89th Texas Legislature: Reduce Electricity Demand and Lower Costs
By Adrian Shelley
The latest session of the Texas Legislature began in January. A few weeks later, with most of the ceremonial and housekeeping activities behind us, legislation can start moving toward failure or the governor’s signature.
As in past sessions, and with the state’s population growth continuing, our priority remains ensuring that Texas is powered with clean, affordable, reliable energy.
Strategies for a Healthier Grid
Since Winter Storm Uri in February 2021, Texans have called on their leaders to fix our shaky grid. Some grid advocates might mention an “all of the above” energy strategy. Usually, this refers to an “all of the above” generation strategy, which means investing in wind, solar, and storage while keeping existing coal and natural gas plants online.
The demand-side strategy—reducing energy use to bring energy supply closer to available energy demand—is often absent from the conversation. Amazingly, the state legislature has not seriously considered this strategy in the two sessions since Uri. Hopefully, this session will be different.
Demand-side strategies make sense because they are cheaper, quicker to deploy, and provide additional benefits to electricity consumers. According to a report by the American Council for an Energy-Efficient Economy published just months after Uri, Texas could spend $4.9 billion over five years on demand-side strategies to achieve:
- 11,400 MW of winter peak load reduction,
- 7,650 MW of summer peak load reduction, and
- 9 million households worth of energy efficiency and demand response upgrades.
Once this investment is made, it will save customers money and provide benefits to our grid for 10-20 years.
So why hasn’t the Texas legislature pursued this strategy? It’s not because of cost. Compare this investment to the Texas Energy Fund, for which the first $5 billion has been committed to purchasing just under 8,500 MW of new gas generation, none of which is even close to coming online. It seems clear that investing in energy efficiency in our homes would provide more energy savings than the TEF can provide in new generation, at least during winter peaks when we need it most.
One explanation might be that our leaders’ top priority isn’t securing the grid. It’s selling electricity. When you consider how dominant fossil fuel companies are in political spending in Texas, it’s not hard to imagine that lawmakers would put the interest of generation companies over that of everyday Texans.
Whatever the case, energy efficiency investment is still a winning strategy for Texas. We hope bills by state Sen. Sarah Echkahrdt and state Rep. Rafael Anchia will finally provide the energy savings goals that Texans deserve.
Transmission Cost Allocation
Staying on the demand side of the equation, Texas has work to do to account for the massive projection in load growth on the Texas grid over the next five years. Some projections suggest we could have 150 gigawatts of peak electricity demand by 2030, a huge increase over our current peak of 85 GW. This massive demand projection led Lt. Gov. Dan Patrick to declare that “it can’t be the Wild Wild West of data centers and crypto miners crashing our grid and turning the lights off.”
Lt. Gov. Patrick is right to focus on data centers and crypto mines. Some estimates suggest we could see 40 additional GW of crypto alone (see this report by NERC at p. 37). This new demand would lead to necessary investments in transmission and distribution–the “poles and wires” that bring electricity from where it is generated to where it is needed.
Some of the cost estimates for needed transmission investments are staggering. In San Antonio, CPS Energy estimated it would need to spend $1.3 billion to build new transmission lines to accommodate 1 gigawatt of additional demand from new data centers. In another recent example, The Rayburn County Electric Cooperative found that each of two planned Bitcoin mines northeast of Dallas would require $20 million in transmission upgrades.
Traditionally, all ratepayers have paid transmission costs when they are added to electricity bills. But why should we spend billions on transmission infrastructure that would only benefit a few large sources of private energy demand, such as AI data centers and crypto mines?
Texas needs a new transmission cost allocation model. One solution is to move to a “pay to play” model–make the largest new sources of demand pay for their needed grid upgrades. This would incentivize these large sources to locate near the big generators that can reliably fuel their operations. It would also prevent the astronomical costs of transmission infrastructure that benefit only a few private entities from being borne by all of us.
Get Control of Crypto
Even if we moved to a new transmission cost allocation model, we might not solve all the problems that cryptocurrency (Bitcoin) mines create for our grid. For one thing, crypto mines can avoid paying their fair share of transmission under the current cost-allocation model through something called “4CP avoidance.”
ERCOT uses the Four Coincident Peak (4CP) program to determine who pays for transmission. It looks at the highest demand in 15-minute increments in June, July, August, and September. It determines who is on the grid during those four peak periods and allocates transmission costs based on their electricity use.
Cryptocurrency companies make money by using cheap electricity to mine bitcoins. When electricity is expensive, it becomes too costly to make money mining bitcoin and the crypto mines turn off. This means they aren’t likely to be counted in the 4CP calculations. This “4CP avoidance” can skew who pays transmission costs.
This is just one way that crypto mines impact costs on the grid. Mines can also make tens or hundreds of millions of dollars by manipulating our grid in other ways. In one example, Riot Platforms took $31.7 million from the Texas grid in one month by participating in ancillary services programs. These programs are designed to stabilize our grid by paying certain sources of demand to shut off. In another striking example, Riot made $125 million during Winter Storm Uri by selling electricity it had already purchased back to Texans at huge markups. Keep in mind that this happened while millions of Texans were suffering without electricity, leading to hundreds of deaths.
This manipulation of our electricity market is simply unacceptable. We need a solution that prevents crypto mines from abusing ancillary services programs and holding electricity hostage. The legislature should pass a law allowing ERCOT to curtail crypto mining whenever necessary to ensure grid stability. Crypto mines shouldn’t be compensated for this service. After all, ERCOT is just solving a problem that the mines created in the first place.
Prioritize new strategies in the Texas Energy Fund
Finally, we support more balanced funding allocated to the Texas Energy Fund. The state has already committed billions to new natural gas plants. Still, it hasn’t yet committed to a program for backup power solutions, including batteries and microgrids, or a program to upgrade generators in the part of Texas not serviced by the ERCOT-administered grid covering the bulk of the state. The legislature should fund these programs before commissioning another $5 billion for more proposed gas plants.
Shelley is the Texas director of Public Citizen