Texas’s new era of electricity demand is forcing policymakers to walk an unprecedented tightrope.

The state has to keep the lights on – and it has to make sure that Texans can afford to do so..

Massive load growth from data centers, population, and electrification is teeing up existential questions for the ERCOT grid. How do we build what we need without overbuilding? And how do we avoid burdening households with costs that businesses and large users should be paying?

Those questions framed our latest Energy Capital roundtable with Matt Boms and Dr. Joshua Rhodes.

Why bills are rising faster than people expect

Utilities across the country are planning massive infrastructure investments over the next several years, and Texas is leading the way. Between new generation, transmission, and distribution upgrades, the price tag for this growth is substantial.

Texas has covered recent load growth primarily with a mix of solar, wind and batteries. Some state leaders have prioritized new gas plants as well, though capital costs for these facilities has more than doubled in some cases, even as wait lists for turbines have grown.

At the same time, transmission and distribution companies are filing rate cases tied to resiliency, reliability, and growth. Those investments often show up in rates years before customers see any economic benefit from load growth.

What’s driving costs matters more than ever

As large new loads, especially data centers, request connection to the grid, the question of who pays becomes unavoidable.

The basic principle is simple: if infrastructure is built for a specific customer, that customer should bear the cost. If infrastructure provides broad system value, then costs should be shared. Problems arise when all customers pay for expensive upgrades to cover loads that may be temporary or never fully materialize – especially with transformers, substations, and core hardware now costing multiples more than they did just a few years ago.

Without guardrails, Texas risks building expensive infrastructure that everyone pays for, even if demand disappears for the energy that infrastructure is meant to support.

Underused tools

There are ways to blunt this load-growth pressure.

Distributed energy resources (i.e. community power or local power), demand response, and energy waste reduction can reduce peak demand and delay or avoid costly grid upgrades. In many cases, these solutions are faster and cheaper than traditional investments in poles and wires.

Analyses show that even modest levels of community power can save ratepayers meaningful amounts of money by deferring transmission and distribution spending while also delivering wholesale market value.

One way or another, decisions made in upcoming utility rate cases will lock in costs for decades.

Grid growth is real. Infrastructure costs are rising. Ignoring either won’t protect customers. The state must align costs with the parties driving them, wringing out value from lower-cost flexibility strategies before committing to the most expensive build-outs.

If Texas effectively walks the line between affordability and reliability, this period of load growth can strengthen the grid without punishing Texans who rely on it.

Timestamps

* 00:06 – Rising Costs, Rising Stakes

* 01:17 – Load Growth and System Pressure

* 03:16 – Gas Dependence and Fuel Risk

* 06:21 – New Generation Costs and Competition

* 07:05 – Oncor Rate Case, $830M Request

* 08:27 – Who Pays, ERCOT vs Other States

* 12:08 – Driveway vs Highway Cost Test

* 15:33 – Capital Bias and Regulatory Incentives

* 18:49 – Avoiding Rate Shock, Role of DERs

* 24:07 – Higher Prices, Solar Payback Effect

* 34:12 – Missing Price Signals in Distribution

* 37:05 – Final Takeaways and Wrap

Resources

Hosts Platforms

* Texas Energy & Power - LinkedIn, Twitter (X), and Bluesky

* Micalah Spenrath - LinkedIn

* Matt Boms - LinkedIn

* Texas Advanced Energy Business Alliance (TAEBA) - LinkedIn

* Joshua Rhodes - LinkedIn

* IdeaSmiths

* Webber Energy Group, UT Austin

Company & Industry News

* Electricity rate hikes slash commercial solar payback periods by 33%, says Wood Mackenzie (pv magazine USA)

* Rising retail rates are accelerating commercial solar payback periods (Wood Mackenzie)

* The Value of Integrating Distributed Energy Resources in Texas (Advanced Energy United)

* TAEBA news page, DER study links (Texas Advanced Energy Business Alliance)

* CenterPoint raises 10-year spending plan to $65.5B (Reuters)

Related Podcasts by TEAP

* More Power that’s Faster and Fairer, Roundtable Discussion (TEAP)

* Why Are Utility Bills Rising So Fast? (Powerlines) (TEAP)

* Distributed Energy Resources and all-of-the-above energy solutions (TEAP)

* Texas’ Load Growth Challenges, And Opportunities (TEAP)

* Texas Needs a Vision for Customer-Side Solutions (TEAP)

* Where the Grid Goes from Here, Reading and Podcast Picks (TEAP)

Energy Capital Podcast is produced by ClarityForge Studios.

Transcript

Micalah Spenrath (00:05.55)

Hi everybody and welcome back to the Energy Capital podcast. I’m your host, Makayla, and I’m joined by Josh Rhodes and Matt Bonds. We are at an interesting place in the energy transition. Energy costs are rising. Utilities are planning to spend trillions of dollars across the country to keep up with rising energy demand. And at the heart of these macro trends is us, the consumers, the payers of electricity bills. So that raises a question. How do we build the grid that we need today?

Micalah Spenrath (00:34.868)

and tomorrow without overbuilding it or pricing people out. I’d like to dig into what’s driving energy costs, where utilities are planning to spend those billions and trillions of dollars, and how we can modernize the grid in a way that’s reliable, efficient, and still affordable. So setting the stage, demand for energy is rising, outpacing traditional energy system planning frameworks and timelines, and utilities are in the middle. Challenge with meeting that demand and keeping costs.

Micalah Spenrath (01:03.778)

to consumers reasonable. So starting with the primary question, what is the primary driver of these increased energy costs in Texas or nationally?

Joshua Rhodes (01:17.038)

You know, there’s just this massive growth in electricity. There’s like a lot of things kind of coming together, kind of been kind of a perfect storm here, right? It’s like one across, you know, the US electricity growth has been flat. It’s been growing in Texas. Texas has been an exception to other places. I mean, really demand growth has been kind of flat, right? And managing a system that is just kind of going from day to day, not really changing is much different than managing a system that’s growing. The amount of inputs you need to that are just different.

Joshua Rhodes (01:46.734)

A lot of the utility spending and buying has been responding to storms or just replacing things kind of at the end of their life, but not really building for growth. And that’s just a different mindset. T...