While our grid may be showing its age, this is the perfect time to shift from reacting to problems to getting ahead of them.

Did you catch those images of idle generators that CenterPoint had on standby during Hurricane Beryl? With over 2 million people in the Houston area left in the dark, many were wondering, "if the generators are ready, why didn’t they get used?" It seems like power outages are becoming just as common as the severe storms themselves.

But as Ken Medlock, Senior Director of the Baker Institute Center for Energy Studies (CES) explains, it's not a simple fix. The outages during Hurricane Beryl were different from what we saw during Winter Storm Uri. This time, with so many poles and wires down, those generators couldn’t be put to use. It’s a reminder that each storm brings its own set of challenges, and there’s no one-size-fits-all solution when it comes to keeping the lights on. While extreme weather is one of the leading threats to our electric grid, it's certainly not the only one adding strain on our power infrastructure.

The rapid rise of artificial intelligence (AI) and electric vehicles (EVs) is transforming the way we live, work, and move. Beneath the surface of these technological marvels lies a challenge that could define the future of our energy infrastructure: they all depend on our electrical grid. As AI-powered data centers and a growing fleet of EVs demand more power than ever before, our grid—already under pressure from extreme weather events and an increasing reliance on renewable energy—faces a critical test. The question goes beyond whether our grid can keep up, but rather focuses on how we can ensure it evolves to support the innovations of tomorrow without compromising reliability today. The intersection of these emerging technologies with our aging energy infrastructure poses a dilemma that policymakers, industry leaders, and consumers must address.

Julie Cohn, Nonresident Fellow at the Center for Energy Studies at the Baker Institute for Public Policy, presents several key findings and recommendations to address concerns about the reliability of the Texas energy grid in her Energy Insight. She suggests there’s at least six developments unfolding that will affect the reliability of the Texas Interconnected System, operated by the Electric Reliability Council of Texas (ERCOT) and the regional distribution networks operated by regulated utilities.

Let’s dig deeper into some of these issues:

AI

AI requires substantial computational power, particularly in data centers that house servers processing vast amounts of data. These data centers consume large amounts of electricity, putting additional strain on the grid.

According to McKinsey & Company, a single hyperscale data center can consume as much electricity as 80,000 homes combined. In 2022, data centers consumed about 200 terawatt-hours (TWh), close to 4 percent, of the total electricity used in the United States and approximately 460 TWh globally. That’s nearly the consumption of the entire State of Texas, which consumed approximately 475.4 TWh of electricity in the same year. However, this percentage is expected to increase significantly as demand for data processing and storage continues to grow. In 2026, data centers are expected to account for 6 percent, almost 260 TWh, of total electricity demand in the U.S.

EVs

According to the Texas Department of Motor Vehicles, approximately 170,000 EVs have been registered across the state of Texas as of 2023, with Texas receiving $408 million in funding to expand its EV charging network. As Cohn suggests, a central question remains: Where will these emerging economic drivers for Texas, such as EVs and AI, obtain their electric power?

EVs draw power from the grid every time they’re plugged in to charge. This may come as a shock to some, but “the thing that’s recharging EV batteries in ERCOT right now, is natural gas,” says Medlock. And as McKinsey & Company explains, the impact of switching to EVs on reducing greenhouse gas (GHG) emissions will largely depend on how much GHG is produced by the electricity used to charge them. This adds a layer of complexity as regulators look to decarbonize the power sector.

Depending on the charger, a single EV fast charger can pull anywhere from 50 kW to 350 kW of electricity per hour. Now, factor in the constant energy drain from data centers, our growing population using power for homes and businesses, and then account for the sudden impact of severe environmental events—which have increased in frequency and intensity—and it’s clear: Houston… we have a problem.

The Weather Wildcard

Texas is gearing up for its 2025 legislative session on January 14. The state's electricity grid once again stands at the forefront of political discussions. The question is not just whether our power will stay on during the next winter storm or scorching summer heatwave, but whether our approach to grid management is sustainable in the face of mounting challenges. The events of recent years, from Winter Storm Uri to unprecedented heatwaves, have exposed significant vulnerabilities in the Texas electricity grid, and while legislative measures have been taken, they have been largely patchwork solutions.

Winter Storm Uri in 2021 was a wake-up call, but it wasn’t the first or last extreme weather event to test the Texas grid. With deep freezes, scorching summers, and unpredictable storms becoming the norm rather than the exception, it is clear that the grid’s current state is not capable of withstanding these extremes. The measures passed in 2021 and 2023 were steps in the right direction, but they were reactive, not proactive. They focused on strengthening the grid against cold weather, yet extreme heat, a more consistent challenge in Texas, remains a less-addressed threat. The upcoming legislative session must prioritize comprehensive climate resilience strategies that go beyond cold weather prep.

“The planners for the Texas grid have important questions to address regarding anticipated weather extremes: Will there be enough energy? Will power be available when and where it is needed? Is the state prepared for extreme weather events? Are regional distribution utilities prepared for extreme weather events? Texas is not alone in facing these challenges as other states have likewise experienced extremely hot and dry summers, wildfires, polar vortexes, and other weather conditions that have tested their regional power systems,” writes Cohn.

Renewable Energy and Transmission

Texas leads the nation in wind and solar capacity (Map: Energy, Environment, and Policy in the US), however the complexity lies in getting that energy from where it’s produced to where it’s needed. Transmission lines are feeling the pressure, and the grid is struggling to keep pace with the rapid expansion of renewables. In 2005, the Competitive Renewable Energy Zones (CREZ) initiative showed that state intervention could significantly accelerate grid expansion. With renewables continuing to grow, the big question now is whether the state will step up again, or risk allowing progress to stall due to the inadequacy of the infrastructure in place. The legislature has a choice to make: take the lead in this energy transition or face the consequences of not keeping up with the pace of change.

Conclusion

The electrical grid continues to face serious challenges, especially as demand is expected to rise. There is hope, however, as regulators are fully aware of the strain. While our grid may be showing its age, this is the perfect time to shift from reacting to problems to getting ahead of them.

As Cohn puts it, “In the end, successful resolution of the various issues will carry significant benefits for existing Texas industrial, commercial, and residential consumers and have implications for the longer-term economic attractiveness of Texas. Suffice it to say, eyes will be, and should be, on the Texas legislature in the coming session.”

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Scott Nyquist is a senior advisor at McKinsey & Company and vice chairman, Houston Energy Transition Initiative of the Greater Houston Partnership. The views expressed herein are Nyquist's own and not those of McKinsey & Company or of the Greater Houston Partnership. This article originally ran on LinkedIn on September 11, 2024.

What does the future of global energy hold? A Rice University institute published its research-backed findings on the subject. Photo via Getty Images

Rice University releases data, analysis on future of global energy

eyes on insights

The Center for Energy Studies at Rice University’s Baker Institute for Public Policy has released a collection of articles addressing the most pressing policy issues in global energy.

The inaugural Energy Insights was supported by ongoing research at CES, with a goal of better understanding the energy landscape over the next few years.

“While no one can predict exactly what comes next, if we are paying attention, the road we travel provides plenty of signposts that can be used to understand the challenges and opportunities ahead,” wrote CES Senior Director Kenneth Medlock.

The articles, which are available online in a 120-page packet, focus on a wide variety of key issues — Texas electricity policy, energy and geopolitics in Eurasia, how the energy transition will affect the Middle East, the growing necessity of minerals and materials, and more.

All in all, the new Energy Insights will look at the ever-changing energy landscape.

“Industrialization, improved living standards, technological and process innovation, and increased mobility of people and goods, to name a few, are all hallmarks of continual energy transition,” Medlock adds. “The process is not done. The past lives on through long-lived legacy infrastructures, and the future evolves most rapidly when it can leverage that legacy. Exactly how though, remains an elusive topic.”

Contributors to the publication include: Medlock, Julie Cohn, Gabe Collins, Ted Loch-Temzelides, Jim Krane, Osamah Alsayegh, Francisco Monaldi, Tilsa Oré Mónago, Michelle Michot Foss, Steven Miles, Mark Finley, Mahmoud El-Gamal, Chris Bronk, Rachel Meidl and Ed Emmett.

The initiative plans to bring together leading experts and policymakers to study the Argentine energy sector from oil and gas to renewables. Photo via Getty Images

Rice University to target Argentina energy sector with new initiative

headed south

A program at Rice University aiming to target the Argentine energy sector by including reports, workshops and conferences.

The Baker Institute for Public Policy announced a new initiative, the Baker Institute’s Argentina Energy Sector Initiatives, that will launch in September.

The initiative plans to bring together leading experts and policymakers to study the Argentine energy sector like oil and natural gas exploration and production, energy infrastructure (e.g., pipelines, electricity transmission and LNG export terminals), and the mining sector in the renewable energy transition. The initiative will include written reports and hold in-person conferences and workshops in Houston and Buenos Aires. There will also be a monthly online seminar series.

Fellows from the institute’s Center for Energy Studies will collaborate on the initiative with Argentine policymakers and technical experts and policymakers. Argentina contains the world’s second largest unconventional natural gas and fourth largest unconventional petroleum reserves, the Vaca Muerta shale formation.

The institute's Center for Energy Studies, which the Argentina program will take place in, has ranked as the top energy think tank in the world.

September’s formal launch will take place at the Baker Institute in Houston, and will be open to the public and live-streamed. The event will feature the participation of Baker Institute fellows, Argentina Program non-resident fellows, Argentine elected officials and others

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D.C. energy company secures $233M for ERCOT battery storage projects

fresh funding

The Electricity Reliability Council of Texas’ grid will get a boost courtesy of Lydian Energy.

The D.C.-based company announced the successful financial close of its first institutional project financing totaling $233 million, backed by ING Group and KeyBank. The financing will support three battery energy storage system (BESS) projects in Texas.

Lydian is an independent power producer that specializes in the development, construction and operation of utility-scale solar and battery energy storage projects. The company reports that it plans to add 550 megawatts of energy—which can power approximately 412,500 homes—to the Texas grid administered by ERCOT.

“This financing marks an important step forward as we continue executing on our vision to scale transformative battery storage projects that meet the evolving energy needs of the communities we serve,” Emre Ersenkal, CEO at Lydian Energy, said in a news release.

The projects include:

Pintail 

  • Located in San Patricio county
  • 200 megawatts
  • Backed by ING

Crane

  • Located in Crane county
  • 200 megawatts
  • Backed by ING

Headcamp

  • Located in Pecos county
  • 150 megawatts
  • Backed by KeyBank

ING served as the lender for Pintail and Crane projects valued at a combined total of approximately $139 million.

KeyBank provided a $94 million financing package for the Headcamp project. KeyBanc Capital Markets also structured the financing package for Headcamp.

The three projects are being developed under Excelsior Energy Capital’s Fund II. Lydian’s current portfolio comprises 20 solar and storage projects, totaling 4.7 gigawatts of capacity.

“Our support of Lydian’s portfolio reflects ING’s focus on identifying strategic funding opportunities that align with the accelerating demand for sustainable power,” Sven Wellock, managing director and head of energy–renewables and power at ING, said in the release. “Battery storage plays a central role in supporting grid resilience, and we’re pleased to back a platform with strong fundamentals and a clear execution path.”

The facilities are expected to be placed in service by Q4 2025. Lydian is also pursuing additional financing for further projects, which are expected to commence construction by the end of 2025.

“These financings represent more than capital – they reflect the strong demand for reliable energy infrastructure in high-growth U.S. markets,” Anne Marie Denman, co-founding partner at Excelsior Energy Capital and chair of the board at Lydian Energy, added in the news release. “We’re proud to stand behind Lydian’s talented team as they deliver on the promise of battery storage with bankable projects, proven partners, and disciplined execution. In the midst of a lot of noise, these financings are a reminder that capital flows where infrastructure is satisfying fundamental needs of our society – in this case, the need for reliable, sustainable, domestic, and affordable energy.”

Houston American Energy closes acquisition of New York low-carbon fuel co.

power deal

Renewable energy company Houston American Energy Corp. (NYSE: HUSA) has acquired Abundia Global Impact Group, according to a news release.

Houston American reports that the acquisition will allow it to create a combined company focused on converting waste plastics into high-value, drop-in, low-carbon fuels and chemical products. It plans to move forward with Abundia’s plans for developing large-scale recycling projects, with a new facility previously announced for the Gulf Coast, located in Cedar Port Industrial Park, near the Baytown area of Houston.

New York-based Abundia used its proprietary pyrolysis process to convert plastic and certified biomass waste into high-quality renewable fuels. Its founder, Ed Gillespie, will serve as CEO of the combined company and will join HUSA’s board of directors. Peter Longo, who previously served as HUSA's CEO, will serve as chairman of the board. Lucie Harwood was named CFO and Joseph Gasik will serve as COO.

“The completion of this acquisition represents a pivotal transformation for HUSA,” Longo said in a news release. “Abundia has a commercially ready solution for converting waste into valuable fuels and chemicals, with a backlog of development opportunities utilizing proprietary technologies and key industry partnerships. This transaction gives HUSA shareholders a ready-made platform and project pipeline for future value generation as the fuel and chemical industries accelerate their adoption of low-carbon solutions and sustainable aviation fuel.”

The combined company plans to serve what it estimates is a multi-billion-dollar global demand for renewable fuels, Sustainable Aviation Fuel (SAF) and recycled chemical feedstocks, according to the news release.

“This is a landmark moment for Abundia and a major step forward for the renewable industry,” Gillespie added in the release. “Joining forces with HUSA and entering the public capital markets positions us to accelerate growth, scale our technology and expand our influence within the renewable and recycling industries. I am proud of the hard work and determination of both the AGIG and HUSA teams to finalize this transaction. We look forward to delivering shareholder value and critical technologies to reduce carbon emissions.”

Houston American Energy announced the deal in March. The company also closed a $4.42 million registered direct offering in January.