ERCOT’s risk of blackouts comes down to two basic factors: supply and demand. 

On the former, markets and policies are making progress — investors are developing solar power and dispatchable energy storage in ERCOT at a record rate. Texas is expected to get another six gigawatts of battery storage in 2024 alone. Solar is being deployed even faster, with seven gigawatts expected this year, padding the state’s resources when use peaks during summer afternoons. And there are currently over 15 gigawatts of natural gas in the ERCOT interconnection queue.

But skyrocketing demand could overwhelm all of that new supply, and then some…

Today, the American Council for an Energy Efficient Economy released an astounding report showing that Texas could slash electricity demand by more than 16,000 megawatts in winter through the widespread use of efficient heat pumps, smart thermostats, and demand response programs aimed at electric vehicles.

That’s more than 80% of the missing megawatts during Uri; ERCOT demand was about 20,000 megawatts more than available supply.

It’s also about 20% of the peak demand that the PUC and ERCOT leaders fretted over last week and 50% more capacity than the infamous Berkshire Hathaway spending binge would create.

The cost savings are about as dramatic. The Berkshire Hathaway plan is now projected to cost $18 billion; to reduce the same amount of power, if utilities and policymakers focused on three highly cost effective offerings (heat pumps, thermostats, and EV demand response), runs about $100 million per year .

Another comparison: the Lieutenant Governor’s newest proposal for zero-interest loans and “completion bonuses” for gas plants is estimated to cost Texans about $1 billion for every gigawatt of electricity that’s added to the grid. The ACEEE study shows that Texas could cut a gigawatt of demand for about $42 million or less than1/20th of that cost — 95% less…

The Public Utility Commission of Texas clearly wants your electricity prices to be higher. They have endorsed a certainly expensive but otherwise uncertain and completely untested market design. The PUCT believes the amount will “only” be $460 million per year.

A new study from Aurora Energy Research presented at last week’s ERCOT Market Summit, called that number into doubt; they modeled the shiftily named Performance Credit Mechanism (or PCM, as in, “Pretty (much a) Capacity Market”).

Aurora estimated that the PCM would cost Texans an additional $2 - $3 billion per year — money paid entirely through electric bills for homes and businesses. That’s a net increase in costs, after subtracting out cost reductions in the energy market (the small gray bar in the slide below).

That amounts to roughly a 15% increase in energy costs.