Texas Legislative session came close to solving the Grid issues

[[{“value”:”

ENB Pub Note: This is another article from Doug Sheridan on LinkedIn, and he raises some excellent points. The Texas legislature did address some grid issues for Texas data centers and would likely want the U.S. Congress to eliminate subsidies for “renewable” wind and solar energy. However, it fell short in adding grid resilience to the ERCOT system.

Is Oil & Gas Right for Your Portfolio?

Source: Doug Sheridan, LinkedIn

The 2025 Texas Legislative session has come and gone, and for the most part legislators continued their hands-off approach concerning the takeover of the state’s grid by subsidized renewables. We can think of three reasons why.

First, state legislators simply don’t believe there’s risk in continuing the years-long transformation of the state’s grid from one driven by affordable, reliable 24/7-capable generation to one dominated by subsidized part-time renewables.

Second, the US Congress may soon pass legislation that cuts the subsidies that drive wind and solar development. No doubt some Texas lawmakers would prefer Congress play the bad guy that ends the renewables party—including the massive wealth transfers conferred to their political donors. That way they can claim to be blameless for the withdrawal pains.

Third is the belief Senate Bill 6 (SB6), a new law passed and signed by Gov Abbott this legislative session will, among other things, force deep-pocketed data centers and other “large loads” on Ercot to underwrite the generation the grid needs. The bill effectively allows ERCOT to drop large loads (currently defined as 75 MW or more) should conditions on the system get too tight.

The net effect of SB6 is that new large loads, including new data centers—and possibly existing ones—will now automatically be “interruptible” on Ercot. These same customers must also demonstrate that they have sufficient behind-the-meter (BTM) backup generation (ie, generation that lacks the ability to export power to the grid) capable of servicing at least half of their site’s load.

The upshot is that, going forward, these deep-pocketed large load customers will build and pay for sufficient BTM generation, presumably gas-fired, to ensure they have the power they need during system tightness. This capacity will in effect be the extra backup generation needed for new large loads on the grid… that Texas ratepayers will not be on the hook for.

It’s not clear to us that large load customers will or should tolerate the terms imposed by SB6—which essentially grants ERCOT a non-negotiable swing option at their expense. If they don’t, the law will deny the state the significant investment and tax base that comes with such facilities… in exchange for avoiding a scenario in which such loads might force increased blackouts or higher rates (or both) on the system.

Alternatively, if large load customers don’t run from the state, SB6 appears to represent a way for Texas to enjoy the economic benefits that come with AI and data-center siting, without having to take on the extra cost and risks associated with their energy-intensive operations.

Some say SB6 will be a model for other RTO’s. It does limit the pain data-center growth might otherwise cause on grids overrun with part-time renewables. But the bill does little to directly encourage new on-system gas-fired generation the Texas grid so badly needs to service it’s everyday customers.

What this means for Texans, Investors, Bitcoin Miners, and Oil and Gas companies

• Higher Electricity Costs: SB 6 aims to stabilize the ERCOT grid by requiring large flexible loads (LFLs), like data centers and crypto mines, to be interruptible during emergencies, potentially reducing grid strain. However, the costs of demand response programs and transmission infrastructure upgrades are often passed to consumers, potentially increasing electricity bills. For example, crypto miners have earned millions through demand response, with costs borne by ratepayers.
• Grid Reliability Concerns: While SB 6 enhances ERCOT’s ability to manage large loads, the projected doubling of power demand by 2030 (from 85 GW to 150 GW) raises concerns about grid reliability, especially if new infrastructure lags. Texans may face higher risks of outages during extreme weather unless microgrids and backup generation are widely adopted.
• Community Impacts: Residents near crypto mines, such as in Granbury, report noise pollution and quality-of-life issues, which may persist as miners invest in on-site power solutions. SB 6’s transparency requirements could help communities anticipate new facilities, but local opposition may grow.

• Data Center and Microgrid Opportunities: SB 6’s interruptible power mandate for large loads interconnected after December 31, 2025, pushes data centers and crypto mines to invest in private microgrids and on-site generation. This creates opportunities for investors in microgrid technologies, renewable energy (e.g., solar, wind), and battery storage. Companies like Schneider Electric, partnering with crypto miners for behind-the-meter wind generation, exemplify this trend.
• Transmission Infrastructure: The bill’s focus on fair cost allocation for transmission upgrades signals increased investment in high-voltage lines, particularly in the Permian Basin, where crypto and oil/gas electrification drive demand. Public-private partnerships and special tariffs for large consumers could attract private capital.
• Risks and Rewards: Investors face risks from regulatory uncertainty (e.g., unclear backup generation rules in SB 6) and Bitcoin’s volatility, which affects mining profitability. However, Texas’s business-friendly environment and federal crypto support under the Trump administration could boost long-term returns.

• Increased Costs for Microgrids: SB 6 requires crypto mines with loads over 75 MW to be interruptible, forcing them to invest in private microgrids or backup generation (capable of serving at least 50% of on-site demand) to ensure uptime during ERCOT curtailments. This raises capital and operational costs, potentially squeezing smaller miners. For example, a 1 MW crypto mine consumes more energy than 700 homes daily, making self-sufficiency expensive.
• Demand Response Changes: Miners have profited significantly from ERCOT’s demand response programs, earning millions by shutting down during peak demand (e.g., Riot Platforms made $24.2 million reselling power in August 2023). SB 6’s oversight of behind-the-meter agreements and cost allocation reforms may reduce these profits, though miners like Cormint support the bill for grid stability.
• Permian Basin Shift: Many miners are moving to the Permian Basin to access cheap, stranded natural gas, reducing reliance on ERCOT. However, SB 6’s disclosure requirements for interconnection requests and on-site generation could complicate expansion plans, especially with competition from oil and gas electrification.

• Increased Natural Gas Demand: The shift to private microgrids and backup generation for data centers and crypto mines boosts natural gas demand, as it remains ERCOT’s primary fuel (45% of generation in 2023). The EIA forecasts an 8% increase in natural gas-fired generation in high-growth scenarios, driven by large loads. Oil and gas companies can capitalize by supplying gas to on-site power plants.
• Electrification Synergies: Oil and gas operations, particularly in the Permian Basin, are electrifying to meet ESG goals, competing with crypto miners for power. SB 6’s exemption of critical natural gas facilities from curtailment ensures reliability, giving these companies an edge. Firms like 360 Mining integrate gas production with Bitcoin mining, using on-site wells to power operations.
• Infrastructure Investments: The Texas Energy Fund’s $5.38 billion in loans for gas-fired plants supports new capacity, benefiting oil and gas companies through contracts for fuel supply. Additionally, surplus gas from oil production can be repurposed for crypto mining, reducing flaring and emissions while generating revenue.

• ERCOT and Grid Management: SB 6 enhances ERCOT’s authority to curtail large loads during emergencies and requires detailed load projections, improving planning. However, the grid’s ability to handle 43,600 MW of new LFL demand by 2027 remains uncertain without significant transmission upgrades.
• Environmental Concerns: Increased natural gas use for microgrids and backup power raises carbon emissions, with projects like Constellation’s Wolf Hollow II plant adding 796,000 tons of CO2 annually. This clashes with climate goals, drawing scrutiny from activists.
• Economic Growth vs. Stability: Texas’s economic boom, driven by data centers and crypto, creates jobs and tax revenue but strains resources. SB 6 aims to balance growth with grid reliability, but its success depends on effective implementation and infrastructure investment.

The post Texas Legislative session came close to solving the Grid issues appeared first on Energy News Beat.

“}]]