battery, there’s only so much energy in it, right? It’s only gonna last you so long. You can only ration that energy out for so long. You gotta be able to put more energy in to be able to use it to manage your cycling load.

But this is such a slept-on feature of the Core. I get so excited about it. What people are trying to do, when they get a backup generator for their home and they wanna make sure that their heating and their cooling is gonna run, they gotta size that generator to meet the demand of an AC pump, for example, you know, a 10 kW AC pump, a 14 kW AC pump.

And at that kind of power range, you need to get a pad-mounted generator that’s $12,000, $15,000 to meet that peak demand to turn that AC pump over. But if you ever, like, listen to how your AC runs, it only runs for a few minutes. The duty cycle of an AC is very short. And so what we can do with the 20 kW inverter on the battery is just push that pump over for a few minutes. And so long as you can charge the buffered-up energy in the battery at the rate equivalent to, like, your hourly average consumption, f— which on a home is, like, 4 kW, then you never actually run out of energy in the battery, and the inverter gives you that, like, oomph to get that AC pump turned over when you need it.

And a 4 kW genny on Amazon’s, like, 500 bucks. And so now what I need to do, if I subscribe with a Base battery, I pay my monthly fee, I get that discounted energy rate. I also get this generator port. I can get, you know, like, an unlimited duration of backup for 500 bucks for the cost of a portable generator to plug in.

And by extension, works with solar panels. The inverter can natively accept connectivity to solar panels, and a lot of folks don’t— didn’t realize that, you know, like, solar panels alone aren’t a grid-forming tool. They can’t back up a home alone. So just getting that inverter plopped on your house, that piece of power electronics, is such a huge power-up for all kinds of peripherals that you can attach to it.

Joshua Rhodes: Yeah. I mean, I was one of those Texans who lost power for 4 days too. I’m actually currently right now, like, I’m in Nacogdoches. I’m at my, my mom’s place, and she actually got a Generac in... She lives out in the country, and she got a Generac installed, like, 2 weeks before Winter Storm Uri hit. You know, lost power, but sailed through the whole thing.

Also burned 500 gallons of propane, which ain’t cheap. It worked. But you’re right, it’s like whenever that thing was running, it can only run at a minimum level so long, right? It can only run so low, and so I know it was sitting there burning, like, extra fuel that it didn’t really have to do if it were able to cycle and kind of buffer through.

And it’s really cool that the battery can do that. And so the value prop seems to be working out. I mean, it says, like, you’re currently is, you know, energizing roughly about 2 MW a day or so. Are you still on track for, like, a gigawatt by the end of this year? Is that, is that the goal or is that the stretch goal?

Chase Dowling: We set ambitious goals, but we set goals that are achievable, and we’re getting there. We’re a little over 600 MWh in the ground today. We won’t hit on a power basis a gigawatt till next year. We’re shooting for a gigawatt hour on the storage capacity. But we’re getting there, and it’s gonna be tight.

It’s been an exciting, exciting ride. That, that installation rate, 2 MW a day energized, that puts us at the top of the range. If you take utility-scale batteries and if you take what we’re giving to regulated utilities and what we’re bringing to the bulk power system as a bulk resource, if you take utility-scale battery developers, if you take a site, a 200 MW site, they take 3 years at best to get interconnected onto the grid, and you’re waiting those full 3 years for those 200 MW to show up.

And if you, like, divide up the time it takes to get those 200 MW online, that 2 MW a day that we’re energizing puts us at the top of the storage developers in Texas. Base is one of the fastest storage developers in Texas right now, and—

Joshua Rhodes: Yeah. If I do the math right in my head, which it’s easy math, so this is dangerous, you’re doing like 200 MW every 100 days. That’s a big battery every 100 days, every 3 months. You’re, I mean, you’re moving fast. What’s the limit now to moving faster? Is it manufacturing, in s— installing, customer acquisition, distribution, ERCOT rules? Like, would you wanna move faster, or is it just time? Like literally you’re just moving as fast as you can.

Chase Dowling: I think it is working on all of the elements of that flywheel simultaneously. On any given day, one thing may be the constraint. On any given day, it might be our ability to recruit enough trained installers in a particular geography, or on another day it might be part of our supply chain for our manufacturing that might be the constraint.

But then kind of being vertically integrated, we can work on these constraints independently, parallelize, increase the installations, like the net energization speed of the resources that we add to the grid simultaneously.

Joshua Rhodes: And when you say vertically integrated, I mean, you’re, you’re all the way down from manufacturing to, like, also the people who are installing these in homes, they work for you, right?

Chase Dowling: Correct. For Base, yeah. Through to the operations of the resource, the application that the customer sees, the maintenance of the installation of the hardware in the homes. And that’s actually an important piece when we go to our regulated utility partners that are looking to improve their peaking capacity in their portfolio. You know, like a regulated utility like Austin Energy, for example, needs more peaking resources on their system.

We facilitate a lot of these functionalities for them, and it’s just plug and play. Their ability to control the resource in the wholesale market, the ability to operate it like a grid-scale battery, just day one. Having control over each of those pieces allows us to offer that up as a resource to a regulated utility as well.

Joshua Rhodes: Okay. It’s a little bit more clear in, like, the deregulated space where you’re the rep and, like, you’re also bidding in ancillary services and things like that. When you’re working with a, with a muni or a co-op or other, are they controlling the batteries? Are y’all controlling the batteries? Is the arrangement different there?

Chase Dowling: Yeah, so for a regulated utility, they’re controlling the battery, and we’re almost kind of like EPC, but a very, like, well-instrumented EPC. So a regulated utility puts out an RFP, and they need peaking capacity, and they need it soon. And what are the options on the table? I could go out and get up a gas peaker.

I could go out and get a grid-scale battery. And as you know, a lot of these are hard to come by nowadays with the construction on the bulk power system. And what we’re able to do is we come up and say, “Hey, we take this utility-scale battery, we cut it up into residential battery-sized pieces. We help you. We build up a program with you to install it on your customers’ homes, and then we can give you the keys to that fleet. And the best part about it is that we can get you that 100 MW you need in 6 months, not 3 years.”

And that’s been a very attractive proposition to utilities that are facing acute peaking capacity needs on their system.

And so it looks like from utility to utility it’s slightly different depending on the problem they’re trying to solve. Say like El Paso procuring a fleet of Base batteries to manage a constraint on a particular substation versus CoServ procuring a large fleet of batteries to become part of their peaking, uh, resource portfolio.

In either case, the customer program that’s offered is co-branded with that utility. But we just simply hand the keys over to that utility through a control surface integrating into their EMS or ADMS, and they can facilitate the operations of that resource directly.

Joshua Rhodes: Well, that makes sense. I mean, one of the things about the energy sector writ large, I always kind of say, is like, if it doesn’t work in Texas, it’s probably not gonna work anywhere else since, like, a lot of folks kind of start and work in Texas.

You cut your teeth in Texas, so what lessons are you taking from Texas to other regions? Or have you found other regions that are maybe easier than Texas? What are you seeing elsewhere as you move into other areas?

Chase Dowling: Well, one of the markets that we’re going to right now, PJM, it’s all over the headlines that there is a significant need for capacity, and that capacity cannot be built fast enough.

So we’re just super excited to be stepping into that market with a new form of resource that can address those capacity needs. The lessons that I, I think that we have been taking away is building the muscle to build a resource that has never been built before at a scale that’s never been built before to solve a new kind of capacity problem.

The transmission system, the bulk power system, we spent 100 years building this giant synchronous machine, and we got really good at building it a certain way. And now with this, like, renewed voracious demand for energy on the transmission system, we need to find capacity everywhere. We need to put more dispatchable power generation wherever we can.

And so the lessons that we’ve been taking away from Texas are like a multitude. One, it’s like, how do you build up the warehousing capability? How do you manage truck rolls and device maintenance? How do you learn to work with the permitting authority in that geography? How do you integrate with that market or that utility? And exercising this muscle that works collectively such that when you show up to that new market, in one month, you know the list of problems that you need to burn down to start effectively putting that batteries on those homes and start energizing those resources quickly.

Joshua Rhodes: Yeah, that makes a lot of sense. But let’s turn to this paper that y’all recently put out, I think the beginning of September. It’s called “Flexibility Without Curtailment.” And so walk me through kind of the high-level executive summary of this paper, and particularly the title. What does that mean?

Chase Dowling: Yeah. I definitely wanna give credit to our partners for Piq Energy and Tom Nudell. They’ve been fantastic to work with on this paper, and it— they did a lot of that heavy lifting. And definitely credit to Tom for that title. That was his baby. But the title is getting at a contract that most balancing authorities in North America are beginning to realize needs to occur. We’re building these multi-gigawatt data centers that are being added to the grid, that, like, an individual data center, if it trips off grid, just the data center turning off creates material balancing and dispatch challenges for that balancing authority that needs to ensure stable frequencies, stable power supply.

So it’s kind of becoming accepted knowledge that, like, the data center needs to facilitate the safe operations of the data center. They become a responsible counterparty to it. And a lot of people have been talking about, like, well, they need to be flexible. They can’t just show up and operate however they please.

They almost become their own kind of resource on the grid. And when people think of flexibility on the load side, generally what they think about is like, “Oh, I can turn it down.” Texas, for example, has a history of a lot of steel mills being able to turn down when there’s severe shortages, and that was kind of a novel thing to add to the grid.

You know, we built a grid over the last century that just kind of assumes that load was inelastic. You designed the coordination of generation, dispatch, and transmission around meeting whatever demand was at the time that demand occurred, and there was no expectation that demand would be this fully equipped counterparty in the balancing of the power system.

And so that curtailment proposition, if you, like, dig a little bit deeper, in order for some of these data centers to curtail, their opportunity cost to curtail is tremendous. There was a recent paper, I don’t know if you saw it, by, uh, Farhad Billimoria and one of his colleagues, that looked at the value of lost load or the opportunity cost for certain data centers to turn down, and these numbers were upwards of $40,000 a megawatt hour, in some cases six digits, hundreds of thousands of dollars a megawatt hour to turn down.

If the only option was for a data center to turn down to ensure the stability of the grid, that hundreds of thousands of dollars of opportunity cost would be felt by ratepayers one way or another. And so what could we do to ensure that that opportunity cost doesn’t get dumped onto people who, like, we are privileged to pay for 4-cent-a-kilowatt-hour energy, right?

And that would just be a tremendous cost burden on ratepayers all over the country. So the core level is simply just add more resources to the grid, increase the operating envelope, and add flexibility to the grid directly. And that’s something that we showed in the paper where using this novel program that ERCOT has, the ADER program, which we could talk about, the advantage of these residential resources, these residential batteries, is because we can install them so quickly, speed to power is the name of the game nowadays, and so, like, this is one of the fastest resources to install.

And if we can install them at meaningful scales, those batteries aggregated at target substations can help facilitate the flexible operations of that grid and help make it more robust in the presence of these very large data centers.

Joshua Rhodes: Yeah, and I think my understanding for, like, a training data center is that it just can’t, like, stop for, like, a 15-minute interval, because if you wanna move all of those weights that you’re tuning from RAM to disk, it can take, like, 4 hours to, like, stop and then 4 hours to start again.

And so, like, for a 15-minute interval, it’s like an 8-hour interruption. The IT load is not inherently as flexible. I know that there are companies working on that, like Emerald AI and other folks, but at least I believe that that is kind of how a lot of that works. And again, I probably got the, the terminology kind of all wrong there.

But I think one of the things that I was really stoked about this paper was that it really pointed out that location mattered, right? Because these new large loads that you’re putting in places, like, they put an acute stress on particular pieces of infrastructure of the grid. The whole grid growing by 100 MW is, like, that’s just in a, a rounding error.

But, like, a couple hundred megawatts at this particular place, that has real implications for the system. So I was wondering if you could talk through those physics in hopefully relatively plain English. One of the things in their paper, you know, you talk about is if you put 100 MW of new load at Burleson Switch, which is, like, a particular bus, like, on the grid in just around the Dallas area, in the Oncor region. You put 100 MW there, what happens? What does the paper show that you’re trying to do?

Chase Dowling: Whenever you put a big piece of new load or new generation on a part of the transmission system, there’s a whole list of, kind of like a checklist of problems that you care about when you connect to this big synchronous machine.

But one of ‘em is, like, is there simply enough room on the transmission lines? And the way the TDUs and the way Oncor assesses whether or not there’s enough room on these transmission lines is they look at operating conditions, different times of year, and different failure modes. Those failure modes, we call them contingencies in the industry, and then they watch them.

They form what are called constraints on the system. Constraint is like a transmission line and a contingency. A contingency is like a power plant goes out or a meteor hits the Earth, and these sit on a spectrum of probabilities, right?

Joshua Rhodes: Hopefully the latter one’s at the tail end of that probability there, but okay, I’ll let you have it.

Chase Dowling: Super fun digression about solar storms, but it gets really interesting on the kinds of things that they’re monitoring on the contingencies. The short story here is that there’s only so much room on these transmission lines, and if I add a new big load, given that the system is coupled, if the load operates the way the load wants to operate, there may not be enough room on that transmission line.

Now a lot of constraint violations on the transmission system today are quite brief. Not all, but many are less than a couple of hours. And so when you add things to the transmission system, you affect a whole bunch of transmission lines all around you, not just like the one that you’re literally connected to.

So as you saw in the paper, if I add this 100 MW load to that spot, a whole bunch of constraints pop up, like, oh, this transmission line, that transmission line, that transmission line. And what we show is that when you put it in a spot, when you hit this transmission line, it doesn’t mean that like one extra megawatt of load at this data center site is one extra megawatt on every single one of these constraints.

It could be as few as, you know, half a megawatt or a third of a megawatt. This is, in the industry it’s called a, a shift factor or like the locational impact to all of the things around you. Now, that constraint, if it’s very far away, it might happen to be in a part of Dallas where there’s a lot of homes, a suburban part of Dallas where you can put a lot of batteries, where is really close to that constraint that cannot be ameliorated unless you were to increase the size of that transmission line or install new resources.

And those resources have like a mechanical advantage by being so close. One megawatt of injection from those batteries can realize 1 MW of relief on that constraint, whereas the data center perhaps a little further away, 1 MW of curtailment on that data center only realizes, say, like half a megawatt of constraint on that transmission line.

So as you saw in the study, there was an example data center in Burleson where a 100 MW data center, all of the constraints that it creates can be ameliorated by 80 MW of strategically sited batteries. And if you s— look closely, there’s like 10 to 20 MW pockets in a number of places that are all strategically dealing with the numerous constraints that arise.

And that’s kind of the short of it, what’s happening with the connection of the resource and what is preventing that resource from being operated safely under all the contingencies that ERCOT analyzes.

Joshua Rhodes: At the risk of getting too wonky here, please don’t answer anything that uses imaginary numbers, ‘cause even me as an engineer won’t be able to understand what you double Es do.

But you brought it up. This was 100 MW, like, additional load, but you only needed roughly 80 MW of resources to, like, effectively make that load okay to host. I mean, people might think of it as like, okay, if you put in 100 MW of load, you need at least 100 MW of stuff on the system, but you’re able to do it with less. How does 80 MW of resources allow 100 MW of new load?

Chase Dowling: Yeah, yeah, yeah. So if you look at the transmission system in Texas, there’s tens of thousands of buses where you can go and, like, install electrical hardware, and there’s not tens of thousands of buses that can host 100 MW of load.

You need the land. You need the high-voltage transformers. It takes a ton of space. It actually limits, like, where on the transmission system you can put these things. But the constraints are everywhere. They’re in the middle of the city. They’re in the suburbs. They’re in, out in the rural parts of the state where the transmission lines are running.

And you can place batteries physically closer to where the constraint is occurring, depending on where the data center’s being built. And so by very simple mental model that works is, like, by virtue of just being closer to where the electrical need is, not where the load was built, you can more effectively control the problem that’s arising.

It’s like I’m in a room, and the data center’s in the room with me, and we both need to shut off the light, and the data center is on the other side of the room, has, like, a stick to turn the light, and I happen to be right next to the light. It’s really hard to reach the light switch with that long stick, and I happen to be right next to it, and I don’t need to work as hard to turn that light switch and effectuate the control.

Joshua Rhodes: Okay, so one of the things I really also appreciated about this paper there is it didn’t stop there. It’s like you next go to a 200 MW case, and instead of less than 200, you actually need more than 200. You need about 300 MW to alleviate 25 of the 30 constraints. And to get to all of them, you would need like 1,200 MW.

So it was like the problem got exponentially harder as you made the loads bigger and bigger and bigger. And so, one, I appreciate you putting that in the paper to be realistic about it. Can you talk about, like, how did it work so well for that 100 MW? What became harder as those loads got larger?

Chase Dowling: Yeah. So there’s almost like two questions in here. Why does it work for some data centers, not others? And then why is there like a long tail? Why does it to— take such a large fleet of batteries to deal with all the constraints that materialize as the load grows? So with the first question, residential batteries aggregated at a load substation are not a panacea for all the problems, right?

Like if there’s a data center being built in West Texas, there simply aren’t enough homes in West Texas to aggregate a multi-hundred megawatt fleet of batteries. It depends a lot on like the local topology of the network, the available real estate to work with to put more resources on the system. It’s case by case.

But if you look at the data center map and where a lot of these systems are being constructed, that middle of the road, the 100 to 300 MW set of data centers, they’re getting built all around the exurbs of the major metropolitan areas, and a ton of them are getting constructed. And so there’s a ton of constraints that are gonna be able to be managed where there’s proximity to big residential communities where we can stack up tons and tons of batteries.

Now, is this gonna solve a problem out west of like Abilene, where there’s very small neighborhoods and not a ton of places to put residential batteries? Probably not. So one, it depends on the topology of the network and what’s available to work with. And then on the like tail of contingencies. Now, like the number of situations that the TDUs and ERCOT look at as failure modes on the transmission system are huge.

Like NERC has like this special ranking system for all the different failure modes that the transmission system can go through to the most extreme, where like our most important transmission lines outright fail, they fall down, they break. We saw a transmission line failure like that down in the Houston area not— about a year ago after a hurricane.

But those are exceptionally rare. And to deal with those constraints, it oftentimes severs whole parts of the system. And in those extremely rare occurrences when you sever that part of the system, you need to make up for all of that lost generation on both sides. And so to fully ameliorate that particular extreme constraint, you do need a ton of generation.

But back to that title, back to that recognition that there’s a realization that these enormous loads joining the system will have to form some amount of flexibility that can be offered to the balancing authority to deal with these extreme cases. I mean, this is kind of what SB 6 was getting after, where like in the most extreme cases, you gotta be able to help the grid from collapsing.

And you don’t need to spend a billion dollars to deal with the most common, the preponderance of the various failure scenarios where a breaker opens, a power plant trips, there’s some sort of problem. These problems happen daily on the transmission system, and they cause these shocks to price that we s— we all see on the grid status dashboard of the nodal price even just yesterday.

Those are things like transmission outages occurring, and breakers opening, and power plants tripping, and things like that. Quite common. And you can deal with a reasonable sized fleet of batteries that are much, much, much, much cheaper than a data center curtailing for several hours. You can deal with 80 percent, 85 percent of all of the constraints that are monitored, all of the contingencies that they map to, the very effective resource.

And so we wanted to show, which is really important, and not a lot of grid planners like think of the grid in this almost good enough way, but you can deal with a ton of the problems with so little work, with so little cost if you’re able to aggregate up these, these small batteries and manage the system more dynamically.

But as you point out in the paper, as you get up to those extreme ends, that’s kind of, I think, what’s on people’s minds when they think of like, what was SB 6 for? How do you deal with the most extreme failures in the transmission system that virtually never occur?

Joshua Rhodes: Yeah. That sounds like the 80/20 rule strikes again, right? You can take care of 80 percent of the problem with 20 percent of the effort or the resources or things. And so, I mean, I think that’s what your paper is kind of getting at. It didn’t take that next step, but it teed it up, I think, really well in terms of like, okay, we can aggregate these resources strategically placed to alleviate, you know, part of the issue, but it doesn’t take away the need that sometimes you just need to build new transmission. Sometimes you just gotta move more bulk power around the system. Am I summarizing that correctly?

Chase Dowling: This is totally accurate. There’s like a question of like, if I had just built more big transmission, maybe that’s an alternative to this problem here. But where all of the threads are converging to take a— another step forward, if we look at what the batch process is doing in Texas, the batch process is looking at data centers that are electing to be curtailable resources, provisional curtailable resources, and they don’t wanna have to do that. Sure. And if I’m signing up to be curtailable, that means I’m gonna do it all the time. I’m gonna have a large opportunity cost to do it. And we have this resource now, this resource that ERCOT can see in their dispatch mechanisms through the ADER program that we can build in less than 6 months to the data center that’s signing up for that risk of curtailment, oh, we can deal with most of the scenarios that you will— can be confronted with when being forced to curtail.

Now, yeah, there’s those extreme emergencies where for the safety of the state’s grid, we need to turn some things off that y— the only way to deal with it is to just build a ton more extremely expensive transmission, extremely expensive generation on both sides of a failure mode.

But if I have multiple hundreds of gigawatts of data centers electing to be curtailable, they’re taking on a lot of risk there for their business, and we can come in with these resources strategically and prevent the preponderance of that risk that they’d be taking on.

Joshua Rhodes: It sounds like, and this is probably work that’ll happen in the Lege coming around, is like, so you got the Batch Zero process, you got the PCLR, and I think what most of these loads want is actually a combination of both of those, so they’re able to, like, be flexible but have the generation also interact.

It sounds like you would need that combo, which may come in the Batch 1 process. I wanted to talk about these assets, you know, being able to allow more load, like who should be paying for that? Is there a business model you have or that you could develop that would allow the cost of these strategically placed assets to be borne by the data center who wants that 100 MW? Like, how would that work out?

Chase Dowling: There’s like two pieces to it, but this is where those threads in the batch process that I was talking about combine. If I’m a data center and I’m joining the batch process, and in order for me to get connected faster, I’m gonna elect to be curtailable, virtually any alternative form of generation to curtailing at hundreds of thousands of dollars a megawatt hour is good news for me.

And so the question on my mind is like, what generation can I pay for to prevent that curtailment? What causes the curtailment and how can I prevent it? And what we’re showing is that, like, the strategic siting of these resources can prevent that curtailment, and we can build them fast and cost efficiently.

And so that sets up a natural commercial transaction where the data center can pay for an aggregate fleet of batteries at these target substations to prevent their curtailment in operations. And so in this case, the data center would pay for the batteries. And there’s kind of like this fabled win-win-win-win-win-win where the data centers that are struggling with just general public concern over their impacts to the grid can pay for a resource that directly benefits the rate base, right?

We’re gonna put these batteries on home o— homes that are, you know, at risk of outage. Now we can offer you a tool that provides outage protection while also being able to recruit all those resources and prevent the very expensive curtailment of the data center, which would eventually land back on a ratepayer’s energy line item, right?

And then outcome there is that the grid’s more resilient, reliable, and data centers paying for that capacity that can deploy very quickly. So that’s what the commercial transaction would probably look like. The piece here, kind of the challenge and what the ERCOT is proposing as the fourth phase to the ADER pilot, is having these resources, these aggregations of batteries modeled and dispatched at transmission substation level so that they can be recognized at the transmission planning phase and in the operational phase when these constraints actually materialize.

Joshua Rhodes: That’s a very wonky point, but I think that’s really important, right? Because the location of these resources matter, you gotta see them in the SSWG files, the PQs for the thing, for the grid topology files. You gotta be able to see them, you gotta be able to model them. And to just pull a little thread on kinda what you said, the part about, like, the data centers and the PR, public relations, that is not great right now.

The value prop is more about just reducing loads. Like, it— you’re actually putting infrastructure at people’s homes. It’s not just, like, nebulous, it will reduce your bill, whatever, add it all together. It’s like now there’s this box on your house that gives you power whenever the grid goes down. Running short on time, so zooming all the way out, we got a lot of data centers coming to Texas, a lot of large load.

How large can this concept realistically get? Have you looked at that? Are you able to extrapolate from what you’ve done? How big could you go if you didn’t have annoying things like supply chains and time to deal with?

Chase Dowling: Yeah. Yeah, yeah. So if we’re looking just at Texas, the question is what is the opportunity space for storage acting as an energy resource or an ancillary service resource, or now, like, additionally as a transmission resource?

And backing me into a corner, no one is building batteries in a fashion as a transmission resource today. There isn’t quite, like, a market for that yet.

Joshua Rhodes: I don’t think you can. Like, transmission can’t own generation, right?

Chase Dowling: Right. But it’s gonna take us 10 years at best to get these 765 kV lines built to improve the availability of the transmission system, make it more robust.

I think the opportunity is quite large in Texas, definitely on the order of gigawatts. But to spread the good word of Base just a little bit, if you humor me, like, I think the aspiration of the company is we see these distributed energy resources and just the proliferation of power electronics onto the distribution system, a means to help electrify the entire world more effectively.

And so we see the upsize, the volume, how big can this go, to be extremely large. We built grids designed 100 years ago, and now we have the ability to reimagine how that grid is built. And so we’re viewing the upside as quite large, quite unlimited in terms of what we can build on the system today.

Joshua Rhodes: Awesome. Love to hear it. I think this is a good place to stop. Chase Dowling, thank you for coming on the Energy Capital Podcast.

Chase Dowling: Thanks, Josh. It was great to see you.

The PUCT approved the southernmost of three 765 kV paths into the Permian on September 13. It has not approved the center path: administrative law judges recommended denying it in August, and chairman Thomas Gleeson sent it back asking what the lines are needed for and what they would save customers.

Michael Webber’s answer is that Texas has run this experiment. CREZ, the Competitive Renewable Energy Zone program finished around 2014, was primarily 345 kV and lowered costs, cut emissions and improved reliability. His case for 765 kV is right of way: more capacity per corridor means fewer corridors, and corridors are what landowners object to.

The same answer runs through most of what is moving on the grid. On this week’s Energy Capital Podcast, Joshua Rhodes talks with Webber, a professor at the University of Texas at Austin.

* The case for AI: Anthropic, OpenAI and xAI leaders called for a global slowdown in September. Webber says nobody has explained what the technology is for. “The case has not been made strongly.”

* Who is resisting, and why: degrowth politics on right and left, a youth movement against data centers, and law firms pushing associates toward AI while the partners who would have trained them work remote. Webber reads the water-and-noise objections as displaced anxiety about AI.

* Where the gas goes: a bigger grid lets Texas sell gas at $8 to $15 rather than burn it at $3, and lets Houston draw West Texas solar instead of adding gas plants to its airshed.

* Hormuz: about 20 percent of world oil moves through the strait, plus fertilizer and chip inputs. US diesel averaged $6.06 a gallon on September 11. Texas will be fine, Webber says; Bangladesh and Pakistan will not.

* Affordability in November: electricity bills creep up through distribution costs, transformers and wildfire hardening, while fuel prices move by the day. Webber expects an anti-incumbent mood.

* Scarcity and abundance: US electricity demand was flat for 20 years and is growing again. Webber wants data centers treated as a way through scarcity, not its cause.

* Plus: why the headline numbers frightened everyone inside six months, what the next six months hold, and why the grid needs helicopter pilots.

Chapters

* 00:00 – Introduction

* 01:03 – Where Texas is building fast, and where it is not

* 02:19 – Why the data center mood flipped

* 05:18 – The AI slowdown letter

* 08:45 – Why younger workers are pushing back on AI

* 12:32 – Junior lawyers, junior engineers, and mastering the fundamentals

* 16:42 – Whether energy for AI is a social good

* 19:26 – The case the hyperscalers have not made

* 21:51 – The argument for 765 kV

* 26:34 – West Texas solar and Houston's peak

* 28:54 – Hormuz, molecules, and what Texas exports

* 33:00 – Affordability heading into November

* 39:05 – Scarcity, abundance, and a drama-free summer

* 42:02 – What the next six months hold

Resources

People & Organizations

* Joshua Rhodes (LinkedIn)

* Webber Energy Group (Website - LinkedIn)

* IdeaSmiths (Website - LinkedIn)

* Energy Capital (LinkedIn - YouTube)

* Michael Webber (Website - LinkedIn - X)

* LBJ School of Public Affairs (Faculty page)

* Walker Department of Mechanical Engineering (Faculty page)

* Kay Bailey Hutchison Energy Center (Website)

Company & Industry News

* Regulators approve controversial southern 765-kV transmission line

* Texas grid expansion splinters conservatives as data center backlash grows

* Facing an estimated 474 GW of interconnection requests, Texas hits pause on data centers

* The AI industry faces a bipartisan grassroots fight

Books, Articles & Filings Discussed

* Economic impacts of 765kV transmission development in support of Texas and Houston-area reliability

* ERCOT - Trending topic: 345-kV and Texas 765-kV strategic transmission expansion

* ERCOT - Reliability plan for the Permian Basin region

* PUCT - Approval of the first extra high voltage transmission lines in the ERCOT region

* Judges recommend regulators reject proposed 765-kV line

* Top regulator recommends remanding transmission project to administrative law judges

* Costs and emissions reductions from the Competitive Renewable Energy Zones wind transmission project in Texas

* Anthropic, OpenAI CEOs call for slowdown in AI development

* Using AI, mathematicians find hidden glitches in fluid equations

* EIA - Strait of Hormuz is chokepoint for 20% of world’s oil

Related Podcasts by Energy Capital

* Build Fast or Fall Behind with Michael Webber

* Texas competes on everything except transmission

* Inside the PUC’s Cost-Allocation Overhaul with PUC Chairman Gleeson

* What the Sierra Club wants from the Texas grid

* Texas Got Tested, Grid Stayed Upright

Related Posts by Texas Energy & Power

* Data centers say they pay their way; Texas will hold them to it

* More Generation, More Transmission, More Load, More Challenges: Texas Grid Roundup #90

* A Tale of Three Performance Reviews: Texas Grid Roundup #94

Transcript

Joshua Rhodes: Hey everyone, and welcome back to another edition of the Energy Capital Podcast. I’m really excited to have Michael Webber back. I think we’re probably gonna get on some kinda six-month rotation with him just to kinda talk about all things energy in Texas, ‘cause there is never a shortage of things to talk about related to those.

But for those who may have not seen the first episode that we’ve had about six months ago, we’ll put that in the show notes. But Michael’s a professor at the University of Texas at Austin, where he’s a Sid Richardson Chair at the LBJ School of Public Affairs, as well as the Cockrell Family’s Chair in Mechanical Engineering in the Engineering Department.

He’s also the former CTO at Energy Impact Partners, a former Chief Science and Technology Officer at ENGIE in Paris, and the founding partner of IdeaSmiths. Since then, has been— is now running an energy opinion column regular every couple weeks for the Houston Chronicle. His work sits at the intersection of energy, engineering, policy, and commercialization. Michael Webber, welcome back to the Energy Capital Podcast.

Michael Webber: Thank you. It’s always fun to have a chance for a conversation with you.

Joshua Rhodes: For sure. So about six months ago, you know, one of the big themes in the podcast when we were talking was that Texas needed to build faster or kinda fall behind, or one of your big things was Texas needed to build fast or fall behind.

So looking back since then, do you think we’re building fast enough? Or are we falling behind? Challenges changed? What’s really changed in the last six months?

Michael Webber: We are building quickly on some things. We’re building new power plants, especially solar and some power capacity like batteries and a little bit of wind and gas.

So we’re doing a good job building new sources of power. Doing a pretty good job building load, new factories, gigafactories, advanced factories or data centers. So that’s a good news story in terms of our ability to keep up with things. We are not as fast today at building transmission, although we have been fast in relatively recent history, so I’m optimistic we can do that again.

And we’ve had issues building gas pipelines and sometimes water facilities we’ve been slow at. So there are places where we have a lot of success on the power side, some success on the gas infrastructure side, but also some shortages on transmission and other things. So it’s like we got a mixed record, but still pretty good.

We’re better at it still than anywhere else in the United States and almost as good as anywhere in the world.

Joshua Rhodes: Absolutely. Are there two or three developments in the past six months that have maybe has challenged your view the way Texas is headed? You have any idea what they’d be?

Michael Webber: Yeah. The two big political things that have emerged that I see is sort of a anti-development or degrowth movement on the right and the left politically around data centers and transmission.

So we’re seeing non-traditional political bedfellows in opposition to getting some things done, so that feels relatively new, especially the flipped opinion on data centers. That’s gone from very exciting to data centers are gonna pay all our property taxes and save the world, to now a lot of suspicion and concern around data centers and also the environmental impacts or anything else.

So a lot of flipped mood on data centers, some of that’s rippled over to transmission lines. So that has changed. I haven’t really perceived that to happen as much for batteries and solar. We’ll see if that happens there as well. So some changes in the last six months since we’ve spoken before that I really didn’t see coming.

Joshua Rhodes: The conversation really kind of went pretty quickly from how do we attract these projects? And so I’m talking about data centers, like, how do we attract these projects to, can the grid actually accommodate all of this stuff that’s gonna come to, wait, do we actually want all that? Do we need to slow this down?

And that’s really kind of happened over the past kind of six months. What do you think is really happening there to really shift something so big, so fast?

Michael Webber: I think there are so many things happening, it’s hard to fully digest in real time what’s going on. But part of it, the pace of construction and the pace of the headlines is really jaw-dropping.

The headlines especially, and I don’t believe that we’ll build anywhere close to what the headlines say. So if we put numbers on it, data centers might require over 400 GW of new power. You’ve talked about that on your show several times already. I don’t believe we’ll build all that. We might only build 10 percent or 20 percent.

Even 10 or 20 percent is still a lot, but it’s really just incredible headlines. And so that has freaked people out, like, whoa, that’s a lot. Can we really do that or not? And we’re already concerned maybe about reliability of the grid or cleanliness of the grid or cost of the grid, and then you add in 400 GW of headline load, that is a challenge.

So I think that’s part of the change, just the numbers and this kind of this race to get things built has changed things. Another thing that’s changed is more and more sort of blinking red lights about whether AI is good or bad for humanity. I think there’s more concern about the ethical implementation of AI.

Will AI be good because it will help us get pharmaceuticals and cancer treatments, or it will be bad because it will lead to the devastation of the planet and the world? So I think we’re confronting the ethical sort of lack of guardrails on AI at the same time. And then there’s a tech villainy, like the tech villains and the oligarchs and the big companies, so a lot of suspicion around the companies.

So there are a lot of factors converging all at once around power, and I think we mentioned water, noise, and light, all the other issues. The headlines, concerns about the people, the individuals or the companies that are implementing AI, it all converges together, and now we have a campaign afoot with major races underway with elections already November.

And so it’s a campaign issue, and that means we’ll give more attention. So all these things are happening now in a way they weren’t six months ago, and I feel like that’s bringing a lot of attention to it.

Joshua Rhodes: Yeah, I mean, just recently as we’re recording this episode or kind of over the weekend, some of the big AI companies just kinda released a letter, yet a letter originally was coming from Anthropic, but signed on or at least, you know, given some cheerleading by OpenAI and even xAI to slow down, calling for a global slowdown in AI development.

You’ve had folks calling for this for a long time. Like, you’ve had a bunch of folks like talking about like the dangers of AI and other types of things, and we’ve had calls to slow down before, but we never have. But w— now we’ve got this other one. One, do you think this will slow down data center development at all if we slow down, like, you know, the development of AI?

Or do you think this is kinda like some of the previous ones where we’ll say we should slow down and then not slow down?

Michael Webber: I feel like this call for a slowdown is different because it’s internal. It is from the AI companies. It’s not the outside ethical watchdogs who are saying, “Whoa, you guys need to slow down.”

It’s people developing going, “We need to slow down.” It reminds me of the Manhattan Project and developing nuclear weapons, where there was a moment where the scientists basically came together and said, “Good God, what have we done? We’ve unleashed this new capacity that could end all of humanity.” And there was this really dark realization of that.

And this AI letter or this internal AI call to slow down its development reminds me of that, where they’re like, “Good God, what have we done? We’ve created this new capacity, and is this good or bad?” And frankly, I don’t think you can slow it down. I think the genie’s out of the bottle, so I think it’s too late.

However, maybe we can take their warning sign seriously, and I think it is serious, and it makes me wonder, what do they know that we don’t know? Makes me think that there’s something they are aware of internally that hasn’t made it to the news yet. So we probably can’t slow that down, but we could speed up the regulations, and we could speed up other things.

And so with nuclear weapons, once they were developed, the genie was out of the bottle. There was a race for other countries to get it. We couldn’t really stop it. Once the knowledge was available, the knowledge was available. It’s hard to go back to ignorance once you have knowledge. But we could speed up the development of strong international institutions and watchdogs and inspector groups and treaties.

There are other things we could do that would make us feel safer. It took decades, frankly, to feel safe. It took things like mutually assured destruction. These are horrible phrases. Maybe we need mutually assured AI destruction or something. But I doubt it we’ll be able to slow it down, but maybe we can speed up these other things.

And I would say if the internal experts are saying this is serious and we need to take it seriously, I think we should listen.

Joshua Rhodes: So what do you think the name of the movie’s gonna be about this? It was Oppenheimer

Michael Webber: for the nuclear scientist. Yeah. It was American Prometheus or something. What was the name of it?

Right? The person that stole fire from the gods. I r— can... I can’t remember. I’m mixing my different Greek mythologies. But I feel like there’ll be some movie about this for sure. There are already documentaries emerging. I don’t know if it’ll be about the character or the person, is it Sam Altman or someone else, or is it about the industry as a whole.

But the fear with World War II and weapons development during and after World War II was bad countries would have nuclear weapons, but now we’re not talking about countries. We’re talking about companies or individuals. It’s a little bit different in terms of who is developing, who has access to it. And I feel like that concern is part of the context that people are absorbing and expressing angst.

Like, AI, like AI as a tool, it’s really handy. I use it in my day to day life, but by the way, it might lead to the end of humanity, or it’s really bad for the environment. And so I think it’s, like, all wrapped up at the same time. These concerns from the AI tech leaders aren’t gonna make it easier to do it. Hopefully it’ll make it easier to develop the guardrails. I

Joshua Rhodes: mean, do you think, you were talking about genies out of... Genie is out of the bottle. Genies typically don’t go back into bottles, so we’re probably gonna, you know, continue to build this stuff. Yeah, I mean, that was some of the pushback. A long time in AI is, like, the last year, last month or so.

But, I mean, one of the things is, right, around some of the pushback against, like, data centers and siting is more than just about the infrastructure that’s in your community, but it’s about the thing that it’s creating, right? The AI. Is the AI gonna take 50% of white collar jobs away or other types of things?

Sometimes it feels like that’s what people feel like is the only lever they have to pull, right? Is to, like, push back against, like, this infrastructure. And so you hear these stories about, like, different firms and things around, like, you know, the older folks in the firms are maybe pushing for more AI use, and it seems like it’s some of the younger generation that’s kinda pushing back against, like, some of the AI use.

Like, I haven’t seen people pushing back against AI use in college. I feel like they’re using it as much as they possibly can, but maybe that’s a separate sphere. But, like— You... Different use case kind of.

Michael Webber: Yeah. This is fascin— Yeah, so there was a New York Times article a few weeks ago about how younger generation is among the loudest activists fighting against data centers, so there’s a movement.

It’s an anti-authoritarian movement. You know, every youth movement has some anti-authoritarianism structure. They don’t wanna be told what to do by other people, so now it’s around data centers. So there is a youth movement against data centers. You and I have been part of conversations with students we know who’ve been interns in the firms.

Elders are pushing AI, and the junior members of the firm are resisting that, which kinda jinks with what we find at the university environment, is students are using AI comprehensively. By that I mean every student’s using AI just about. They might not use it for every class or every assignment, but it shows up a lot.

So I look at younger students as AI natives who use it quite frequently, yet it seems like a lot of resistance to AI is also by younger generations. So I can’t quite square that circle. I don’t know what’s going on, but I think it reflects a variety of concerns around control and who gets access to what.

Does this democratize access to intelligence? Is this consolidated control around a government? You might be suspicious if the government has control. You might be suspicious if it’s the five oligarchs or the magnificent seven or whatever names we have for the companies and individuals. It’s kinda messy right now as people are finding their way.

I think it’s triggering every concern that people might have, so elderly people who retired in the rural areas might not like the way data centers are disrupting their way of life. Younger students or younger career entrants might be worried about AI taking away their power or sense of control. Other people might not like it because of who gets the money from all the AI.

Like, it might take my job and make someone else rich, and that person who gets rich might get even richer. So it’s like triggering every concern. It’s like a uniquely unifying part of society. Unifying in that a lot of people are resisting it. You and I have talked before about, we wonder, is this gonna undermine the ability for people to master the fundamentals of engineering and sciences, or just make it easier, right?

So we all have some of the concern. It doesn’t matter who you are, you’ll look at AI and go, “Yeah, there’s something in there that’s triggering some fear,” right?

Joshua Rhodes: There’s a couple things. So you know, you and I were talking to... Or hearing from the student who had the inter— who had the internship over the summer, where they were talking about the older folks wanting it, the younger folks not.

I was thinking through that. There was a couple things were kinda coming up. One is like, in this case, they were architects, right? And it felt like the younger folks, they wanna be architects, not computer scientists. They actually want to, like learn the craft and do the thing. And then there was like, typically in those types of environments, you have, like the younger folks doing a lot of the work, and then you have the older, more senior folks who come in and ask questions and like point out and say, “Why’d you do this?”

Or, you know, “Change this and that and the other.” And they’re expected to know what they did, right? I mean, there was no way to do it without knowing what you did. But now with some of these tools, you can do it without knowing what you did, which can be an awkward conversation if, like your superior’s asking you, like, “What did you do here?” Have you seen any of that with students?

Michael Webber: Yes. So I heard this similar a couple years ago in law firms, but it’s almost from a different sort of context. So law firms have two contexts that have changed in the last few years. One is the rise of AI and pressure to be more productive. And if AI makes you more productive as a lawyer, then you should use AI.

It’s like better for the client, better for everybody, better for the billable hours, for the firm, everything else. But also with COVID and beyond, not as many lawyers are working in the offices. A lot of them are working remote, especially the senior partners who are often wealthy, have a second house at the coast of Cape Cod or whatever.

So you have the senior partners working remotely more often and putting pressure on everybody to use AI more often, but they’re not there to mentor the junior partners. And so the junior partners are not getting the mentorship. A way to become a good lawyer is to get a lot of interaction with senior partners.

You can learn from their mistakes, you get a lot of guidance. And if the senior partners are not in the firm or not in the office because they’re at their coastal home or whatever, and they’re putting pressure to use... on you to use AI, so you’re not even mastering that through your own sort of suffering through the different cases and precedent-setting decisions that have been made.

That is like a double whammy for junior lawyers. So I think like the rise of remote work and AI is a double whammy for entry-level lawyers. And now that kind of thing might be happening for engineers, maybe not as much the work from home thing, but AI, where putting pressure on junior engineers and firms or elsewhere to be more productive, to move faster, maybe even in the research environment. But there’s something about taking the time to master the material that will lead to fewer mistakes, we hope.

So AI makes it easier to learn, makes it faster to learn, but might make it a little harder to master the fundamentals because you’re not as close to it. It’s a magic black box. However, the AI might have mastered the black box, like it might have mastered the fundamentals, and so actually mistakes might go down because there’s some calculations that are pretty standard across different settings, so this all might be fine.

And I don’t think I know, and I think we’re in that sort of awkward adolescence of AI where we haven’t quite gotten on the other side of it, so we don’t know if it made it better or worse. But I do worry that AI will make us think we’re smarter while making us dumber. So that’s the risk we have, right?

That we will have bridges and buildings fall down because we didn’t know we made a mistake and AI didn’t catch it. But we thought we were smarter because we were able to design the bridge or building faster. And so that’s like kind of this metaphor, yeah. And I know this is sort of an energy podcast, but it’s hard not to talk about those other elements because this is actually the anxiety that people might be having, but they don’t know how to express that, so instead they say, “Well, I don’t like the energy, water and noise and light and everything from the data center,” which is also a concern.

Not to say that those aren’t real concerns. Anyway, so I feel like you and I are grappling with this as instructors and mentors and researchers, like, okay, when is the AI tool appropriate because it’s accelerant and it’s a good check on our work? Where is AI inappropriate because it undermines the sanctity of our analysis?

Like, does it make our analysis worse or better? And that will come a time, I think, and we used to say the same thing going from slide rules to calculators and from T-squares and drafting tables to CAD or whatever. So these kind of technology transitions have happened. This one feels different because the pace feels faster and because it’s not replacing a tedious task, it’s replacing an intellectual task, a mental task.

So we’ll see. I’m apt to be an optimist on this, but it makes me nervous, frankly. I’m nervous about whether students in my classroom are learning. It makes me nervous about whether the students in our research projects are learning as well.

Joshua Rhodes: The pushback I always have against like that calculator slide rule thing is like, you know, that’s a deterministic thing and, you know, it doesn’t matter how you do it, the answer like is gonna be the same, you

Michael Webber: know? There is a right answer, and we know if it’s right or wrong.

Joshua Rhodes: Yeah, there is a right answer. Every other revolution just got you information faster, and this one is actually trying to, you know, approximate synthesizing that for you, which is definitely feels new to me. But yeah.

Michael Webber: Yeah, it’s a ca— Like if you do a calculator, you know, if you put in four times eight, it gives you the same answer every single time.

But if you ask an AI agent, platform, bot, whatever it is, a question, you might not get the same answer every time because there’s some natural variability by design. And so there’s not a predetermined fixed answer that it will give you, even though you and I might know what the right answer is, we could test it.

So, and also has hallucinations and everything else. So yeah, it’s not deterministic in the same way, and that’s one reason why this transition’s gonna be different.

Joshua Rhodes: So one of the things in the last time I taught my data analytics class is we actually trained a very small large language model neural network, and you could watch it go through like there was some randomness in the number of like, I’m blanking on the terms now ‘cause it’s been a while, but it would trim off pieces of the model as it was building, like randomly just to try to like add some of that stochasticity in there, like, so it’s not always getting you to the same thing.

I’m butchering that, but anyways, it’s one of the reasons why you never get the same thing. But we’re using this stuff. But this is an energy podcast, but it’s one of the things is like the big story in energy has been AI, but then, you know, now it’s kind of a whole like societal story and become a, like a political story.

Michael Webber: It’s worth asking these other questions because it does tie into is the energy provision or the energy made available for AI going to be a social good or not? And with all the other expansions of the energy system for the last 160 years, there was a very clear and obvious societal good that came out of it.

You got better steel or you got better railroads, you got cars and personal mobility, or you got heating and cooling a lot. Like, there are all these things you can say, “Yes, this expansion of the energy system gives me something that’s very obviously good that I crave.” The expansion of the energy system to serve AI is more nuanced because there are some certainly good things in there.

Like it makes my searches better on the internet. I can do a little bit of analysis here and there, and maybe it can help us accelerate the development of treatments and vaccines and everything else, but it has all these bad things with it too. And the societal good is not as obvious. The societal bad is really hanging in there.

The prior expansion of energy had a societal bad, really land impacts or water pollution or air pollution, but they were less visible or less obvious, or they’re far away, like the energy I’d feel in my home and that felt good, but the pollution was somewhere else. But with AI, we don’t have the separation of the downside physically the same way.

Like we’re just like, we see it with our algorithms or human. So I feel like this is part of the challenge is every prior expansion of energy came with obvious personal and societal good. This one, because of our suspicions, concerns, whatever it is, our skepticism about the companies and the people makes it more of a discussion, for sure.

And I think there’s maybe responsibility on AI companies to explain what the social good is, and not just better cat videos. You and I have joked about some of the tweets out there. They’re gonna use AI, a major airline now said they’re gonna use AI to extract more money out of travelers by fine-tuning their preferences, and that didn’t feel like a simple supply and demand argument of we’re gonna use price changes to fill our planes to get better performance for everyone.

It felt more like we’re gonna use everything about you to find your weak point and your vulnerabilities and manipulate you. This was something that a CEO of a major airline said. That doesn’t build a lot of confidence. And sorry, okay, what’s the social good here?

Joshua Rhodes: We were just both at the KBH Energy Conference this past week and ran into...

There was a bunch of different hyperscalers and things there, and we ran into one and were just having a conversation, and this is one of the things that I was a little blunt. I was like, “We’re waiting for you to make the actual argument for th—” Like, there’s a bunch of pushback. Why haven’t you made the value proposition? If you have one, why haven’t you made one?

Michael Webber: And clearly they believe there’s one. The level of CapEx is so high, so they believe that there’s something there, and maybe it’s just because they think there’s a lot of money to be made. But, like, we’re ready to be told or, you know, at least give them their best shot to make their pitch, right?

So I think we can be a willing audience for that. Okay, make your pitch why this is good. I’m listening. But in the meantime, we’ll fill it with our own stories.

Joshua Rhodes: Yeah. I mean, do you think they’re saying anything? You think good things are being said about it, but we’re just ignoring them because we’re, like, so fixated on the initial downsides?

Michael Webber: There’s some— I mean, there have been some pretty interesting mathematical sort of advances in the last few months. There’s been some development of better understanding of discontinuity in the Navier-Stokes equation. By the way, almost no one cares about the Navier-Stokes equation, but it’s a deeply important scientific principle of fluid mechanics.

It’s kind of cool that AI can help find a point where it doesn’t hold up the way we thought it did. There have been development of vaccines have been accelerated, so th-there’s some pretty interesting scientific stories and some pretty good advances. It gets coverage. There’ll be a news article and kind of people forget about it the next day.

So it’s not like there’s a steady drumbeat of successes, and that’s part of the problem because we feel the impacts today, but the successes come tomorrow. And so there’s a real mismatch in time between the negative impact and the positive benefit. There’s also a mismatch in location, at least for the data center.

The data center will impact a location where it’s built, and you and I might not feel that if we’re not living next to the data center, but we might use the AI tool or platform. So there’s mismatches in time and place for this, and that’s part of the problem. But I think the mismatch in time between the impact is felt today, the risks are felt today, but the benefits will be enjoyed tomorrow, that’s a problem.

And it’s almost like the opposite of climate change, where the benefits of energy are felt today, but the downside risk of climate change are felt tomorrow. So we have like a flipped problem with AI. And interestingly, AI could be an accelerant for solving climate change if we can do it. So I feel like the case has not been made strongly.

There are some positive examples. They’re here or there. They get a one-off story. They’re not going viral the same way as a noisy data center might, and that’s part of the challenge.

Joshua Rhodes: Yeah. Bringing things back to kinda like more core of Texas energy and infrastructure, one of the things we will need to build infrastructure to build the data centers, to site the data centers in terms of we’re gonna need to build transmission, but not just for data centers.

In fact, we’re still now trying to figure out how much for the 765 transmission lines that we’re gonna build in the state. I saw the Public Utility Commission just the other day approved another line. I think there’s two out of the three paths that are going out to the Permian have been approved, and the other one’s been kinda kicked back for reanalysis.

You just wrote an op-ed piece about transmission 765, like, what are you looking to make?

Michael Webber: The short argument I made is that we’ve expanded the transmission system before. We did it with CREZ, the Competitive Renewable Energy Zone program that was really launched in the 2000s and then came to fruition around 2014 or so.

We expanded the grid. It was good for us in terms of lowering the cost, improving reliability, which is not something people believe easily after Winter Storm Uri, by the way. But it improved reliability, lower costs, and lower emissions. Like, it really helped enable the rise of new power infrastructure that was good for all of us.

We did it before, then we had a slowdown, and I just basically say we should do it again. If we expand the grid, then we will get economic, environmental, and reliability benefits. But what we did with CREZ was primarily 345 kilovolts with some upgrades to the 138-kilovolt system, so we did upgrades on the legacy system, expansion of the newer higher voltage system.

This time we should go even higher voltage, 765 kilovolts, because you get more throughput or more capacity per right of way. And the thing that I’m most sensitive to and that I think a lot of landowners are sensitive to is the rights of way. The corridors where you’re gonna build this, they’re ugly, they’re impactful.

You take a lot of land. You might degrade the views or the vistas in different places. And so the fewer of those corridors we need, the better, and one way to get fewer corridors is with higher voltage. So I basically said, “Look, we’ve done this before. We know how to do it. We had a lot of benefits. Let’s just do it again, but let’s go even higher voltage.”

And then this will facilitate better performance, reliability of the grid, lower cost, more cleanliness. It also lets us inject more wind and solar into the grid, which is something I really like because that will reduce emissions and reduce water use while making more gas available for export, and I think that’s really important from a geopolitical and national security perspective.

But frankly, that’s actually one of the things some people are worried about. They want to burn more gas. They don’t want to use less gas. So this trigger is one of those things like, yeah, people have their preferred fuels and technologies, and I keep thinking our gas is most useful in Europe or China.

It’s not really that useful in Texas, but there are people who really wanna burn it in Texas. That’s maybe an aside, but I feel like expanding the infrastructure is something that’s good for us. We’ve done it before. We’re actually pretty good at it. We shouldn’t be afraid of it. We know what the outcome will be ‘cause we’ve seen this story before, and the sooner the better.

The data centers tie in because they are one of the high-profile sets of customers that really want this, in addition to oil and gas and factories and cities and just people with all our population growth and use of air conditioning and electric vehicles and everything else. So there are a lot of customers who want the bigger, better grid.

The data centers are the most visible ones, and they’re the richest, and so these stories get coupled together in ways that are sort of not obvious to a typical consumer.

Joshua Rhodes: Also really resonate with that argument about, like, having more, not necessarily getting more gas out of the ground, but putting it to better use, right?

It’s like, because we can’t really export wind and solar. Texas is an island of electricity, like we can’t export that really to anyone, anyone else, but you can export molecules. And so if we could have all the electricity that we need here, and also then be able to sell something to someone else who will pay more money for it, it makes a...

I don’t know. I’ve written op-eds on that. I know you’ve written op-eds on that, that it makes a lot of sense, right?

Michael Webber: I think it’s, like, why would we buy and burn gas for $3 in Texas when we can sell it for $8 to $15 to Europe or Japan? It’s like, they’ll pay us so much more. I know there’s transport fees, everything else, but I feel like the story of Texas molecules liberating countries was the story of World War II, where we had the Allies float to victory on Texas oil, and people say, “Let’s burn Hitler and Texas oil,” this kind of thing.

We can do it again by using Texas molecules and gas to liberate Europe from under the thumb of Vladimir Putin and Russian exports, or we can export to Asia to get them out from under the heavy environmental burden of coal. So there’s just, like, such high value from Texas gas. It’s so clean compared to some of those other options.

We’re so secure and safe compared to bad actors out there. And if we have a bigger, better grid, then we’ll have more gas to export, which means we need to improve the export facilities also. That’s the companion piece. You can’t export gas if you don’t have the facilities, but we’re building those. We just need to free up the gas for it, so to speak.

Joshua Rhodes: Yeah, totally. You and I are both on a report looking at the benefits of the 765, or looking at the impacts and the trade-offs, and we, you know, came across that it was, you know, had a lot of benefits to build out the entire, not only the western, but also the eastern, being able to better move that energy around.

It’s like Zephyr CREZ. We built the CREZ to nominally get the wind, and ended up electrifying oil and gas. And so now we’ve got the step or the 765 lines to nominally electrify oil and gas, but it does unlock a lot of resources in parts of the state that are currently, basically have no backbone, have no access, but have some of the best solar resources in the state, and they’re even further, you know, west than our current system, right?

So they’re, like, even better aligned with places like Houston’s peak and other places. So I think, yeah.

Michael Webber: That point’s really subtle but important, which is West Texas solar around El Paso or Pecos County or wherever it is aligns really well with Houston’s peak demand. Whereas solar in Florida does not.

It’s kind of the opposite. You wanna go further west for your solar resources to get better alignment with the peak. And so bigger, better grid lets us do that. And it makes much more sense for Houston to tap into western solar than in location solar. And also with Houston, with the airsheds as filled as they are with refineries and everything else, it’s not great to build natural gas plants locally either, because you don’t want to add even more pollution to a busy or full airshed.

It’s better to push your natural gas further out, which means you need a bigger, better grid. So the bigger, better grid lets us site resources where they are less environmentally damaging or lets us access resources where they are more naturally and abundant and at a more convenient time. So just all of it is good, and kind of no surprise that we found benefits from the transmission.

Most analysts find that if you make a better grid, a bigger, better grid, you get nice results out of that. Same thing’s true for natural gas infrastructure. If you have a bigger, better gas grid with more pipelines and more connectivity, you get more market efficiency. You tend to have less of the price spikes that happen on occasion and less of the glut where you have low prices or negative prices.

A bigger, better gas grid smooths out the volatility, improves the efficiency of the market. A bigger, better power grid does the same. We have gluts of wind and solar with curtailment that lowers the prices falsely, or we have price spikes in some locations where you have a lot of demand, but you can’t get the power to it. So having a better market system is really the result of an improved infrastructure.

Joshua Rhodes: Yeah, speaking of bigger, better grid, gas grids, getting gas to other places or pay more for it anyways, put it to better uses, like, you know, on the other side of the world, there’s also a lot of things going on in terms of like the movement of energy.

Like, you know, Strait of Hormuz has been kind of choke point for a while now. It looks like other straits are getting choked out with, you know, Houthis and stuff and blocking off access to the Red Sea. Can Texas molecules help in this? Are we able to tie anything there?

Michael Webber: It’s hard to sort of talk about. The disruption that’s happening right now is so large and so unprecedented because the Strait of Hormuz is like the worst possible closure you can have in the world because it’s like 20 percent of the world’s flow of oil, but you also have flow of gas, urea, and fertilizers like ammonia, sulfur, and helium.

There’s like so many things that come through that strait that affect certainly energy prices, but also food security, the ability to manufacture semiconductor chips, the ability to extract copper out of mines in Africa, like you name it. There’s so many things affected by that closure. Oil had some other routes they could use with the East-West pipeline, for example, through Saudi Arabia or the pipeline to bypass the strait through UAE, the United Arab Emirates.

But those pipelines are under attack, as you mentioned, or other choke points are getting attacked. So this looks like it’s going to be sustained. It doesn’t look like the negotiations are making progress between Iran and the rest of the world, so prices might be high for a while. The buffers that we had, strategic reserves at different countries, commercial reserves, the ability to change patterns with refining or switch to electric vehicles.

A lot of things happen to reduce demand and tap into those reserves, but those reserves are often hitting their bottoms now. Like they’re running out of additional capacity. That’s especially true in the United States. The other routes are getting attacked, and it seems like now we’re starting to see a lot higher prices.

Prices have gone up tens of cents per gallon for gasoline in the last few days alone, gone up like 5 to 15 cents per day. Like this is pretty dramatic for gasoline, even more for diesel. So th-this is very consequential for the world. The buffers in the system that we’ve had for the last six months have been very helpful.

Those buffers are running out of their capacity to be useful, so that’s a challenge. What does that mean for Texas? Well, Texas, as a major molecule producer, will feel this less than others, but we’ll probably make more money. There are a lot of oil and gas extraction companies that are making plenty of money because prices are higher.

Refineries are especially making money. The crack spread is like $100 a barrel. The crack spread is the difference between what you pay for the crude, say $100 a barrel today, and what you sell the refined products at. Diesel’s selling for $200 a barrel. So $100 per barrel profit on the diesel, but also other products and distillates is really across.

So this is a big moneymaker for parts of the Texas economy. The parts of the economy that depend on those outputs, say farms that use diesel or semiconductor manufacturing that needs helium, will see a lot of inflation in prices, but this will be bad for Texas. All in all, we’re still a major producer and exporter of molecules, so we’ll be okay in Texas.

I’m more worried about like Bangladesh and Pakistan, India, places where people will starve because they can’t get the fertilizer, and that might be millions or tens of millions of people. But Texas will be okay. This is one of the advantages of Texas having electrons and molecules, is that we can adjust our behaviors to match what the markets are making available to us.

Joshua Rhodes: Yeah, totally. I mean, one of the things I was, even kind of the beginning of some of these conflicts, was kind of talking was like, “Well, are you tired of the price of, you know, gasoline going up? Get an electric vehicle.”

Michael Webber: I mean, my prices for my transportation have not gone up in my electric vehicle, right? I got solar panels on my roof and my electric car, and that’s a very privileged situation, but that is no longer the, be the privileged situation. It’s gonna be the smart situation.

Joshua Rhodes: Yeah.

Michael Webber: And that’s the normal situation in Norway and China and other places that have electrified transportation specifically to get away from this price exposure to the volatility. So some of us in the United States, we’re a laggard compared to everywhere else in the world because we don’t have access to the cheaper EVs, or we don’t have the high prices for gasoline the way other countries do, or at least not quite as high.

So yeah, EVs are a great solution. Electrification in general of industrial processes will be one solution as well.

Joshua Rhodes: Yeah, totally. We’re heading into a political season. Feels like in the US we’re always in a political season. Yeah, I was like—

Michael Webber: Do we ever? Yeah, it’s like, it’s like when does the political season end? ‘Cause that’d be awesome if we had that.

Joshua Rhodes: Seriously, a break would be great. But it feels like there’s two... That energy is like front and center in political races, like all across. And we’ve seen this in other regions. I think, you know, Georgia flipped a public service commissioner seat from, you know, Republican to Democrat, a long-serving commissioner there.

But now there’s all this pushback against like data centers, infrastructure, people worried about electricity prices. I think diesel’s on average $6 a gallon. Used to $200 a barrel, $6 a gallon for like the first time, I think ever. And just it feels like there’s two big pieces of energy, like the two big ways that people consume energy, you know, electricity, you know, and transportation fuels, like are both kind of front and center in ways where we were both of them being at the same time, although maybe you can correct me if I’m wrong. But like how do you see this going into November?

Michael Webber: I think there will be political upheaval that happens November. It’s already happened. You mentioned the public service commissioner in Georgia. I mean, you and I follow those things closely because we’re energy nerds, so most people aren’t paying that close attention to who their public utility commissioner or public service commissioners are.

The fact that people were so mad they threw out a long-serving incumbent is a sign that people are frustrated. It’s mostly around the discussion of affordability. President Trump in 2024 ran and won on a platform of affordability. A lot of frustration with the Biden administration around inflation, for example.

So talking about and running on affordability helped his electoral chances, and I would say is a major explanation for why he won. It’s a major vulnerability for him now because everything’s gotten more expensive, so that’s a challenge. And so you’re seeing James Talarico running for Senate in Texas or Gina Hinojosa running for governor of Texas talk about affordability.

And so affordability is a political issue for sure. The incumbents are different, so the affordability story will play out differently now than in 2024 ‘cause now Trump’s not the insurgent, he’s the incumbent. Governor Abbott is the incumbent, has to defend his record on affordability. And the affordability shows up for the power sectors, the molecule sectors a little bit differently.

For the power sector, it’s been a slow-moving crisis where prices have been going up every year, mostly because of additional expenses at the distribution level. Distribution level being the wires and poles in your neighborhood or your homes. They’re expanding or replacing or updating transformers to accommodate new loads like electric heating or electric vehicles, accommodating solar panels, and that’ll drive up distribution costs, but especially wildfire costs, extreme weather costs have driven up distribution.

So higher costs for electricity has been a creeping story for a couple years now. And then you add in the sudden price spikes in gasoline and diesel. So oil and gas and diesel prices move much more quickly. You can see it every day as you drive by a gasoline station. The prices are very visible. They’re very large numbers and pronounced by, “Here’s our price today,” and you can remember what it was last week or a few weeks ago.

So the movement is much faster, much more obvious and visible. The movement in electricity bills is on a monthly rate with the bills. It kind of creeps up bit by bit, but a slow-moving crisis. So you combine the slow-moving affordability crisis of increasing distribution costs and electric bills, the very obvious and visible price spikes for especially diesel, but also gasoline in a visible way, and it’s all converging together.

And when that happens, people get frustrated and scared and angry, and it tends to translate into an anti-incumbent mood. We’ll see how it goes in November, what the outcomes are, but people look upset. And the way the political candidates are talking about it means that they see it’s something that people are concerned about, and so they’re talking about it. And especially the challengers are talking about it.

Joshua Rhodes: Yeah. What do you think on the energy front is a winning stump speech? Like, what does that look like?

Michael Webber: I’m pretty bad at politics, so I don’t know, but I just feel like there is room for a can-do attitude and optimism like, “Hey, we hear you. Affordability is a big issue.

Here’s how we’re gonna tackle it. We’re gonna tackle it by making the system bigger and better and cheaper by making it more reliable, ‘cause one thing that’s really expensive is outages. We’re gonna make sure the cheapest resources have a way to connect online. We’re gonna make sure that new customers, these gigafactories or data centers, pay their fair share and maybe even help subsidize the system to lower the cost.”

There’s a variety of ways to go about it, but I would say affordability can be solved, but the way to solve it is not to quit building stuff, actually. And this is counterintuitive because building things sounds expensive. Building transmission lines costs tens of billions of dollars. Building data centers costs tens of billions of dollars.

It all sounds expensive, but actually, if we build and operate it the right way, it will lower the cost for everybody. So I think there’s a story that if we work together to build it all and expand the system, it will actually lead to better outcomes and lower prices for everybody, ‘cause then you don’t have scarcity.

If you have abundance, prices go down. If you have scarcity, prices go up. And we’re in this kind of scarce moment, and I think we need to address that, and the way to deal with scarcity is expand the system. I’m actually kind of excited about the convergence of data centers and transmission because the data centers might pay to help us get through the scarcity.

We think of them as a cause of scarcity because they will demand so much power, but if they invest in expanding the system, they can help be a pathway to abundance. Let’s make sure they’re a pathway to abundance and not a pathway to scarcity. And I think that’s a challenge. People feel like power is scarce ‘cause we haven’t had to expand it very quickly in a long time.

Let’s do that. For the price spikes, volatility of oil and gas, the thing I’ve been saying for a long time is what you said earlier is like, well, let’s make sure you have options, that you have the option to have an electric vehicle or to work from home or to use mass transit or to have a walkable city.

There’s a lot of ways to deal with the exposure to the price spikes of gasoline, for example, for commuters, or the price spikes to diesel for an industry as a whole and logistics. That is harder, but we can think about more efficiency of the diesel trucks or electric long-haul heavy-duty trucking. There are other things we could do, and we’ll probably have to do all of it.

There’s gonna be no one solution. We’ll have to do every single solution we can. We’ll have to implement them all together.

Joshua Rhodes: When you bring up the concept of scarcity when it comes to electricity, can you unpack that a little bit? Like, what are some of the time those scarcity but help us get it to a time of abundance? What are you meaning there?

Michael Webber: So one of the challenges with electricity is that overall consumption in the United States hasn’t grown for about 20 years, and now it’s growing rapidly. And if we cannot expand the system as a whole to meet that growth, then we’ll have scarcity, which is we have more demand than supply, and if you have more demand than supply, then prices should spike.

We already have that a few hours of a few days of the year when it’s really hot outside and the air conditioning’s going, and we don’t have as much supply maybe, and so we might have scarcity then that may lead to price spikes. But if we expand the system really quickly, and we have abundant energy, and then actually prices should go down because then we have plenty of excess and plenty of spare reserves and everything else.

So part of it is the rate at which we expand. Part of it is the time and location. The scarcity only happens some times during the year. Most of the year we have abundance, so we have to think about what resources we build that are available at the times we need them, and with the summer cooling season with air conditioning, that tends to be solar.

With the winter heating season, that might be wind or some other option. We gotta think about what we’re building for which region based on what time of day we have scarcity or abundance. But there’s also the location of scarcity or abundance. We have parts of Texas where we have so much wind and solar that they get curtailed even though we might need the power in Houston.

And so there’s a location where we have abundance here, but scarcity there, or there’s constant negative prices in West Texas, but high prices in Houston. Well, that’s where the transmission comes in handy. We can mash the places of scarcity abundance together across great geographies, and then if we have energy storage or flexible workloads, we can match the time to scarcity abundance by time of day.

And so if we can bridge the gaps in scarcity abundance by time and location, that will be the great system. And that’s kind of what we’re moving toward. We’re building more storage, we’re building flexible loads, we’re building some transmission, but we kinda need to do all of it. And I think right now we’re acting as if there’s a scarcity mindset, like there’s not enough to go around.

I’m like, “No, no. Seek abundance mindset. Let’s expand and build and operate better.” We’ve had that mindset before. We had that mindset with rural broadband in the 2000s. In the Bush administration, we expanded rural broadband and fiber optics. We did that with highways in the ‘50s. We did it with canals and railroads in the 1800s.

We’ve had abundance mindset before, and I think it’d be good for us to have that mindset again.

Joshua Rhodes: I definitely agree. Looking at the grid this past summer, the grid, it grew for actually for the first time in a couple years, but it seems like there wasn’t that much drama around it.

Michael Webber: I mean, the best grid is a drama-free grid, right? You actually don’t wanna think about the grid. Yes, when you’re thinking about it, it’s because something went wrong or prices are high or failed and people are dying, so it’s nice to have a drama-free grid. And the primary reason is because we’ve been able to expand the number of power plants on the grid, which is great, primarily solar, but also some additional capacity support for batteries and then wind and gas.

And that’s a good news story that we’ve been building faster than demand has grown, and therefore hasn’t been a problem for the most part.

Joshua Rhodes: Absolutely. Okay, when I have you back on six months from now, what’s gonna be the big Texas energy story that we’re gonna be talking about?

Michael Webber: I think we’ll talk politics again because by then, the outcome of the elections this November will be known, and new officers’ position will be in place, or the same officers’ position will be in place.

Although there are some incumbents that are have retired, so we’ll at least have some change. But either the story will be the political leadership’s the same, and what does that mean? Or the political leadership is different, and what does that mean? So we’ll be talking about the new leadership at the state and federal level because I think that will be consequential no matter which way it goes.

I think we’ll talk about, in six months, a little bit of the winter heating season as we have the rise of solar, which is an excellent performer in the summer. We’ll wanna see how that performs if we have a winter cold snap. And El Niño and weather patterns will affect whether that’s a cold snap we need to worry about or not.

There’s gonna be a lot of growth in data centers by then that have broken ground will be connected to the grid. We might have a few data points, additional data points on whether those data centers are good or bad for grid performance and everything else. So I think we’ll talk with more data with a different season, a different political season for sure, and we’ll talk more about all those things and how they might affect Texas.

By then, we might have broken ground on some transmission as well. Like, with these approvals happening now, we might have shovels in the dirt for a few places by, say, March. So I think that’ll be pretty interesting. There’s always something we don’t expect. I don’t think you and I expected six months ago the change in attitudes around data centers.

So what will be the change in attitudes by six months from now? I guess that’s hard to predict as well. Maybe we’ll have a massive geothermal renaissance or nuclear renaissance. We’ll see. We’ll have plenty to talk about, that’s for sure.

Joshua Rhodes: Yeah, if they’re breaking ground on the lines, I wonder if, like on the, some of these by helicopter again.

Did you ever see that? Do you ever see them, like, stringing the CREZ lines by a helicopter?

Michael Webber: I did. I drove in West Texas once when they were stringing the lines by helicopter. This was not 2014 when they were doing the massive build out. It was a little later. I’ve seen that. They’ve also— I didn’t see this, but they had done hot live reconductoring, where you actually don’t de-energize the transmission and you lay new conductors.

And so they workers have to wear special Faraday suits to make sure they don’t get electrocuted. So some of those different approaches accelerate the development of the transmission lines. The hard part’s the permitting and approvals. But then once you’re going, it’s just a matter of years, really, a couple years to get things built. So we should see progress month by month, which will be kind of exciting.

Joshua Rhodes: Yeah. I remember seeing it. It was, like, in 2012 during the CREZ lines when they’d hook up a line to a helicopter, and the helicopter would almost turn, like, sideways and just, like, pull the cable or at least the leader line to, like, the next tower that they were, like, pulling through.

It was insane to watch. So if we’re gonna string long, long lines again, I imagine we’ll see some more of that, yeah.

Michael Webber: Incredible. Super skilled pilots, a lot better than doing a bunch of ladder trucks, especially as the pylons get so tall. So helicopter’s really, really specialized, really high risk, but really expedites the whole process.

So that’s one thing when I talk to, like, high schoolers and others, like, the energy industry needs everybody. You wanna be a pilot? The energy industry needs you. You wanna be an artist? Well, we need you as well. You wanna be an engineer? Okay, there’s places for engineers. But helicopter pilot is one of the places that’s a growing industry for the power sector.

Joshua Rhodes: Michael Webber, thank you for coming back on the Energy Capital Podcast.

Michael Webber: Thank you for having me.

Rayburn Electric Cooperative broke ground in June on a 570 MW gas plant in Sherman, backed by a $411 million Texas Energy Fund loan at 3 percent, the fund’s seventh generation loan and first to a cooperative.

Rayburn is also putting batteries in members’ houses. Both run on the same logic: Rayburn generates the power and owns the transmission, so it earns on both. An independent power producer earns on energy alone.

On this week’s Energy Capital Podcast, Matt Boms talks with Christian Nagel, senior director of power supply and production at Rayburn.

* Home batteries as a transmission asset. Texas allocates transmission costs on four summer peaks, so discharging batteries then cuts Rayburn’s bill, worth more, Nagel says, than the energy.

* Telling real load from speculative. Rayburn screened data centers with its own questionnaire before ERCOT standardized one. Abbott’s audit has since pushed ERCOT’s Batch Zero study past April 2027.

* Plus: the 12CP fight and what comes after gas.

Whether Rayburn is a model or a special case turns on rules the PUCT has not written.

Chapters

00:00 – Introduction

01:36 – Wind development and the landowner conversation

06:02 – The video that went viral

08:17 – Using your service to open doors

10:23 – The Atlantic Council years

12:19 – Her graduate research on energy and national security

14:44 – From Annapolis to flying Growlers

19:54 – Grounded, and the move to cryptologic warfare

23:59 – Why veterans run down their own service

30:08 – Advice for veterans trying to get into energy

32:56 – How to plug into Project Vanguard

34:49 – Closing thoughts

Last month the Public Utility Commission of Texas held public hearings on plans to build giant 765 kilovolt transmission lines. The controversial plan drew complaints from influential voices, including Senate Business and Commerce Chairman Charles Schwertner, who asked commissioners to deny the pending applications for the lines in a letter. Cyrus Reed sat through the roughly 15 hours of testimony, and we recorded with him the morning Schwertner’s thoughts came out.

On this week’s Energy Capital Podcast, Joshua Rhodes talks with 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.

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

Wind, solar, and storage are the only new categories of generation to reach the US power system at scale in fifty years. Craig Gordon thinks his company is adding one. Mainspring Energy’s linear generator drives magnets through copper coils rather than burning fuel in a flame, switches between natural gas, biogas, propane, and hydrogen under load, and ramps from minimum to full output in 25 seconds.

The same modular unit 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 NOx rather than carbon, and the carbon case rests on burning less fuel per megawatt hour than the engines and turbines it displaces.

In ERCOT it arrives at a useful moment. Large load requests run into the hundreds of gigawatts, most of them data centers, against a small fraction approved to energize. The Batch Zero process approved in June will sort which projects get firm grid capacity, and generation on a customer’s own site never enters it. Gordon does not treat that as a substitute for building the grid, and 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 MW 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 and hydrogen far off at current production costs.

* Running alongside solar and batteries, covering the hours renewables do not, and how it compares with engines, turbines, and fuel cells.

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

Chapters:

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

About 6 million electric vehicles are on American roads, and roughly 1 million of them can already export power back to the grid. A typical one sits parked about 95 percent of the day, plugged in for 12 to 14 hours while needing 2 to 3 hours of charge. Texas still meets most of that capacity as load.

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.

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.

Chapters

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

Cattle prices swing, goat prices swing, and the drought comes whether or not the ranch can afford it. For a fifth-generation West Texas operation, the search for income that holds steady through all of it comes from an unexpected source: the wind.

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.

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

Some of the largest electricity buyers in the world have a message for Texas: charge us. The Texas Energy Buyers Alliance was the first organization to propose that large loads pay transmission charges tied to their approved capacity. The idea is to protect other customers as the grid builds out.

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.

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.

Chapters:

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

Texas built a competitive retail electricity market: consumers choose among roughly a hundred providers, and generators build power plants at their own risk with no guaranteed return. Transmission, the high-voltage lines that move power from where it is made to where it is used, runs on a different model. One utility builds each line and recovers every cost from ratepayers, plus a return, on time and on budget or not, and faces no competition.

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

On this week’s Energy Capital Podcast, Joshua Rhodes talks with Barry Smitherman, the only person to have chaired both the Public Utility Commission 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. He sat on both commissions during the CREZ buildout, Texas’s early-2000s program that moved West Texas wind to market, and saw competitive transmission work firsthand.

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

Batch zero stops being theoretical on July 11. That is the day ERCOT’s rule for connecting large new customers takes effect. The new policy replaces a process that involved studying each giant load independently, then ordering restudies when new giant loads joined the queue, leaving projects stuck in a serial loop. Two prior episodes of this show traced how the new rule was designed. This one asks the people who connect the load what to fix before the next round.

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.

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.