by the numbers

Texas sees major increase in battery storage capacity, according to a new report

ERCOT will close 2023 with nearly 3.3 gigawatts of battery storage capacity and almost 10.7 gigawatts by the end of 2024. That would represent a one-year jump of 225 percent. Photo via Getty Images

The Electric Reliability Council of Texas — which runs the power grid serving about 90 percent of the state — is energizing the rise of U.S. battery storage capacity.

A new report from data provider S&P Global Commodity Insights forecasts that ERCOT will close 2023 with nearly 3.3 gigawatts of battery storage capacity and almost 10.7 gigawatts by the end of 2024. That would represent a one-year jump of 225 percent.

Austin-based ERCOT is expected to add nearly 400 megawatts of battery storage capacity during the third quarter after adding no capacity in the second quarter, according to S&P Global.

In terms of bulking up battery storage capacity, ERCOT had a momentous first quarter. The nonprofit organization added 498.6 megawatts of battery storage capacity during the first three months of 2023, accounting for 70.2 percent of all new capacity in the U.S., says S&P Global.

One gigawatt, which equals one billion watts, can provide enough power for about 750,000 homes.

ERCOT’s battery storage capacity has contributed to a lack of power outages during this year’s scorching summer heat in Texas. However, it’s worth noting that this summer’s wave of triple-digit temperatures is straining the ERCOT grid, prompting a series of pleas for Texans to conserve energy.

ERCOT set a new September peak demand record of 78,459 megawatts September 4, surpassing the previous September peak of 72,370 megawatts set on September 1, 2021. The current all-time peak demand, 85,435 megawatts, was set August 10.

As of September 5, ERCOT has set 10 records this year for peak demand. In 2022, ERCOT set 11 peak demand records, surpassing 80 gigawatts for the first time.

“Based on expected weather conditions, ERCOT anticipates there will be sufficient generation to meet customer demand this summer,” ERCOT said in its forecast for summertime power demand.

ERCOT’s combined solar and wind share of overall power generation is projected to reach 43 percent by 2035, according to S&P Global.

“Firing on all green energy cylinders, despite a long-surpassed renewable portfolio standard,” says S&P Global, “Texas leads the U.S. in operating and planned wind energy as well as solar and battery storage capacity in development … .”

Houston is playing a pivotal role in Texas’ adoption of battery storage of wind and solar power, with companies like Broad Reach Power and Key Capture Energy among the leaders.

“Known for its strong ties with oil and gas, Texas and Houston in particular are changing the narrative on their relationships with energy, with new innovations and initiatives being created to combat the effects of climate change and to create better, more efficient energy systems for years to come,” says the Greater Houston Partnership.

More than three-fourths of the 20.8 gigawatts of utility-scale battery storage capacity on track to be installed from 2022 to 2025 will be in Texas (7.9 gigawatts) and California (7.6 gigawatts), according to the U.S. Energy Information Administration.

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Texas has also officially claimed the No. 1 spot in the U.S. for existing and under-construction data center capacity, according to the report. Photo courtesy JLL

Houston stands to benefit from constraints dogging data center markets elsewhere in Texas, a new report indicates. This comes against the backdrop of Texas surpassing Virginia as the country’s top state for data centers — and amid deepening opposition to these facilities.

The report, published by commercial real estate services provider JLL, foresees Houston continuing to gain traction in data center development as occupants seek “scalable alternatives” to Texas markets experiencing supply-and-demand imbalances.

The Houston area currently hosts data centers with 287 megawatts of capacity, well below capacity levels in the Dallas-Fort Worth, Austin-San Antonio and West Texas markets.

However, the region is witnessing a spike in capacity, with 390 megawatts of capacity under construction, according to the report. Counting newly built data centers, Houston would be home to 677 megawatts of data center capacity, an 80 percent increase from the current inventory, the report says.

Developers target West Houston for large-scale data centers

Developers increasingly are evaluating West Houston and surrounding areas for large-scale campuses capable of supporting behind-the-meter power, according to the report. Data center development in the region is likely to remain concentrated in those areas, where power is readily accessible and flood risks are lower, the report adds.

The report notes that Houston is evolving from a traditionally enterprise-focused co-location market for data centers into a “credible large-scale growth market,” buoyed by rising interest in hyperscale facilities and increased development activity.

Corporate, energy and healthcare users are still active in Houston’s data center market, the report says, with cloud computing and technology tenants making inroads. The Houston market absorbed 25 megawatts of data center capacity in the first half of this year.

Texas crowned No. 1 state market for data center capacity

The growth of Houston’s data center sector is occurring in tandem with Texas’ ascent as a data center market. The report shows Texas now boasts 26 gigawatts of existing and under-construction capacity, followed by Virginia at 13 gigawatts.

JLL declares that “Texas has cemented its position as the state for data centers.”

The “frontier” markets of West Texas, the Carolinas, Louisiana, and Ohio account for 77 percent of all capacity being developed nationwide, according to the report.

As evidence of Texas’ heightened stature in the data center sector, commercial real estate services provider Cushman & Wakefield recently ranked Dallas as the world’s No. 1 primary data center market, while Austin-San Antonio led the list of second-tier markets and West Texas topped the third-tier ranking.

These rankings underscore “Texas’ growing importance as a large-scale AI infrastructure hub,” Cushman & Wakefield says.

Opposition to new data centers in Texas grows

While businesses see the value of adding data centers in Texas, the state’s data center boom is rattling residents and politicians alike.

A recent University of Houston survey finds that although 85 percent of Houston-area residents use AI—a key driver of data center growth—nearly 63 percent oppose construction of a data center within a mile of their home. Experts estimate 6.5 gigawatts of capacity, or roughly one-fifth of the total U.S. pipeline, will join the Texas power grid by 2030, with Houston serving as a main hub.

A poll taken recently by the University of Texas/Texas Politics Project yielded similar results: 56 percent of Texans oppose development of data centers in their community.

“Texas’ grid is already facing pressure from population growth, extreme weather and rising industrial demand,” UH researcher Soran Mohtadi says. “When residents say they are concerned about data centers, they’re mostly referring to grid reliability and affordability.”

Data center backlash prompts action by politicians

Responding to Texans’ concerns over power and water consumption, Gov. Greg Abbott recently imposed a moratorium on new data centers in the state to allow time for regulatory agencies to assess the projects’ impact. Meanwhile, some state lawmakers are calling for a crackdown on data center development.

Last month, a state legislative committee chaired by Sen. Joan Huffman, a Houston Republican, held a hearing on the effects of state sales tax exemptions given to data centers. The cost of these exemptions has climbed from an estimated $14.6 million in 2014-15 to a projected $3.3 billion in 2028-29, according to law firm Holland & Knight.

Two backers of massive data centers in Texas, social media giant Meta Platforms and AI powerhouse OpenAI, agreed this week to comply with Abbott’s recently issued standards regarding data center projects—and more have followed suit.

Dan Diorio, executive vice president of state policy and government affairs for the industry-backed Data Center Coalition, fears backlash against data centers may curb economic growth in Texas.

“I worry that communities that put moratoriums ultimately create too much uncertainty and unpredictability, and what that ultimately means is that those communities may shut themselves off to data center development but also may shut themselves off to broader economic development,” Diorio told Fox 7 News in Austin.

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