Texas Grid Collision: ERCOT’s Batch Zero & Governor Abbott's Data Center Audit

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Okay, we're going back to Texas this week because of three major developments.
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First, on July 29th, ERCOT, the Electrical Liability Council of Texas, CEO, Pablo Vegas had presented the first update on ERCOT's batch zero process to the Senate Committee on Business and Commerce.
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That batch zero process requires large loads, mostly data centers, the applicants to clear several hurdles on the road to interconnection to the transmission system.
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You may remember we covered the batch zero concept last month, discussing how the grid operator was planning to study large load applicants, those with demand in excess of 75 megawatts, in separate batches based upon their location and implications for the transmission system.
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Batch zero requires large load interconnection applicants to come to the game with demonstrated control of sites, proven financial wherewithal, payment of$50,000 per megawatt of load, and an initial qualifying study that would allow them to even proceed in the batch zero process.
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The initial qualifying deadline to proceed was July 10th.
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Spoiler, not much clarity was achieved in terms of the big picture.
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Yeah, half the loads got chunked, but what remains is still so big as to remain fanciful.
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It's still well over twice Urcott's most recent system peak demand.
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We'll dig into that in just a bit.
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The second thing that happened was Texas Governor Greg Abbott, looking at this massive wave of new potential large and mostly data loads in Texas, said, slow down, we need to sort this out.
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And he sent a letter to URCOT and the Public Utility Commission directing them to audit all prospective data centers for implications related to water and power use, as well as any received tax benefits.
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Of course, this Governor Abbott directive ran like a torpedo directly into the side of Urcott's just started batch zero process.
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So, third, after receiving the directive, Urcott requested the Public Utility Commission to grant them a good cause exception to slow down the batch zero process until it addressed Abbott's mandate.
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Though Urcott II asked for some exceptions.
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Got it?
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Yeah, this stuff is moving really fast and it's pretty complex.
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But it's great for lawyers, though.
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So let's start with the presentation on the first stage related to batch zero following the July 10th submission deadline.
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The presentation did tell us a few things.
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First, the initial number was 500 gigawatts.
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So even beyond Abbott's letter discussing 474 gigawatts, that's because that came from an earlier snapshot and another 26 gigawatts requested interconnection in the interim.
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Second, of that, 294 gigawatts was no longer in play.
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They didn't supply the required information, and that's a good thing.
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But it still doesn't get us out of stupid land in terms of the huge and unrealistic numbers.
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It gets the number down to about 205 gigawatts as quote, eligible for inclusion in batch zero.
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Then it gets interesting, to me at least.
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Of that total, 114 gigawatts, 127 projects, have existing studies that qualify them for the batch zero process's allocated load.
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The next 25 gigawatts, 49 projects, have existing studies qualifying them for batch zero, and they also submitted dynamic model data.
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They were to have been reviewed by ERCOT with a determination by August 7th as to whether they are qualifying for base or allocated load.
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ERCOT's document on the process creates a distinction between these base and allocated loads.
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Base have already been validated with predetermined capacity requirements, while allocated load has no such entitlement.
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That load will be allocated capacity based upon available transmission.
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In the final grouping of 65 gigawatts, 150 projects have those studies, and they're now capable of being included as baseloads.
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Rucot was planning to make its final determination as to who's in and who's out of batch zero and allocated versus base and communicate that by September 2nd, or at least that was the plan prior to Governor Abbott's letter.
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That August 3rd missive comments at the outset that the governor's office's priority is to protect Texans' safety and quality of life, to wit, quote, that includes providing affordable energy, maintaining a reliable electric grid, preserving water for our communities, and championing Texas values, unquote.
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The letter also notes that ERCOT was looking at over 474 gigs of interconnection requests, over five times the state's record peak demand, with 90% of that coming from data centers.
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I'll help further put that number in perspective.
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The U.S.
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peak demand day last year across the country was 759 gigawatts on July 9th.
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So yeah, 474 gigawatts is big, was big.
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That unprecedented low growth, Abbott stated, quote, could endanger the reliability and stability of the Texas electric grid, unquote.
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Even the 205 gigawatts still being considered in BAT Zero could do the same thing.
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It doesn't really matter whether the gorilla that jumps into your canoe weighs a thousand pounds or a ton.
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Either one's going to sink your vessel.
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The short-term solution, as Abbott sees it, is to have both entities, the PUC and ERCOT, conduct a comprehensive verification and audit, measuring water and power usage of all data centers advancing through the interconnection process before any additional data centers are approved to connect to the grid.
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Other localized impacts, as well as tax-related implications, will also be considered.
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Not to get all red and blue here, but until now, this type of response, such as New York's one-year moratorium on data centers, has typically been a blue-state thing and criticized as such.
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However, a recent survey shows that opposition to data centers has grown considerably on both sides of the aisle over just the past six months.
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So perhaps this level of caution will continue to evolve as an increasingly bipartisan response.
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Given the massive size and speed associated with this explosion of new large load demand, doing nothing was a pretty poor option.
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But now the question arises, what does this mean in practice?
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What will be included in these audits?
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Who will undertake them?
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How long will the process take for each applicant?
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How does one get into the queue for this undertaking ahead of others?
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And what are the implications for not passing and what are the remedies for failure?
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The dust wasn't even close to settling on this Abbott letter before some analysts were already weighing in.
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Bloomberg New Energy Finance, for example, estimated that this move puts approximately 20% of data centers in the U.S.
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pipeline at risk, especially if the audit process takes long enough to bleed into the upcoming convening of the 2027 Texas legislative session.
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Texas ledge has shown itself to be both very interested and very active in electricity-related issues.
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So there's a lot to watch here as this unfolds in the future.
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Then in response to Abbott's letter came ERCOT's August 10th good cause exception request for relief to the Public Utility Commission.
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It notes that the studies will require time to complete, saying it couldn't complete the new level of classifications, the base versus allocated, as a consequence of the Abbott missive.
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The grid operator now plans to provide an update for its response at the upcoming August 20th open meeting, but it also wants an exception to continue processing 23 large loads, the megawatt amounts weren't specified, that interconnecting distribution and transmission service providers requested to be classified as base load and that ERCOT determined eligible to qualify as base load, but hasn't yet formally classified.
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That basically holds their place in line while the audit process plays out.
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So there's a lot of cards up in the air right now, a lot of uncertainty around process and timeline.
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And that clarification should emerge over the next couple months, but I wouldn't hold one's breath for any clarity in the short term.
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Well, thank you for watching, and we'll see you again soon.