Senate Business & Commerce met on June 12 to hear invited and public testimony on the following interim charges: Electricity Market Design, Transmitting Texas Power, and the Impact of Bitcoin Mining.
This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer.
Opening Comments
- Chair Schwertner – This is the first of three interim hearings this committee will hold
- Chair Schwertner – Pleased with the progress of SB 2627 and the TEF; 125 notices of intent to apply for a loan totaling $39b
- Chair Schwertner – Need to key in on the parameters for the prioritization of projects/applications; are due July 27 next month
- Chair Schwertner – HB 1500 rolled in a number of bills – ERCOT board change, firming requirement, volunteering mitigation plans, renewable energy credit repeal, dispatchable reliability service, reliability program (PCM)
- Chair Schwertner – Concerned about the consultant’s report that says we need to move away from an energy only market design
- Chair Schwertner – HB 1500 requires real time optimization be implemented before any reliability standard is implemented; plan is to not implement until 2026
- Chair Schwertner – Cost benefit analysis needs to be fully hashed out before the reliability plan is put in place
- Chair Schwertner – PCM would be a third revenue stream; may not be needed at this time
- Chair Schwertner – ECRS has gone into effect and has put $12b into the market between June-December of 2023
- Chair Schwertner – All members signed a letter previously with our concerns about the PCM; still have concerns
- Chair Schwertner – Concerned about implementing all the parameters of HB 1500 before implementing a reliability program
- Chair Schwertner – Broad question is, is this even needed now
- King – Is a lot of money in the market now; all the applications for the energy fund are demonstrative of that
- King – After the announcements of new build by Vistra and others; if PCM is even the right direction to do, need to question if we need it
- Campbell – Have a lot to do; need to discuss how we manage the pressure on our energy only market by capacity only markets
Electricity Market Design: Assess state efforts to provide incentives for new thermal generation. Review and report on the state of the electricity market in Texas and issues impacting the reliability and resiliency of the Texas electric grid. Consider rulemaking related to wholesale market design, including the impact of these changes on grid reliability, market revenues, costs to consumers, and the efficiency of operations. Examine and report on the direct and indirect impacts that variable resources, such as wind and solar, have on grid resiliency, consumer prices, and market uncertainty. Monitor the implementation of House Bill 1500, 88th Legislature.
Tom Gleeson, Chair Public Utility Commission
- Market design blueprint; will discuss reliability standard/program (PCM) and DRRS new ancillary service
- Development of a reliability standard is in progress; this Thursday will move forward with publication on a rule for a reliability standard
- Aim to adopt a reliability standard by August of this year
- Waiting for the cost benefit analysis one from IMM and one from ERCOT; $1b net price cap – what benefit do we get
- Will have that completed by November/December
- Goal is for DRRS to come online 2026-2027
- Moving into the application phase of the Texas Energy Fund – 56 GW in proposed projects
- Application phase will run through July; consultant and commission staff will be reviewing applications and then make recommendations to the commission
- When commissioners make decisions on application approvals, will be made in a public meeting
- Backup power package grants; the advisory committee; PUC RFP for a consultant to chose the parameters/projects that go forward
- Want to have this done in a couple weeks
Pablo Vegas, CEO ERCOT
- Is increased demand from data centers and AI, but that is not the whole picture
- Seeing significant electrification of oil and gas, impacts of hydrogen, green hydrogen, etc. Inflation Reduction Act has added fuel to this as well
- Changing our demand growth and how we plan for demand in the future
- NERC and other states have been looking at how Texas is defining this reliability standard
- Real time coop – are on track; may be able to implement early 2026 or late 2025
- Is top priority
- DRRS thermal dispatchables generation units would be eligible in the initial definition; batteries not included in that, could be if that is legislative intent, but would delay the roll out
- Could not include in initial definition then go back and augment
- Not obligated to implement PCM, is an option; are looking at the cost effectiveness of the options we have
- Last year our five-year forecast to 2029 totaled 110 GW in demand
- Because of the change in criteria due to legislation over the last year, now the five-year forecast is 150 GW; doubling the peak demand
- As applications move forward, will move into the generation queue; still shows heavy on solar and batteries
- Chair Schwertner – Is Texas moving away from an energy only market?
- Gleeson – No, do not have the authority to make this request
- Vegas – Agree with Gleeson; is about augmenting, not moving away from
- Chair Schwertner – The only thing we have not required of you is to implement PCM, ECRS added more funds than I thought it would, is PCM necessary?
- Vegas – Have the foundation of the changes we wanted to make, have options to pay for the costs of the changes; PCM may not significantly add effectiveness/cost-effectiveness of the market
- Vegas – Need to develop the optimal mix of tools we use for revenue of the market
- Gleeson – Is to be determined; is about sequencing; PUC needs to look at existing tools first as we see what the PCM will develop into; PCM is in statute if we need to turn it on
- Chair Schwertner – We put in a net price cap which is being worked around in workgroups; intend to follow the law?
- Vegas – Yes; RTC is the first priority as well
- Gleeson – Yes; do not want to work around existing statute
- Campbell – E3 study developed with former PUC chair; they do not have experience in an energy-only market; helpful for them to check their own work?
- Vegas – Would be more efficient to use the same group to; PCM is not changing the energy-only market, is augmenting
- Campbell – Have a different opinion on that
- Campbell – Someone analyzing their own work product is not a good idea; what is in the interconnection queue is not
- Vegas – Only considering what is in the market now
- Campbell – This company is picking and choosing what they want in the analysis of the PCM; are now saying will be 14 GW of retirement, more than they said previously
- Vegas – Will be ample discussions on the assumptions of the PCM, are early in the process-
- Campbell – But the PCM was proposed to us last session
- Chair Schwertner – Agrees with Campbell’s observations; concerned about messing with a competitive market
- King – Load growth? What is going to double?
- Vegas – Because of the change in criteria due to legislation over the last year, now the five-year forecast is 150 GW; doubling the peak demand
- King – Primary drivers
- Vegas – Permian Basin alone is responsible for 24 GW of that growth; electrification of oil and gas, green hydrogen, data centers, cryptocurrency, traditional industrial economies
- King – Is related to transmission as well
- Chair Schwertner – Bitcoin/data centers, among other things, will result in massive demand
- Zaffirini – What is your evaluation of the impact of HB 1500 and SB 2627?
- Vegas – Created the core elements of our future energy-only market design; looking forward to putting pieces together to see how things will look
- Gleeson – Agree; need to keep an eye on costs; after Uri the pendulum swung to reliability over cost-effectiveness; want to come back around to cost-effectiveness
- Gleeson – Market participants have told us they want regulatory certainty; are a lot of changes here; need time to implement all of this
- Zaffirini – What are you doing to ensure affordability?
- Gleeson – Settled we need more transmission, have concerns about over-building
- Gleeson – IMM has an eye toward economic efficiency; need to listen to them when they have concerns about cost; PUC’s job to find balance between cost/reliability
- Zaffirini – Real time cost of electricity and natural gas cost drops?
- Vegas – Texas remains being most affordable energy in the nation; looking at a way to balance the market including focusing on energy efficiency and demand response
- Zaffirini – HB 1500 identifies 11 guardrails, do we need more
- Gleeson – Are fine at this point, are still early in the process of PCM development; do not need guardrails on any other market design issues
- Gleeson – Concerned about over-build of transmission; may have lowered the bar too low on that; aim to address these concerns in a rule, but may raise that as an issue with the legislature
- Zaffirini – Asks about legislative action
- Gleeson – Have increased incentives greatly
- Vegas – A bill allocated $10b spent on lower interest loans, completion bonuses, were not fully appropriated that amount; only $5b
- Chair Schwertner – If the load will be 150 GW in 2030, could not frontload the other $5b as soon as possible
- Zaffirini – How do you work with other agencies?
- Gleeson – Have worked closely with others especially following Uri
- Vegas – Is one of the greatest changes since Uri; preparation and planning in advance since then has had a meaningful impact of the reliability performance of the system
- Johnson – Are risks with an energy-only market; ancillary provide us with the reliability we need?
- Gleeson – Part of their purpose, are looking to see if they could meet all our needs
- Johnson – Ancillary services are used to incentivize new build?
- Gleeson – They look at all revenues in the market to see if they can get an ROI
- Johnson – DRRS proceeding to non-thermal if that is the intent of the legislature; amendment by Zaffirini was added to include batteries specifically, why are they not included in your plan?
- Gleeson – Are trying to incentivize more thermal
- Johnson – So looking at it as an incentive to build new then?
- Gleeson – Are looking at it as a pot of funds; hard to argue there are enough incentives for storage given what is in the queue currently
- Gleeson – Not on its own; but will help provide proper incentives to be built in the state
- Johnson – Looking at baseload, not ancillary?
- Gleeson – Not necessarily, they have requirements on how quickly they can come on and how long they need to run
- Johnson – Appreciate the work you do, just concerned about following legislative intent following through to implementation
- Vegas – Are specific technical reasons why storage resources are not included in this; accommodate storage, would be significant core changes at ERCOT
- Johnson – Plants more likely to stick around if they are being RUCed?
- Vegas – Hurts the plant in the long run
- Johnson – Asks about DRRS
- DRRS would provide more incentive for a business to commit
- Johnson – Fewer retirements because we deployed ECRS?
- Vegas – Could be; in addition response we have needed due to the hot summers
- Menendez – Recent PUC filing you were looking at demand side measures; what is the fastest we could see new generation built?
- Gleeson – Second half of 2026
- Menendez – Only immediate new sources would be demand response or energy efficiency?
- Gleeson – Have not been at the forefront of our discussions
- Menendez – Would that not be a way to free up electrons?
- Gleeson – Would be a way to free up electrons
- Menendez – What are you doing concerning demand response? Residential users need to be made aware?
- Gleeson – Have been having discussions concerning demand response; are challenges; have a new energy efficiency division in PUC
- Vegas – Is the fastest opportunity to get MWs moving in the system; aim to make more progress on that in 2024
- Menendez – Uncertainty of PUC rulemaking raising rates?
- Gleeson – Seen a large increase in prices on the residential side; as we focus on cost-effectiveness, hope to see prices going down
- Gleeson – Energy efficiency programs do have barriers for low-income customers – like smart thermostats
- Menendez – Are some programs around the state where those smart meters are free
- Menendez – Estimated costs of the PCM; who will be responsible for those costs?
- Gleeson – The customers
- Menendez – How define system stress as it relates to the PCM?
- Gleeson – Are taking comments on our proposal on that now
- Menendez – Has E3 conducted a back-cast on 2022-2023 to figure out these?
- Gleeson – E3 is here, can answer that
- Menendez – TEF criteria?
- Gleeson – Staff is reviewing applications and identifying attributes are standing out to them
- Gleeson – Personally, value geographic diversity
- Menendez – Batteries could be more competitive in this area as you can put it closest to need
- Menendez – Municipally-owned utilities allowed to apply to the TEF?
- Gleeson – Yes
- King – Not suggesting what I am about to say is a good/bad idea; can liken grid to transportation system; regulate many aspects of it
- King – Generation type versus load type
- King – Have regulatory authority to say we are not allowing a certain type of generation due to certain parts of the grid; for example, would not allow a wind farm in a certain area due to its potential negative impacts?
- Vegas – Only control we have is if they violate a NERC operating requirement – if they compromise the reliability of the grid
- Gleeson – Agree, cannot prohibit, we create incentives
- King – So you could not say “no”
- Vegas – Can it created a transmission congestion issue; have an open interconnection protocol; allow resource to come on to the grid if they cannot fully deliver under all circumstances, we curtail it
- King – Authority, if additional transmission needs to be built, require bonding/security to ensure industry is going to be in that region for a long-enough time?
- Vegas – Can only limit access to a load if it creates a stability risk; cannot limit access to connect into the grid; do not have any of those tools
- Menendez – If bitcoin miners want to take up all generation in the Permian – what if we required for them to pay to build their own generation
- Menendez – If you are going to be a demand that destabilizes an area, why should taxpayers be on the hook for that; for-profit generation should be treated differently
- Nichols – Walk people though the steps to plug into the grid
- Vegas discusses the steps
- Nichols – Is a difference between an incentive and a subsidy; PCM is a subsidy
- Nichols – Concerning when agencies put things into rule; want to stay on the incentive side
- Nichols – Looking at price is not a full measure of efficiency; need to look at other things
- Campbell – How many MWs or GWs does one AI data center use? Know how many are here? Want to come here?
- Vegas – Fastest components of the data center that is coming
- Vegas – Amount of energy to do an AI search is 10-30 times the power requirement to do a traditional google source
- Vegas – Do not know how many are coming; one company core processing unit fueling AI processors sent out 500k GPUs; each one uses as much power as one household uses in a year
- Vegas – Electric demand hitting the U.S. and the world will be exponential
- Chair Schwertner – Discussed a hydrogen facility that was 1 GW with someone yesterday; would be the largest in the state
- Chair Schwertner – Be careful of a reliability program; do not think we need the PCM
Panel 2
Zachary Ming, E3
- Overviews E3’s background in the process of developing the PCM
- Aim of PCM is to create a reliable system that does not get pushed to the brink but allows resources to recover their costs
- Nothing is changing about the energy market itself, PCM is an augmentation
- Concerning if the PCM is needed/not needed – if PCM is not needed as in there is enough revenue in the market, ramps down by design
- Currently are waiting on public feedback
- Chair Schwertner – Seems like there are many variables like retirement, cost of new entry CONE, etc. devising this through the PCM is too complicated to get this right
- Chair Schwertner – Concerned about price over-runs
- PCM can be designed to prevent that scenario; if there are sufficient revenues in the market, the PCM would back off
- Chair Schwertner – Sometimes new/improved things do not work at all; can over-engineer something
- Campbell – Last session and this study shows artificial retirement that have not happened; does not count what is in the queue, or the TEF – created scarcity in the study
- Study is looking forward to 2026 using an established ERCOT equilibrium study
- What is the total quantity of generation is the market expected to support
- Chair Schwertner – Study includes DDRS?
- Does not include DRRS as it is not in place yet, but does include ECRS
- Campbell – Seems like study has opinion disguised as fact
- Menendez – Asks about a back-cast discussed earlier
- Released analysis on when we expect PCM hours to look on a forward basis
- Could do a back cast, but a forward cast would be most helpful
- Menendez – Back cast is to get a better understanding of how you got the forecast
Courtney Hjaltman, Office of Public Utility Counsel
- Annual energy only cost 2019-2023 growing $5.3b each year
- Annual ancillary service cost 2019-2023 growing $300m each year
- ORDC change doubled the effect of the ORDC; 2023 decreased but bridge solution in November 2023 was put in place, will able to see what that solution is doing at the end of the year
- Electric bills will be increasing for customers
- Increase in ancillary from an increase in intermittent, overall demand, and demand for a more reliable grid
- Increase in cost by 32.4% due to the new ancillary service ECRS
- Consumers are seeing benefits of a more reliable grid and the integration of new, cheaper, renewable resources
- Average monthly bill 2019-2023 has been increasing
- Things that will help with that cost: review of ancillary services, reliability standard definition, and implementation of RTC
- Zaffirini – How will RTC lower costs?
- Will allow ERCOT to have a better visual on what is online, will drive cheaper resources to be sued
- Zaffirini – OPUC saved consumers average $200 on bills? Resources to do better?
- Intervene on consumers’ behalf and bring volume asking for down; examine expenses being billed back directly to the consumer like attorney fees
- Zaffirini and Hjaltman discuss agency interaction
- Menendez – Noticed congestion map in your report; would be good to see how that converts to increased cost
- Menendez – Consultants and attorneys being billed back to consumers?
- In cases where we intervene, companies will hire out consultants/attorneys, our question is whether consumers are totally responsible for that cost
- Menendez – Maybe could be a negotiation where the consumer and the entity would split that cost
Dr. Jeff McDonald, Potomac Economics
- Focus is on reliability/resiliency; is some friction between this and consumer interest/economic efficiency
- Will provide analysis and input on how we appropriately evaluate this
- Johnson – Charged with efficiency not reliability?
- Economic efficiency; analysis is focused on balance with reliability/resiliency and economic efficiency
- Johnson – Your analysis shows ECRS deployment results in double average energy prices? Analysis used what?
- Numbers reflect a 75% deployment
- Johnosn – Your study shows fewer shortage prices in 2023 due to the influx of renewables, storage, and new capacity of traditional
- They did help, but yes additional capacity helped
- Johnosn – Saw a reduction in natural gas prices and real time energy prices; real time prices are not linked to actual prices? Correlation is pretty loose?
- Are not perfectly correlated; one factor is the contracting of natural gas versus spot purchase – imagine 70% are –
- Other years when you see more natural gas setting the price, will see more of a correlation
- Johnson – What should we learn from that?
- Attributed deviation to increased pricing of ECRS
- Johnson – So if we see too big of a deviation something else would be going on in the market?
- Yes
- Zaffirini – Your report states ECRS cost the market more than $12b, ERCOT estimates $750m, why different?
- Do not know ERCOT’s methodology; we re-ran the real-time market during the period ERCS was in production, removed 75% of ECRS out of reserve and made it available
- Zaffirini – Recommendations related to the charge?
- Are still working with ERCOT and PUC on ancillary services, will have recommendations in the next 6-9 months
- Nichols – Your report says the concept is to move away from an energy only market – why say that?
- Ming – Was to emphasize there would be an augmentation to the market
- Nichols – Reiterates there is a different between a subsidy and an incentive
- Ming – If the PCM is not needed in the market, it is by design to ramp down
- Nichols – The IMM’s study shows that we may not need the PCM
- Ming – This is about creating something sustainable; a sustainable stream of revenues
- Ming – If other revenue streams are sufficient, it will ramp down
- Chair Schwertner – Been told DRRS, ECRS, TEF are building a bridge to PCM, agree?
- Ming – Are long run additions to the market
- Chair Schwertner – Are performance credits a subsidy?
- Ming – View ECRS, DRRS, PCM competitive market products
- Chair Schwertner – ECRS and DRRS incent what we need, do we need an additional one?
- Ming – Want to make sure our cost benefit analysis is robust; the PCM could be implemented and if needed, it is there
- Campbell – Clear you have a bias towards a capacity market; expect that bias to show up in your future analysis
- Johnson – You have testified that you are not trying to restructure the market; not advocating for the PCM, but clarifying that is no one intends to move away from our market design
Panel 3
Brent Bennett, Texas Public Policy Foundation
- Concern going forward is the cost; California rates have gone up 50% our residential rates have gone up 20%
- Do not see anything in the near term that is going to negate that
- Renewables have to be balanced when they cannot turn on
- At what point is that system more expensive than a system that is on all the time
- 50% renewable grid is more expensive to operate than the grid we had previously; are a lot of factors that go into that, but believe it is true that renewables are at the heart of the cost issue
- Backup power study is due at the end of the year and next year’s pricing study are important
- Have not even begun a study concerning cost allocation of ancillary services that Governor Abbott asked for years ago
- Menendez – Annual cost is ERCOT’s cost? Account for increase in ORDC? Some costs are not related to just renewables
- Working on adding complexity to our model; is looking at operational costs wholesale
- Why a firming requirement in our opinion would help find the appropriate resource mix
- Menendez – Have had more costs related to reliability rather than just the source of generation
- Zaffirini – How would a study on ancillary costs be done?
- Can run a model to consider them a pass through cost or considering it as a part of the generator’s cost structure
- Eventually those costs do pass through to rate payers, but is about reducing volatility
- Zaffirini – Recommend reliability requirement the same to all generators?
- Reliability requirement only applies to new generation; want to have a cross-market requirement
- Chair Schwertner – Firming is only for new generation; and cost-allocation study is ongoing
Panel 4
Walt Baum, Powering Texans
- Formed by Calpine, Constellation, NRG, and Vistra
- Appreciate the market reforms the legislature has enacted in the last couple sessions
- Had gotten 5k MWs of additional gas dispatchable generation in the ground
- Solidifying a reliability standard is critical for market certainty
Julia Harvey, Texas Electric Cooperatives
- Support many of the recent and forthcoming changes to the market
- Need to allow PUC to define a reliability standard in rule
- Conservative operations; afraid we have moved to reliability at any costs; difficult to hedge; creates wholesale price disconnected from real risks
- Long term load forecast; perspective load unconfirmed; scarcity on speculative load; even forecasts raise costs significantly
- Need to consider this in transmission planning and its associated cost allocation
Katie Coleman, Texas Association of Manufacturers
- Share PCM concerns; do not see it as a supplement, becomes primary source of income for generators
- Immense amount of judgement calls with the PCM; what is sufficient revenue and who decides that
- Implied heat rate is up and prices are up because of administrative intervention
- Want certainty of PCM, ECRS, what is the reliability standard, what does conservative operations mean
Mark Stover, Texas Solar Power Association
- 25k MW installed capacity $28b investment; 9% of state power needs
- Renewables have lowered wholesale costs by $30b
- Will likely see natural gas step ahead of solar in the interconnection queue
- Are seeing storage co-located with solar; adds additional duration
- In 2023 saw less tightness in the market and less scarcity in part due to renewables and legislative action
Cathy Webking, Texas Energy Association for Marketers
- Appreciate efforts of last session
- Lubbock City moved into ERCOT area – has gone smoothly
- Customers have implemented demand response; those things can be enhanced by electric retail providers
- Are a number of measures that are increasing costs to the market
- Concerned about a mandatory reliability standard – concerned it will lead to a mandatory procurement of a capacity
Q&A
- Nichols – Can predict that solar will go away and battery adds more time; need to have power at night; federal credits for solar?
- Stover – Federal Investment Tax Credit is 30% of capitol cost of project; solar providers and elect to use the PCT due to change
- Nichols – How much does that equate per kWh
- Stover – Maybe less than a penny per kWh
- Nichols – Discusses that a dispatchable KW is more valuable than a solar/wind KW
- King – Cost of build out of transmission to the Permian; cost to build out CREZ? Started out as $2b and turned into $10b; what numbers are you hearing for the Permian build?
- Coleman – Not heard public numbers yet; heard it will be as much if not more
- Coleman – Purpose of this is to serve load; will have new load coming on, will balance costs; have less concern of the cost impact
- Coleman – This is trying to put oil and gas load on the same connections as residential and small loads
- King – Concern is data miners will move out to W Texas and the transmission capacity will be bogged down by them or you overbuild
- Coleman – Are trying to formulate a position on this; load indicated it is going to come; do not have a system to reserve capacity; cannot stop them from interconnecting
- Coleman – Could think about a tool like a facilities extension agreement where you could draw on security
- King – Could think about some kind of bond or security
- King – Acreage versus MWs?
- Stover – 6 acres per MW; seeing advancements in technology that could add 5-15% of output for project
- King – The federal tax credit is for residential as well?
- Stover – Not sure
- King – Notes he is getting residential solar and is getting a credit
- Stover – Sometime the local utility provides incentives; not sure if you are getting the same federal incentive
- Chair Schwertner – Transmission needs to be remodeled?
- Coleman – Introducing a higher voltage, are practical concerns that need to be worked through; increased costs, harder to tap into, etc.
- Coleman – Just need to be deliberate on where/how technology will be introduced
- Coleman – Permian project is not the appropriate place to have this discussion because that plan needs to move
- Menendez – Your customers would be least likely to afford socialized costs; want to do this in a transparent way to ensure this is not paid for by those who cannot afford it
- Harvey – Yes
- Zaffirini – How do we balance reliability and affordability?
- Baum – Are doing that now; once rules are set, investment will follow
- Zaffirini – How can ERCOT and PUC balance price tolerance between industry and customer classes
- Coleman – My clients typically feel price changes directly; not sure if there is a long-term differential impact
- Zaffirini – ERCOT recently submitted NPRR 1235 that limits participation in DRRS – how does that impact solar?
- Stover – Our industry supported this incentive before the legislation was passed; would be helpful for our industry; would incentivize longer-duration storage
Transmitting Texas Power: Identify the future electric transmission and distribution system needs of the state and recommend ways to reduce barriers to constructing the necessary electric infrastructure to support the growing demand and changes in technology. Review and make any necessary recommendations to enhance legislation passed during the 88th legislative session, including the status of projects to improve the safety and resiliency of the transmission system, as well as the effect of current and future projects on consumer costs.
- Chair Schwertner notes that PUC commissioners and some witnesses may be recused from discussing things that could relate to Resiliency Plan Proceedings
Panel 1
Lori Cobos, Commissioner PUC
- States electricity needs are increasing due to increased demand, increased population, increased technological electrification
- Over 60% of new load growth due to data centers and bitcoin mining
- Takes 3-6 years to build transmission; faster than any other state
- Commission ordered a new circuit 400-mile new circuit 800 MW import capability
- 345 kV line middle and across the Permian to be completed by 2027
- New circuit and new large scale $1b transmission investment
- HB 5066 reduced PUC timelines on processing CCN applications to expedite transmission construction
- Opened a project and a rule adopted by end of year; what policy criteria reasonable load forecast data being provided to justify transmission
- Provisions related to the Permian Basin; require to direct ERCOT to develop a reliability plan of the Permian Basin; will be filing that plan next month and will take feedback and approve final in September
- 26k MW of load
- No estimated cost figure at this time; will be in the final reliability plan filed at the commission
- HB 2555 resiliency plans; will allow to recover resilience-related investments
- Adopted a rule in January
Courtney Hjaltman, Office of Public Utility Counsel
- 30-40% of customers’ bills are transmission costs; includes pole/wires, riders, etc.
- Intervene to ensure these are reasonable
- Looking at growth, is coming from businesses; billing for transmission is on the back on the consumer
Woody Rickerson, COO ERCOT
- Provided future load growth; $2b enforced in transmission projects at ERCOT
- $14b in engineering, licensing, construction in the ERCOT grid right now
- Large load can show up in a short amount of time
- Invertor generation can be built more quickly than thermal
- Transmission is still a 3-6-year process; do it faster than other places, but is the slowest part of the grid planning process
- Extra high voltage study will be released by the end of the year
- Investment in the grid will need to exceed what we have seen in recent years to meet that load growth
- Large array of changes that will take a while to integrate/implement
Q&A
- Chair Schwertner – Believe the forecast of 150 GW by 2030? I think it could be less
- Cobos – Need to further examine; hydrogen production facilities are heavy electricity use; one in the Permian will be a 2.6 GW facility
- Menendez – $14b in planning?
- Rickerson – Yes
- Menendez – Are projects that will be paid for by all the rate payers in ERCOT?
- Rickerson – Yes
- Menendez – Could we get a list of the highest energy users we have and then who is projected to come online?
- Rickerson – Can supply you with that
- Menendez – Study on reduction in congestion; are we making the system the most efficient
- Rickerson – When we look at additional transmission, look at congestion reduction
- Rickerson – Using recent transmission congestion parameters set by the legislature
- Menendez – Hope you use the criteria that priorities those who can build closest to demand
- Cobos – Is a part of our considerations
- Menendez – Are costs shared equally between residential and industrial?
- Hjaltman – Do not have those data points
- Zaffirini – High-capacity transmission, status, where most needed, need incentivizing?
- Cobos – ERCOT is conducting their high voltage study
- Cobos – Looking at accelerating transmission through reliability criteria and through HB 5066 that allows ERCOT to submit reliability transmission plans
- Cobos – Made rules for congestion cost savings test; ERCOT is working on adding those to their operations
- Cobos – Have all the tools we need
- Zaffirini – Recommendations on how consumer impact could be minimized?
- Hjaltman – Have questions on what they are asking to be refunded for; hard to hold them accountable, but need to address on our own
- Rickerson – Some considerations for resiliency include moving transmission inland to avoid damage by natural disaster
- Nichols – Costs include reading meters, maintenance, costs need to be broken apart to find new transmission build
- Nichols – Concerned about new demand forecast; are we getting a disproportional amount of growth?
- Cobos – No; everyone’s mix is a little different; we are an attractive market for hydrogen and bitcoin mining
- Nichols – Need certainty that this 150 GW is real; chair of the committee could add additional interim charges
- Chair Schwertner – This 150 GW number has come out of nowhere; where did this come from?
- Menendez – San Antonio is ranked 11th in the nation for data centers; these places go to where the energy is cheap and reliable; these data centers have backup power; can we allow them to put the power back on the grid in times of need?
- Rickerson – Nothing to keep them from doing that; is not in the business plan to do that
- Chair Schwertner – Addressing growth is a part of our interim charges; will discuss this more later
- Chair Schwertner – Which is the better way of measuring growth?
- Rickerson – Data centers are a huge part and electrification of existing load; and hydrogen technology coming online
- Chair Schwertner – How did we not know this?
- Rickerson – This was not contracted
- Chair Schwertner – If that is right, it has huge policy implications
- Chair Schwertner – This data could not have been used for forecasting
- Rickerson – Could not use transmission plans for anything other than contract load
- Johnson – HB 5066 initiated a change in terms of forecasting; changes in technology has changed all of our jobs in this room
- Campbell – As emerging technologies come on the scene – can we just say no, you cannot hook up; something we need to think about
- Chair Schwertner – Are core functions we need to prioritize, is a discussion on prioritization needed to be had
- Nichols – AI over the next years will be more energy efficient
- Johnson – Need to look at this in terms of stability as well; need to look at load growth with the resource mix
- Menendez – Need to prioritize homes
Panel 2
Ellen Buck, Oncor
- End of Q4 for Oncor had 300 request for load interconnection into the transmission 47 GW of demand; only included 25 GW in the attestation that we anticipate will move forward
- Customer demand outpaces transmission development
- 27% growth in peak demand in Delaware Basin
- 100 request for service in the Permian Basin and are unable to do so until transmission upgrades are complete
- Remaining questions on how to implement HB 5066:
- How will PUC implement ERCOT’s plan
- How will plans be prioritized
- Requires a restudy of each project before it is built
- How do we determine which loads are real/credible to attestation
- What is the customer’s evidence of “skin in the game”
- Only included 25 GW in the attestation that we anticipate will move forward
Todd Staples, President Texas Oil and Gas Association
- Our members are pleased with the conversations and actions this legislature has had/done
- Are not asking for preferential treatment, just trying to catch up
- Are limitations to new projects like infrastructure, power, demand for oil
- Notes all forecasts warrant scrutiny
- Important legislative intent of HB 5066 is advanced to its full extent
- Geographic diversity is important to our projects and attracting different mixes of businesses to the state
Katie Coleman, Texas Association of Manufacturers
- ERCOT and PUC and utilities have tools in statute to meet the transmission needs in that
- Agree more implementation work needs to be done for HB 5066
- HB 5066 was very important and reintroduces utility forecast; has not been integrated into ERCOT’s forecast
- SB 1281 was passed two sessions ago concerning consumer congestion costs; was only partially implemented
- Is a role for high voltage projects, looking forward to the study
- Different customer classes
Q&A
- Chair Schwertner – Asks about the forecast ERCOT has provided
- Coleman – Need to hammer down on the data more; not a lot of coordination to prevent extra load being on the forecast; cannot distinguish between data mining and firm load
- Staples – Know there is additional scrutiny in the PUC approval process
- Staples – Need to ensure incentives are balanced
- Zaffirini – Asks about challenges dye to crypto mining
- Staples – Access to transmission and generation concerns; do not know how long crypto miners will be there, what type of investment
- Staples – Do not want a system that allows some businesses to game the system
- Zaffirini – Permian Basin plan due soon, lessons learned in this planning process
- Staples – Yes; needs are growing around the state
- Zaffirini – Asks about highest energy needs in the state
- Staples – Most pronounced in the Permian and Gulf Coast region
- Zaffirini – With natural gas so low, why is electricity not low?
- Staples – Do not know; as market design continues to mature, should see some corresponding decline; need to focus on affordability again
- Johnson – Transmission distribution system will meet these massive voltage lines
- Buck – Will likely need to move to higher voltage; need a comprehensive plan for this
- Johnson – Did Oncor see this coming or were these requests a surprise?
- Buck – Yes and no; did not see data center growth, but have been struggling with the Permian Basin
- Johnson – Electrification in the Permian – a lot is retrofitting of old diesel?
- Staples – 11 plus GW in total; do not know retrofitting pieced out from the total
- Johnson – When discussing socializing the costs of electrifying oil and gas; symbiotic between oil and gas and renewables
- Staples – Electrifying old and new supply
- Johnson – Legislative action needed?
- Staples – Not only current, but future operations as well; Permian is most important resource in terms of meeting reqs of our allies; emissions have reduced significantly in recent years & can continue
- Johnson – Should recognize there are social benefits as well; looking for any lege action?
- Staples – Legislation passed in recent sessions has created framework for growth, important to let market implement policies
- PCM concerns heard today are spot on, share those; unnecessary component because of the revenue streams that exist
- Johnson – Previously could only look at signed contracts for large loads, now can look at non-signed contracts and projections; looking at this as 100% firm? Regulatory hitch? Why?
- Coleman – A lot of these are newer techs and don’t have experience forecasting loads
- Historically have not had great visibility in resources connected to grid, working to get this info to ERCOT; as we get more experience may be able to forecast better
- Johnson – Need to expand crypto mining policies so we have better view?
- Coleman – No legislative need, utilities just weren’t doing it because it wasn’t as big of a factor
- Johnson – Asks Buck, do you agree?
- Buck – I do, once the planning process is complete, there is still a process through PUC where they review need
- Coleman – Good point, if ERCOT endorses a project gets weight in PUC review; but not always how things were done & not what is done in other jurisdictions
- If they don’t prove need PUC won’t approve CCN, can also address other factors; haven’t leaned on this process as heavily as ERCOT has started playing central planning role
- Menendez – Asks Staples, you said demand response could be gamed? is it possible to get contracts with people like crypto miners where they are restricted from demand response during peak? Offensive to me that people who will be using this much power can profit from power “saved” when they really didn’t need to run
- Coleman – Don’t have an answer, but many have observed that new businesses are doing these things to an extreme position
- To me the question is if you can predict behavior then maybe you can plan for it
- Menendez – If we can predict they stand to profit when gaming the system, maybe we restrict ability to participate in demand response when we know they don’t have to run 24/7
- Staples – There are programs that prohibit participation in demand response if you aren’t critical
- Coleman – ERCOT is discussing whether you could factor flexible loads into the market engine seamlessly; could be incentives to get businesses to register as controllable loads
- Menendez – Great deal of consternation over growing load, always best if industry regulates itself without lege need
- Chair Schwertner – SB 1751 would’ve limited crypto participation
- Nichols – Not just ERCOT, many contract with retail providers; would need to be all-inclusive; absolutely convinced they are gaming the system; have seen people dodging the regs by shifting labels, e.g. crypto mine labeling itself a datacenter
- Nichols – Always good to give credit where it’s due, ONCOR does a really good job
- King – Do we need to prioritize the type of generation coming onto the grid in short term and times when we’re facing increased pressure; very concerned about 150 gigawatts projections; do we need to prioritize type of generation that we want to allow to interconnect?
- Coleman – PUC and ERCOT have already tried to do this; there are defined interconnection timelines; dispatchable generation connection is prioritized
- You may be saying delaying interconnections altogether
- King – I think I am, e.g. do we want crypto miners on right now or do we delay; growing load is good problem to have, but wondering if we are at a point where we think about prioritizing dispatchable generation versus renewable; some of the problem is the much faster growth of renewable generation; renewable subsidies have mean it has outpaced and we have too much
- Coleman – I know you had a bill on that last session
- King – I did and it was very simple, 50% of new generation had to be gas-fired; didn’t pass House; do we need to do this or do we need to plan better? If it was a free market I would say no, but we have high federal subsidies; in light of 150 gigawatt possibility, do we need to look at this again?
- Coleman – Two aspects to the question, wholesale market design & transmission
- On transmission, how resource-intensive is it to connect these resources; not sure on answer, but probably not as difficult as the load, probably no harm in connecting any resource that wants to interconnect
- Not sure transmission interacts with large load issue
- Buck – Agree, not resource intensive to interconnect; TEF is prioritizing dispatchable
- King – Market designed in 1999 was before renewables, crypto, AI, etc.; keep coming back to wondering about the subsidies and if we don’t need a stronger priority system; after TEF is gone in a couple years, still have more federal subsidies to come
- Menendez – On ERCOT’s mobile app, 75% of power is from nuclear, thermal, and natural gas; not necessarily overdependent on renewables
- King – Agree, some days it’s the opposite; need to think about right amount of renewable vs. dispatchable; money is going towards renewables & this is where market incentivizes
- Menendez – None of the tech like crypto, AI, etc. were here 18 months ago; also don’t know what those techs will do to help with congestion and generation & hopefully will help
Panel 3
Mike Adams, Osmose Utility Services
- Provides overview of Osmose, works with electric utility partners on structure and infrastructure on the grid
- Mostly do wood pole inspections, 12m-14m wood poles in TX
- Highlights issues with wood pole structural integrity, incl. decay & proper maintenance process
- Also do grid resiliency work and models based on data collected from pole inspections
- Also look at steel transmission, lasts longer than wood but has similar problems with corrosion
- Offer wildfire mitigation as well
- Chair Schwertner & Adams discuss maintenance process & wildfire mitigation
Mark Bell, Association of Electric Companies of Texas
- TX is growing, demand has risen by 25% over the last decade compared to 5% for nation as a whole; peak demand has grown 18% over the last 5 years, could increase by 77% over next 10 years
- Over last summers, TX has set numerous peak all-time records
- O&G electrification in Permian and population growth throughout state creates significant challenges for generation, transmission, and distribution; investment is essential to economic future
- HB 5066 required development of regional transmission plans, also allowed ERCOT to revise load forecasts to include prospective load; led to ERCOT update showing increased load
- Have also seen tremendous storm activity causing issues across the state; smart to invest in resiliency and infrastructure, saves money in the long-term
- Investing in mitigation strategies to reduce risk is a top priority, incl. wildfire mitigation; wildfire mitigation continues to evolve
- Mitigation recs incl. standardizing filing reqs for emergency plans, reviewing shut off rules, looking at vegetation management rules
- Initial phase of TEF appears to be overwhelming success
- Electricity pries in TX are below the national average, 12th best rates in the nation
- 65% of Texans chose reliability over affordability in polls
Impact of Bitcoin Mining on the Texas Electric Grid: Study the impact of energy-intensive cryptocurrency mining facilities on the Texas electric grid. Report on whether any changes should be made to ERCOT demand response programs and large flexible load registration requirements to limit the impact of these facilities on system reliability and consumer costs.
David Ball, American Electric Power
- Provides overview of AEP, appreciate committee’s attention to challenges from the crypto industry; demand for energy was almost flat for two decades, now seeing reverse driven by large customers
- Chair Schwertner asks Ball to pause and for Morgenstern to begin
Brian Morgenstern, Riot Platforms
- Provides overview of Riot, bitcoin mining investor active in Texas and planning to expand in other areas of the state
- Not fly by night, in the bitcoin market which is one of the largest commodities markets in the world
- Stiff competition for sites with available power; lowest risk price signal for bringing new generation on; 90% of the time we have adequate supply, but peak is the worry & bitcoin miners are one of the most flexible industries
- Locations are registered in CLR and can be used as a “dimmer switch” with dynamic response to pricing, e.g. can be kept on when excess production is available as well
- Idea of bidding into programs is offsetting costs incurred by miners in exchange for grid reliability services
- Have invested close to $1b in Rockdale, $100s of million in Corsicana, not an industry that will go away; covers not only mining, but transaction fees, etc.; absolutely not going anywhere, involved in communities & no intention of leaving
- Transmission is critically important, located next to old Alcoa facility in Rockdale and next to substation in Corsicana; want to repurpose existing infrastructure; generally not causing transmission costs as we will go to the power
- Chair Schwertner – Do you consider yourself a crypto company or energy trading company?
- Morgenstern – Bitcoin company, do have a long-term PPA power agreement with Rockdale
- Chair Schwertner – Not demand response?
- Morgenstern – No, PPA allows us to sell some power into wholesale market, can also bid into ancillary services market for WERCOT to control load; sometimes they want to keep us online, can move our load up and down
- Have a fixed price under that portion where we’re paying higher than spot price for vast majority of time, selling is only decreasing overall cost annually under the PPA in Rockdale
- Corsicana is all spot price
- Chair Schwertner – So you participate in selling into ancillary market and DRS?
- Morgenstern – Not at the same time
- Chair Schwertner – Looking at revenue in 2023, sometimes 58% of total revenue; significant portion of revenue?
- Morgenstern – Power credits are cost offsets, totaled about $70m, $40m under the PPA, $20m was selling control of load to ERCOT
- Chair Schwertner – Looking at your 10-Q, strikes me that TX has set up a system that allows crypto mining to be significantly advantaged by the way our energy market operates; obviously good for the company, but question is if it good for TX
- Chair Schwertner – You mentioned you lower power, but graphs I’ve seen suggest you would do this anyways when high prices don’t correlate with price of bitcoin
- Morgenstern – Would disagree with characterization that we have an advantage versus anyone else; our data centers
- Chair Schwertner – You’re not a datacenter, you’re miners
- Morgenstern – We are a building full of computers
- Chair Schwertner – But unlike others you can turn off during high prices; we don’t have control on high prices keeping you on, you turn yourself off
- Morgenstern – That is pure economic curtailment, not necessarily good for TX
- Chair Schwertner – But good for you, can you not curtail when bitcoin price is high?
- Morgenstern – Generally yes
- Chair Schwertner – You operate at negative? You stay on as controllable load in hopes you will be curtailed by demand response?
- Morgenstern – Not sure I understand; some load can be controlled by ERCOT, also participate in wholesale be projecting if prices will be higher than mining proceeds or not; more complicated than prices going up and miners turning off
- Chair Schwertner – Asks about equipment used
- Morgenstern – Long-term plan is to utilize chips made by Samsung plant in TX
- Chair Schwertner – Micro BT?
- Morgenstern – Operate in Pennsylvania, parent is Chinese
- Johnson – Is there a particular generation source you’re more likely to procure power from?
- Morgenstern – We’re interconnected at both sites, so use whatever is on the grid
- Johnson – You don’t collocate with generation?
- Morgenstern – Not yet; working with a company that is producing from municipal solid waste; for us it is building out large sites that will be usable forever, these are just connected to the grid
- Johnson – There are concerns not just about availability of electrons, if you’re just connected to the grid then everyone is concerned about competition for electrons; is growth of crypto likely to collocate with cheap renewable or will you compete with everyone else?
- Morgenstern – More likely to collocate with intermittent and work to make sure we can alleviate stress rather than contribute
- Johnson – Could be a policy approach to that continued growth in crypto as far you alleviate scarcity or pricing pressure; is this what you referred to earlier?
- Morgenstern – If we can make power available it will drive down market; likewise in the ancillary side it costs us less to bid, ERCOT and ratepayers are paying less for control of our load versus someone else’s
- If you conceptualize different business like cloud website hosting, hospital operations, etc. where if it turns off there is danger
- King – Trying to figure out your industry, new and dynamic; one consistent thing I hear is that it uses a whole lot of electricity & new demand can come online very quickly; not a facility like the Samsung plant where there is years in planning where market can work out power needs; my understanding is it can also leave very suddenly
- King – Sounds like you can create a lot of demand very quickly and create a fire, and as a result of participating in TX programs you get paid to put out the fire you created?
- Morgenstern – Disagree with the characterization; Riot is next to a substation in Corsicana, next to old Alcoa plant, etc. generally locate next to existing infrastructure
- Frequent that you can collocate next to intermittent source and use it when no one else needs it but give it back when it’s needed elsewhere
- Not causing a problem, someone will be demanding power; flexible companies making baseload demand that is purchased when available and cheap creates the market & you can provide it back when needed
- King – Your business model in TX is built around participation in demand response, PPAs, etc.?
- Morgenstern – It’s part of it in that TX has the favorable sites for this type of activity
- With the PPA usually paying more than spot price, but can decrease average over year with ancillary, etc., so average price per bitcoin is favorable
- King – Where were you before TX?
- Morgenstern – Leased a portion of a site in NY previously, now have two sites in TX
- King – What is your load?
- Morgenstern – 300-400 megawatts in Rockdale, 100 megawatts in Corsicana, but would ultimately be 400 as well
- Corsicana has a gigawatt and would be great to use, but would take years to use that
- King – Asks Morgenstern to meet and discuss the crypto industry; it is a concern, don’t know what the longevity is; don’t want TX to build out resources and then have you disappear; concerned that it is wrong to have an industry built on demand response
- Morgenstern – Demand response and wholesale participation is a much smaller number and is an offset for higher costs
- King – I’m guessing you’ve seen projections, you understand why we’re concerned about meeting needs?
- Morgenstern – I do; our gut is that the interconnect queue has a lot more projects that will actually come to fruition
- Other part is we consume power but can give it back when it is scarce
- King – Best ideas on how to fix this usually come from industry, so you should think about this
- Chair Schwertner – On 10-Q, $281m in total revenue, $71m power credits earned; statement in there that August was example of Riot’s power strategy; so it is part of your strategy?
- Morgenstern – It is important, of the $31m in August, most was per contract
- Chair Schwertner- Riot supposedly made $125m selling energy during Winter Storm Uri
- Nichols – Unique structure in ERCOT is one of the key reasons people invest; can you give me example of crypto investors across the country?
- Morgenstern – TX is the leader, but many other states are active in this market, business that is particularly well suited for rural areas with a lot of power
- Nichols – Understand there are spots around the state that fit, but it is the ability to sell power you aren’t producing that makes TX unique; are you building facilities outside ERCOT?
- Morgenstern – Only in Rockdale and Corsicana
- Nichols – Do you know of anyone building in the regulated markets?
- Morgenstern – Can look into this
- Nichols – Any other states where crypto miners are flourishing?
- Morgenstern – Yes, OK, WY, Nebraska, etc.
- Nichols – 60% of all additional load in Permian is from crypto; separate from datacenters, 10x datacenter additional load; might be because of population base
- Nichols – System is being gamed, at a critical period with power and demand, if priority will be residential and industrial; references Dutch Tulip market boom
- Chair Schwertner – Crypto mining can be powered by LNG, lower cost of production?
- Morgenstern – Yes, can also capture instead of flaring; miners generally want cheapest available power
- Chair Schwertner – Can you utilize that but also participate in demand response in other programs? You could power yourself with thermal and then sell extra?
- Morgenstern – Depends on the site, this would usually be trying to harness stranded power
- Menendez – Heard you say “we can give the power back,” are you not being compensated?
- Morgenstern – We are at times, e.g. when purchasing per agreement then selling excess, winning an ancillary contract, etc.
- Menendez – Disingenuous to say your giving it back, you’re selling it back; you also mentioned datacenters, datacenters host medical, LEO, etc. data, they don’t mine for bitcoin; how can you call yourself a datacenter? What portion is datacenter services versus mining?
- Morgenstern – Bitcoin is data, it is a datacenter
- Menendez – For the purposes of bitcoin mining
- Chair Schwertner – Is there a statutory definition of datacenter?
- Menendez – If not we will find one
- Johnson – Need to be able to distinguish between a crypto datacenter and what most of us think of as datacenters; what word should we be using? You’re not purporting to be the same
- Morgenstern – Would need to think; firm vs. flexible load is probably the most meaningful distinction
- Chair Schwertner – Reads definition of virtual currency mining facility, not datacenters; when you’re conflating yourself with datacenters, raises concerns about what you’re trying to do; saying you’re a datacenter is disingenuous and you probably shouldn’t testify to that; are you a datacenter?
- Morgenstern – A bitcoin mining datacenter
- Chair Schwertner – Better to say that
- Menendez – Not trying to be adversarial, but when you say things skirting the edges it makes it difficult; hope you’re more careful with how you present facts to us
- Birdwell – Are you leasing the Rockdale and Corsicana properties, or did you purchase?
- Morgenstern – Purchased Corsicana, leased Rockdale
- Birdwell – How terminable is it?
- Morgenstern – Don’t know terms, need to check
- Birdwell – Also possible for lessor to terminate a lease; in Granbury Marathon is the miner, but it is getting to point where you yell fire and then get remuneration for putting the fire out; need to explore prioritizing this within ERCOT; if you own property in Corsicana, it is much more difficult to extract yourself from than a lease environment
- King – Would encourage you to rephrase selling back the electricity; it isn’t like you bought electricity and are storing it in a battery, you’re really saying you’ll turn down the system and not use 300-400 megawatts at each facility; that power draw is equal to a pretty substantial powerplant; not selling it, just not drawing it, and then we pay you
- Morgenstern – We paid for access to it for 10 years at a time per the PPA, the people we bought it from can take it and sell it to someone else
- King – But from your perspective you’re turning off your computers
- Morgenstern – Yes, and not making money from mining
- King – But obviously you make more money doing that than mining, otherwise you’d be doing that
- Chair Schwertner – Participate more in the wholesale market than ancillary?
- Morgenstern – Yes, one is contractual
- Apologizes to Menendez for possibly misleading statements
- Menendez – If you’re selling it, you’re not giving; you’re also different than an AWS, etc.
Woody Rickerson, ERCOT
- Demand from crypto is about the same as City of Austin, 2,600 megawatts; expecting another 2,600 megawatts to come on
- During peak times, 2,600 becomes about 200 megawatts
- Have an interim large load process, voluntary in collaboration with TSPs, about 43k megawatts of large loads and can’t split this between crypto, datacenter, etc.; don’t have load categories for new loads coming online
- On controllable load resources, ERCOT can use load to provide balance just as easily as generation; load communicate the price points and energy management system can balance
- About 500 megawatts identified as crypto load registered as CLRs, only about 130 megawatts actually participating as CLRs
- On ancillary services, roughly 7% of overall money spent on electric market, crypto is about 4% of that 7%; participate in about 3 kinds of ancillary services
- Chair Schwertner – What about economic curtailment for crypto?
- Rickerson – When wholesale price is around $70, most crypto turns off; numbers change with price of crypto, a little bit of a hold your breath moment when we see scarcity to see when the load will go offline
- Would like to see all crypto become CLRs
- Chair Schwertner – What do you need to do that?
- Rickerson – There are some court cases that would need to be resolved first
- Chair Schwertner – Any tie to foreign acquisition of land/infrastructure
- Rickerson – No tie that I see, no registration for crypto
- Chair Schwertner – So you’d like to see all of crypto be CLR?
- Rickerson – From a grid operator standpoint CLRs are a good way to have visibility on when it will turn on and off
- Chair Schwertner – We could mandate that, could we not? Hope people are taking notes
David Ball, American Electric Power
- Picks up from earlier testimony
- Crypto mining and datacenters are typically large energy consumers
- AEP has concerns of ownership of crypto industry as it is a relatively large amount of load versus other industries
- Facilities’ true ownership and operations of entities is unclear
- Need large loads, incl. crypto, to register with ERCOT and NERC and be subject to reliability standards
- Need to encourage planning and RTO tools to assess dynamic aspect of large loads like bitcoin mining
- Crypto mining loads are sensitive to unexpected frequency and voltage changes, resulting loss can lead to grid equipment damage, system tripping offline, and outages
- Supports ERCOT having greater visibility on large flexible loads
- Target for cyberattacks from bad actors
- NERC should require registration of large loads, AEP supports registration of crypto, AI, and datacenters with ERCOT and NERC; should be supported by anyone with interest in reliability
- Transmission operators also face challenges with large loads, need to look at impact of large loads on resources
- Need to develop new processes and tech to forecast large loads operations, including RTOs capable of quantifying voltage and stability limits
- System operators and reliability coordinators need to have tools capable of identifying large loads causing reliability issues
- More holistic planning on interconnections should be considered, 765 kV transmission could lower energy loss over long distances
- Menendez – Appreciates the recommendations from AEP and ERCOT, starting to see a foundation of how to move forward; would also like to hear from co-ops and others in the system
- King – Two ways crypto makes money is by pre-purchasing power at low price, then when prices are high they sell that same power back into the market and curtail; other way is participating in demand response and being paid by ERCOT
- Rickerson – Only time they are paid by ERCOT is for ancillary services, if a crypto miner submits ancillary service and are awarded it
- King – Are they selling back to who they purchased it from?
- Rickerson – Megawatt value sold to ERCOT
- King – And the unique part of their business model is that they can ramp up and down the mining operation very quickly
- Rickerson – Right, very few loads capable of doing that
- Nichols – Asks Ball for written testimony detailing recommendations; you seem to be able to identify difference between crypto and datacenters, but can’t tell us the difference?
- Ball – Seeing difference in reaction to price at metering between miners and datacenters
- Nichols – When we’re creating definitions for datacenters, etc., to define differences from crypto miners, will need something more than load differences
- Chair Schwertner – No statutory definition of datacenter
- Nichols – Would be helpful to have one
- Chair Schwertner – On Riot’s revenue, press release highlighted sale of pre-purchase energy to TXU, receive credits on future energy bills, press release also states Riot participates in demand response; two different ways, clear on how you make money from an electricity standpoint
- Morgenstern – Correct, Corsicana is not under a PPA
- CLR program seems market based and fair; two registration pathways, one under Sen. Johnson’s bill and one for CLR
- CLR would make sense
- Chair Schwertner – I don’t understand why crypto is only 500 megawatts of the 3 gigawatts in CLR
- Morgenstern – More of a legal problem
Public Testimony
Charge 1:
Matthew Boms, Texas Advanced Energy Business Alliance
- Energy efficiency programs should be available for all residential customers; could save $5.5b
- The cheapest MW is the one not spent
- Need to solidify rules on DERs
- Johnson – DERs proliferations could impact transmission challenges
- Could avoid congestion costs
Elisa Hammond, Third Act Texas
- Support the growth of renewables and batteries
- Oppose the expansion of coal and gas entities due to negative health and climate impacts
- From a business perspective oil and gas are inefficient
Joanna Freebaum, Self
- Customers are having trouble paying their bills and energy is inefficient
- Solar coming online is going to put us in a bind and more farmland will be taken over
- Chair Schwertner – Overviews federal tax subsidies in their written testimony
Larry Leninschmidt, Self
- Climate change has not been discussed in this hearing at all until this point
- $2m needs to be appropriate to the PUC to create a climate change plan to be updated every two years
- Air quality is also a concern; will contribute to additional pollution
- What about the massive subsidies of oil and gas built into the system
- Overviews abandoned unplugged well
- Johnson – We need to be bearing in mind all aspects of this situation
Susan Meridth, Self
- Energy efficiency consultant; do not think roads are an apt metaphor for energy
- Notes the complexity of the situation
Charge 2:
Don Brown, Self
- HB 2555 gave the option for pre-approval for grid resilience; no PUC mandate/authority to protect from low-frequency events
- CenterPoint has been working for years to handle EMP high frequency pulses
- Entire state should have a mandate to handle these types of events
- Johnosn – There are several agencies looking into this specific issue
Larry Leninschmidt, Self
- Should be preparing for the grid of 2050; need a backbone of transmission lines planned and constructed now
- Comprehensive plan is needed; economic analysis does not include extending the economic life of transmission lines
- Should consider high voltage lines and consider providing incentives
Susan Meridth, Self
- Regional solutions make the most sense concerning transmission lines
- Should have incentives for all demand side storage
Charge 3:
Lee Bratcher, Texas Blockchain Council
- Are adding 90 MW of bitcoin mining per month
- 40k MW of flexible phantom load in the interconnection queue
- Support additional fees to get that cleared out of the queue of that phantom load
- Largest employer in 3 counties and largest taxpayer in 4 counties
- Was a false fact earlier that 60% of W Texas oncoming load was bitcoin mining
- ERCOT says this is actually 20%
- Bitcoin mining is a responsive and flexible load
- Texas ATM research paper showed bitcoin mining does not stress/strain the grid
- Another showed bitcoin mining could be beneficial for grid stability if it moved into CLR
- Is a patent and ongoing litigation issue; support that patent being removed
- AI will not move into CLR because they are not flexible
- 1/3 of bitcoin miners have hedged power price; the remaining are curtailing their load when prices get high; are not getting paid by ancillary services
- Chair Schwertner – Supportive of all bitcoin miners moving into CLR?
- Yes
- Chair Schwertner – That may be something we could do this session
- Johnson – What would that move look like
- We would act like a demand side battery
- Johnson – Money in and out?
- Are lowest bid in ancillary services
- Johnosn – Fund CLR the same as we do ancillary services?
- It is paid for; is an ancillary
- Market costs would not go up if bitcoin miners are in it
- Johnson – Could crowd out, but could bid in at a lower price
- Chair Schwertner – Would be more visibility to us as well
Alex C, Marathon Digital Holdings
- Can quickly curtail to help stabilize grid operations
- In January 2024, voluntarily curtailed for 48 hours
- Want to be a responsible member of the grid
- Nichols – Are you a bitcoin miners
- Yes, Texas sites are mainly crypto mining, also capture excess energy own generation/build generation, develop hardware/software
- Nichols – Difference between data centers and crypto mining?
- Define based on its energy characteristics; we do not have the same high energy requirements 100% of the time
- Could define based on the end result; is difficult as there are not as many differences between us and certain centers
Sheriff Mike Clore, Sheriff Milam County
- Large bitcoin mining center outside of our county
- They have revitalized the area and contributed to the community
- Are responsible corporate citizens
- Chair Schwertner – Are statewide issues with crypto mining, is an important discussion and appreciate your testimony
Susan Meridth, Self
- Proof of work mining is more energy intensive that proof of stake
- Makes sense for large scale centers to have energy storage
- AI uses an exponential amount of energy
Don Brown, Self
- Has the ability to go up and down and have a significant problem with large Chinese transformers that can be shut off at the will of their government
- Need to replace the transformers and allow bitcoin miners to replace them
Adrian Shelley, Public Citizen
- Bitcoin miners are not data centers; use very specific equipment that no one else uses
- Riot Platforms made $8.6m in one month – 7.4m of which was for participation in demand response
- Riot made $24.2m made by selling that energy and made $170m in 2022 for participation in the demand response program
- Vast majority of their income came directly from manipulating the market
- Riot Platforms confirmed they did make $124m during Winter Storm Uri
Mayor Ward Roddam, City of Rockdale
- Bitcoin mining has had a significant impact on our community
- Bitcoin miners Riot and Bitdeer have revitalized the community and created many jobs
- Are the some of the most significant taxpayers to Rockdale ISD and the county
- Have additionally made many donations to the community
- Are low-cost providers of ancillary services
- ERCOT’s current rules effectively govern bitcoin miners while not curtailing local incentives
Next hearing August 27
Adjourned