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Houston expert asks: Is the Texas grid ready for the future?

Guets Column

Data centers, EVs, and storms put the Texas grid to the test. Photo courtesy UH.

Texas has spent the past five years racing to strengthen its electric grid after Winter Storm Uri exposed just how vulnerable it was. Billions have gone into new transmission lines, grid hardening, and a surge of renewables and batteries. Those moves have made a difference, we haven’t seen another systemwide blackout like Uri, but the question now isn’t what’s been done, it’s whether Texas can keep up with what’s coming.

Massive data centers, electric vehicles, and industrial projects are driving electricity demand to unprecedented levels. NERC recently boosted its 10-year load forecast for Texas by more than 60%. McKinsey projects that U.S. electricity demand will rise roughly 40% by 2030 and double by 2050, with data centers alone accounting for as much as 11-12% of total U.S. electricity demand by 2030, up from about 4% today. Texas, already the top destination for new data centers, will feel that surge at a greater scale.

While the challenges ahead are massive and there will undoubtedly be bumps in the road (some probably big), we have an engaged Texas legislature, capable regulatory bodies, active non-profits, pragmatic industry groups, and the best energy minds in the world working together to make a market-based system work. I am optimistic Texas will find a way.

Why Texas Faces a Unique Grid Challenge

About 90% of Texas is served by a single, independent grid operated by ERCOT, rather than being connected to the two large interstate grids that cover the rest of the country. This structure allows ERCOT to avoid federal oversight of its market design, although it still must comply with FERC reliability standards. The trade-off is limited access to power from neighboring states during emergencies, leaving Texas to rely almost entirely on in-state generation and reserves when extreme weather hits.

ERCOT’s market design is also different. It’s an “energy-only” market, meaning generators are paid for electricity sold, not for keeping capacity available. While that lowers prices in normal times, it also makes it harder to finance backup, dispatchable generation like natural gas and batteries needed when the wind isn’t blowing or the sun isn’t shining.

The Risks Mounting

In Texas, solar and wind power supply a significant percentage of electricity to the grid. As Julie Cohn, a nonresident scholar at the Baker Institute, explains, these inverter‑based resources “connect through power electronics, which means they don’t provide the same physical signals to the grid that traditional generators do.” The Odessa incidents, where solar farms tripped offline during minor grid disturbances, showed how fragile parts of this evolving grid can be. “Fortunately, it didn’t result in customer outages, and it was a clear signal that Texas has the opportunity to lead in solving this challenge.”

Extreme weather adds more pressure while the grid is trying to adapt to a surge in use. CES research manager Miaomiao Rimmer notes: “Hurricane frequencies haven't increased, but infrastructure and population in their paths have expanded dramatically. The same hurricane that hit 70 years ago would cause far more damage today because there’s simply more in harm’s way.”

Medlock: “Texas has made significant strides in the last 5 years, but there’s more work to be done.”

Ken Medlock, Senior Director of the Center for Energy Studies at Rice University’s Baker Institute, argues that Texas’s problem isn’t a lack of solutions; it’s how quickly those solutions are implemented. He stresses that during the January 2024 cold snap, natural gas kept the grid stable, proving that “any system configuration with sufficient, dispatchable generation capacity would have kept the lights on.” Yet ERCOT load has exceeded dispatchable capacity with growing frequency since 2018, raising the stakes for future reliability.

Ken notes: “ERCOT has a substantial portfolio of options, including investment in dispatchable generation, storage near industrial users, transmission expansion, and siting generation closer to load centers. But allowing structural risks to reliability that can be avoided at a reasonable cost is unacceptable. Appropriate market design and sufficient regulatory oversight are critical.” He emphasizes that reliability must be explicitly priced into ERCOT’s market so backup resources can be built and maintained profitably. These resources, whether natural gas, nuclear, or batteries, cannot remain afterthoughts if Texas wants a stable grid.

Building a More Reliable Grid

For Texas to keep pace with rising demand and withstand severe weather, it must act decisively on multiple fronts, strengthening its grid while building for long-term growth.

  • Coordinated Planning: Align regulators, utilities, and market players to plan decades ahead, not just for next summer.
  • Balancing Clean and Reliable Power: Match renewable growth with flexible, dispatchable generation that can deliver power on demand.
  • Fixing Local Weak Spots: Harden distribution networks, where most outages occur, rather than focusing only on large-scale generation.
  • Market Reform and Technology Investment: Price reliability fairly and support R&D to make renewables strengthen, not destabilize, the grid.

In Conclusion

While Texas has undeniably improved its grid since Winter Storm Uri, surging electricity demand and intensifying weather mean the work is far from over. Unlike other states, ERCOT can’t rely on its neighbors for backup power, and its market structure makes new dispatchable resources harder to build. Decisive leadership, investment, and reforms will be needed to ensure Texas can keep the lights on.

It probably won’t be a smooth journey, but my sense is that Texas will solve these problems and do something spectacular. It will deliver more power with fewer emissions, faster than skeptics believe, and surprise us all.

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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 appeared on LinkedIn.

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A major heat alert is in place for Texas. Photo via Getty Images

Is the Texas power grid prepared for summer 2025 heat?

Guest Column

Although the first official day of summer is not until June 20, Houstonians are already feeling the heat with record-breaking, triple-digit temperatures. The recent heatwave has many Texans wondering if the state’s grid will have enough power to meet peak demand during the summer.

How the Texas grid fared in summer 2024

To predict what could happen as we enter summer this year, it is essential to assess the state of the grid during summer 2024, and what, if anything, has been improved.

According to research from the Federal Reserve Bank of Dallas, solar electricity generation and utility-scale batteries within the ERCOT power grid set records in summer 2024. On average, solar contributed nearly 25 percent of total power needs during mid-day hours between June 1 and August 31. In critical evening hours, when load (demand for electricity) remains elevated but solar output declines, discharge from batteries successfully filled the gap.

Texas added more battery storage capacity than any other state last year, and, excluding California, now has more battery capacity than the rest of the country combined. The state also added 3,410 megawatts of natural gas-fueled power last year. While we did experience major power losses as a result of extreme weather, such as the derecho in May and Hurricane Beryl in July, ERCOT did not have to issue a single conservation appeal last summer to ward off capacity-related outages--and it was the sixth-hottest summer on record.

Policymakers are also taking steps to pass legislation that will help stabilize the grid. During this year’s 89th legislative session, Senate Bill 6 (TX SB6) was introduced, which seeks to:

  • Improve ERCOT's load forecasting transparency
  • Enhance outage protections for residential consumers
  • Adjust transmission cost allocations
  • Bolster grid reliability

In essence, the bill is meant to balance business growth with grid reliability, ensuring that the state continues to be an attractive destination for industrial expansion while preventing reliability risks due to rapid demand increases.

Is the Texas grid prepared for summer 2025?

The good news is that the grid is predicted to be able to manage the energy demand this summer, but there is no guarantee that power disruptions will not happen.

The National Oceanic and Atmospheric Administration has indicated that summer 2025 will likely be warmer and drier than average across most of Texas. Based on ERCOT data and weather projections, West Texas and the Dallas-Fort Worth and Houston metropolitan areas face the highest risk of outages.

While Texas is No. 1 in wind power and No. 2 in solar power, only behind California, there are valid concerns about heavy reliance on renewables when the wind isn’t blowing or the sun isn’t shining, compounded by a lack of large-scale battery storage. Then, there’s the underlying cost and ecological footprint associated with the manufacturing of those batteries. Although solar and wind capacity continues to expand rapidly, integration challenges remain during peak demand periods, especially during the late afternoon when solar generation declines but air conditioning usage remains high.

Additional factors that contribute to the grid’s instability are that Texas faces a massive surge in demand for electricity due to an increase in large users like crypto mining facilities and data centers, as well as population growth. ERCOT predicts that Texas’ energy demand will nearly double by 2030, with power supply projected to fall short of peak demand in a worst-case scenario beginning in summer 2026.

Thanks to investments in solar power, battery storage, and traditional energy sources, ERCOT has made progress in improving grid reliability which indicates that, at least for this summer, energy load will be manageable. A combination of legislative action, strategic planning and technological innovation will need to continue to ensure that this momentum remains on a positive trajectory.

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Sam Luna is director at BKV Energy, where he oversees brand and go-to-market strategy, customer experience, marketing execution, and more.

Texans are facing extreme weather at every turn — can the grid withstand these events? Photo via heimdallpower.com

Can the Texas grid handle extreme weather conditions across regions?

Guest Column

From raging wildfires to dangerous dust storms and fierce tornadoes, Texans are facing extreme weather conditions at every turn across the state. Recently, thousands in the Texas Panhandle-South Plains lost power as strong winds ranging from 35 to 45 mph with gusts upwards of 65 mph blew through. Meanwhile, many North Texas communities are still reeling from tornadoes, thunderstorms, and damaging winds that occurred earlier this month.

A report from the National Oceanic and Atmospheric Administration found that Texas led the nation with the most billion-dollar weather and climate disasters in 2023, while a report from Texas A&M University researchers indicates Texas will experience twice as many 100-degree days, 30-50% more urban flooding and more intense droughts 15 years from now if present climate trends persist.

With the extreme weather conditions increasing in Texas and nationally, recovering from these disasters will only become harder and costlier. When it comes to examining the grid’s capacity to withstand these volatile changes, we’re past due. As of now, the grid likely isn’t resilient enough to make do, but there is hope.

Where does the grid stand now?

Investment from utility companies have resulted in significant improvements, but ongoing challenges remain, especially as extreme weather events become more frequent. While the immediate fixes have helped improve reliability for the time being, it won't be enough to withstand continuous extreme weather events. Grid resiliency will require ongoing efforts over one-time bandaid approaches.

What can be done?

Transmission and distribution infrastructure improvements must vary geographically because each region of Texas faces a different set of hazards. This makes a one-size-fits-all solution impossible. We’re already seeing planning and investment in various regions, but sweeping action needs to happen responsibly and quickly to protect our power needs.

After investigators determined that the 2024 Smokehouse Creek fire (the largest wildfire in Texas history) was caused by a decayed utility pole breaking, it raised the question of whether the Panhandle should invest more in wrapping poles with fire retardant material or covering wires so they are less likely to spark.

In response, Xcel Energy (the Panhandle’s version of CenterPoint) filed its initial System Resiliency Plan with the Public Utility Commission of Texas, with proposed investments to upgrade and strengthen the electric grid and ensure electricity for about 280,000 homes and businesses in Texas. Tailored to the needs of the Texas Panhandle and South Plains, the $539 million resiliency plan will upgrade equipment’s fire resistance to better stand up to extreme weather and wildfires.

Oncor, whose territories include Dallas-Fort Worth and Midland-Odessa, analyzed more than two decades of weather damage data and the impact on customers to identify the priorities and investments needed across its service area. In response, it proposed investing nearly $3 billion to harden poles, replace old cables, install underground wires, and expand the company's vegetation management program.

What about Houston?

While installing underground wires in a city like Dallas makes for a good investment in grid resiliency, this is not a practical option in the more flood-prone areas of Southeast Texas like Houston. Burying power lines is incredibly expensive, and extended exposure to water from flood surges can still cause damage. Flood surges are also likely to seriously damage substations and transformers. When those components fail, there’s no power to run through the lines, buried or otherwise.

As part of its resiliency plan for the Houston metro area, CenterPoint Energy plans to invest $5.75 billion to strengthen the power grid against extreme weather. It represents the largest single grid resiliency investment in CenterPoint’s history and is currently the most expensive resiliency plan filed by a Texas electric utility. The proposal calls for wooden transmission structures to be replaced with steel or concrete. It aims to replace or strengthen 5,000 wooden distribution poles per year until 2027.

While some of our neighboring regions focus on fire resistance, others must invest heavily in strengthening power lines and replacing wooden poles. These solutions aim to address the same critical and urgent goal: creating a resilient grid that is capable of withstanding the increasingly frequent and severe weather events that Texans are facing.

The immediate problem at hand? These solutions take time, meaning we’re likely to encounter further grid instability in the near future.

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Sam Luna is director at BKV Energy, where he oversees brand and go-to-market strategy, customer experience, marketing execution, and more.

A new coalition of energy leaders wants to “take the Texas grid from good to great." Photo via Getty Images

Houston energy leaders form new coalition to improve Texas power grid

grid tech

A Houston-based coalition that launched this month aims to educate Texas officials about technology designed to shore up the state’s power grid.

The public-private Texas Reliability Coalition says it will promote utility-scale microgrid technology geared toward strengthening the resilience and reliability of the Texas power grid, particularly during extreme weather.

A utility-operated microgrid is a group of interconnected power loads and distributed energy sources that can operate in tandem with or apart from regular power grids, such as the grid run by the Electric Reliability Council of Texas (ERCOT). Legislation passed in 2023 enables the use of utility-scale microgrid technology in Texas’ deregulated energy market, according to the coalition.

John Elder, executive director of the coalition, says that with the legal framework now in place, the Public Utility Commission of Texas and ERCOT need to create rules to establish the Texas marketplace for microgrid technology. The goal, he says, is to “take the Texas grid from good to great” by installing microgrid technology, improving the infrastructure, and strengthening the system — all targeted toward meeting power needs during extreme weather and amid growing demand.

Houston-based CenterPoint Energy will test the utility-scale microgrid technology being promoted by the coalition. In a January 31 filing with the Public Utility Commission, CenterPoint says microgrid technology will be featured in a $36.5 million pilot program that’ll set up an estimated three to five microgrids in the company’s service area. The pilot program is slated to last from 2026 to 2028.

In the public affairs arena, five Houston executives are leading the new reliability commission’s microgrid initiative.

Elder, one of the coalition’s founding members, is president and CEO of Houston-based Acclaim Energy. Other founders include Ember Real Estate Investment & Development, Park Eight Development, and PowerSecure. Ember and Park Eight are based in Houston. Durham, North Carolina-based PowerSecure, which produces microgrid technology, is a subsidiary of energy provider Southern Co.

Aside from Elder, members of the coalition’s board are:

  • Stewart Black, board secretary of the coalition and vice president of Acclaim Energy’s midstream division
  • Todd Burrer, president of municipal utility districts at Inframark.
  • Harry Masterson, managing principal of Ember
  • Martin Narendorf, former vice president at CenterPoint Energy.
Houstonians can expect rain and potential electricity outages this week. The region recently experienced devastation from Hurricane Beryl. Photo via Getty Images

Tropical system expected to strengthen in Gulf of Mexico, CenterPoint reports preparation plans

incoming

Update: Space City Weather reported Monday morning that the storm has turned, and Houston is likely to see minimal effects.

A tropical system in the southwestern Gulf of Mexico was expected to strengthen this week into a tropical storm and dump heavy rains onto Mexico and Texas before reaching the U.S. as a potential hurricane, the National Weather Service said Sunday.

The system, about 340 miles (545 kilometers) south-southeast of the mouth of the Rio Grande, had maximum 50 mph wind speeds (85 kilometers per hour) on Sunday and was forecast to drift slowly northwestward. Forecasters said it was too early to pinpoint the exact track of the storm and its potential impacts but warned that the upper Texas and Louisiana coastlines could see damaging winds and storm surges beginning Tuesday evening.

Houston-based CenterPoint Energy released a statement about its preparation for potential severe weather in the Greater Houston area, as well as in Louisiana and Mississippi. The company reported having 2,000 frontline workers and over 600 vegetation management personnel actively conducting pre-storm activities — with about 700 additional vegetation management personnel and 5,000 additional frontline workers if needed for response.

"While our weather experts work to determine the path, intensity and timing of the tropical activity, we remain vigilant and are fully focused on executing on our storm preparation plan. We are in the process of mobilizing all of our available resources and mutual assistance resources from other utility companies so we will be prepared to safely and quickly restore power to our customers should this tropical system impact our area," Darin Carroll, senior vice president of electric business, says in the release.

Texas Gov. Greg Abbott put state emergency responders on increased readiness and warned of the potential of flash flooding and heavy rains.

“Texas will continue to closely monitor weather conditions to protect the well-being of Texans,” Abbott said in a statement.

Donald Jones, a meteorologist with the National Weather Service in Lake Charles, Louisiana, said during a weather briefing Saturday night that parts of southeast Texas and southwest Louisiana should expect a “whole lot” of rain in the middle and later part of this week.

The tropical disturbance comes after an unusually quiet August and early September in the current Atlantic hurricane season, which runs through Nov. 30. The season was set to peak on Tuesday, Jones said.

So far, there have been five named storms this hurricane season, including Hurricane Beryl, which knocked out power to nearly 3 million homes and businesses in Texas — mostly in the Houston area — in July. Experts had predicted one of the busiest Atlantic hurricane seasons on record.

The next named storm would be called Francine.

In a report issued last week, researchers at Colorado State University cited several reasons for the lull in activity during the current hurricane season, including extremely warm upper level temperatures resulting in stabilization of the atmosphere and too much easterly wind shear in the eastern Atlantic.

“We still do anticipate an above-normal season overall, however, given that large-scale conditions appear to become more favorable around the middle of September,” according to the report.

Last month, the National Oceanic and Atmospheric Administration updated its outlook but still predicted a highly active Atlantic hurricane season. Forecasters tweaked the number of expected named storms from 17 to 25 to 17 to 24.

CenterPoint has committed to "the largest investment in Greater Houston infrastructure in the company's nearly 160-year history." Photo via Getty Images

CenterPoint Energy announces $5B expanded resiliency plan

doubling down

CenterPoint Energy disclosed that it's completed its core resiliency actions first phase of its Greater Houston Resiliency Initiative. The company also reports that it's outlined extra upcoming efforts.

Following the unprecedented outages of Hurricane Beryl, CenterPoint outlined its GHRI in August. As of last week, the first phase, which included more than 40 critical actions in total to strengthen the electric grid, has been completed ahead of schedule.

The company also announced a second phase of GHRI and approximately $5 billion in resiliency investment from 2026 to 2028, a figure that's around twice as much as initially promised.

"We have heard the call to action from our customers and elected officials, and we are responding with bold actions," says Jason Wells, CenterPoint president and CEO, in a statement. "Our defining goal, going forward, is this: to build the most resilient coastal grid in the country that can better withstand the extreme weather of the future. To achieve this ambition, we will undertake a historic level of resiliency actions and investment, because this is what the people of the Greater Houston area expect and deserve."

According to CenterPoint, the second phase will include system hardening, strategic undergrounding, self-healing grid technology, and further enhancements to the company's outage tracker.

CenterPoint outlined its recently completed efforts, including installing over 300 automation devices and more than 1,000 stronger poles, as well as removing hazardous vegetation from more than 2,000 miles of power lines. Next up, CenterPoint says it's near-term actions will include further grid strengthening, public communication improvements, and enhancements to local, community, and emergency partnerships. The details of this phase, which will take place between September 1 to June 1, will be released by September 30.

In the company's longer-term action plan, CenterPoint commits to $5 billion in upgrades from 2026 to 2028 — "the largest investment in Greater Houston infrastructure in the company's nearly 160-year history."

"The mission of this longer-term plan of action is to build the most resilient coastal grid in the country by investing in a smarter grid of the future that can better withstand a broad spectrum of risks," reads the statement. "The proposal, and the entire scope of these actions will be outlined in a new system resiliency plan that is expected to be filed with the Public Utility Commission of Texas on or before January 31, 2025."

CenterPoint reports that lawmakers have received this information directly, and that the plan will be shaped by feedback from its customers, experts, and stakeholders, including elected officials and local agencies.

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ERCOT approves $9.4B project to improve grid, meet data center demand

power project

The Electric Reliability Council of Texas, which manages the electric grid for 90 percent of Texans, is undertaking a $9.4 billion project to improve the reliability and efficiency of statewide power distribution. The initiative comes as ERCOT copes with escalating demand for electricity from data centers and cryptocurrency-mining facilities.

The project, approved Dec. 9 by ERCOT’s board, will involve building a 1,109-mile “super highway” of new 765-kilovolt transmission lines. One kilovolt equals 1,000 volts of electricity.

According to the Hoodline Dallas news site, the $9.4 billion project represents the five- to six-year first phase of ERCOT’s Strategic Transmission Expansion Plan (STEP). Hoodline says the plan, whose price tag is nearly $33 billion, calls for 2,468 miles of new 765-kilovolt power lines.

STEP will enable ERCOT to “move power longer distances with fewer losses,” Hoodline reports.

Upgrading the ERCOT grid is a key priority amid continued population growth in Texas, along with the state’s explosion of new data centers and cryptocurrency-mining facilities.

ERCOT says about 11,000 megawatts of new power generation capacity have been added to the ERCOT grid since last winter.

But in a report released ahead of the December board meeting, ERCOT says it received 225 requests this year from large power users to connect to its grid — a 270 percent uptick in the number of megawatts being sought by mega-users since last December. Nearly three-fourths (73 percent) of the requests came from data centers.

Allan Schurr, chief commercial officer of Houston-based Enchanted Rock, a provider of products and services for microgrids and onsite power generation, tells Energy Capital that the quickly expanding data center industry is putting “unprecedented pressure” on ERCOT’s grid.

“While the state has added new generation and transmission capacity, lengthy interconnection timelines and grid-planning limitations mean that supply and transmission are not keeping pace with this rapid expansion,” Schurr says. “This impacts both reliability and affordability.”

For families in Texas, this could result in higher energy bills, he says. Meanwhile, critical facilities like hospitals and grocery stores face a heightened challenge of preventing power outages during extreme weather or at other times when the ERCOT grid is taxed.

“I expect this trend to continue as AI and high-density computing grow, driving higher peak demand and greater grid variability — made even more complex by more renewables, extreme weather and other large energy users, like manufacturers,” Schurr says.

According to the Pew Research Center, data centers accounted for 4 percent of U.S. electricity use in 2024, and power demand from data centers is expected to more than double by 2030. Data centers that support the AI boom make up much of the rising demand.

In September, RBN Energy reported more than 10 massive data-center campuses had been announced in Texas, with dozens more planned. The Lone Star State is already home to roughly 400 data centers.

“Texas easily ranks among the nation’s top states for existing data centers, with only Virginia edging it out in both data-center count and associated power demand,” says RBN Energy.

Federal judge strikes Trump order blocking wind energy development

wind win

In a win for clean energy and wind projects in Texas and throughout the U.S., a federal judge struck down President Donald Trump’s “Day One” executive order that blocked wind energy development on federal lands and waters, the Associated Press reports.

Judge Patti Saris of the U.S. District Court for the District of Massachusetts vacated Trump’s executive order from Jan. 20, declaring it unlawful and calling it “arbitrary and capricious.”

The challenge was led by a group of state attorneys general from 17 states and Washington, D.C., which was led by New York Attorney General Letitia James. The coalition pushed back against Trump's order , arguing that the administration didn’t have the authority to halt project permitting, and that efforts would critically impact state economies, the energy industry, public health and climate relief efforts.

White House spokesperson Taylor Rogers told the Associated Press that wind projects were given unfair treatment during the Biden Administration and cited that the rest of the energy industry suffered from regulations.

According to the American Clean Power Association, wind is the largest source of renewable energy in the U.S. It provides 10 percent of the electricity generated—and growing. Texas leads the nation in wind electricity generation, accounting for 28 percent of the U.S. total in 2024, according to the U.S. Energy Information Administration.

Several clean-energy initiatives have been disrupted by recent policy changes, impacting Houston projects.

The Biden era Inflation Reduction Act’s 10-year hydrogen incentive was shortened under Trump’s One Big Beautiful Bill Act, prompting ExxonMobil to pause its Baytown low-carbon hydrogen project. That project — and two others in the Houston region — also lost federal support as part of a broader $700 million cancellation tied to DOE cuts.

Meanwhile, Texas House Democrats have urged the administration to restore a $250 million Solar for All grant that would have helped low-income households install solar panels.

Texas launches cryptocurrency reserve with $5 million Bitcoin purchase

Digital Deals

Texas has launched its new cryptocurrency reserve with a $5 million purchase of Bitcoin as the state continues to embrace the volatile and controversial digital currency.

The Texas Comptroller’s Office confirmed the purchase was made last month as a “placeholder investment” while the office works to contract with a cryptocurrency bank to manage its portfolio.

The purchase is one of the first of its kind by a state government, made during a year where the price of Bitcoin has exploded amid the embrace of the digital currency by President Donald Trump’s administration and the rapid expansion of crypto mines in Texas.

“The Texas Legislature passed a bold mandate to create the nation’s first Strategic Bitcoin Reserve,” acting Comptroller Kelly Hancock wrote in a statement. “Our goal for implementation is simple: build a secure reserve that strengthens the state’s balance sheet. Texas is leading the way once again, and we’re proud to do it.”

The purchase represents half of the $10 million the Legislature appropriated for the strategic reserve during this year’s legislative session, but just a sliver of the state’s $338 billion budget.

However, the purchase is still significant, making Texas the first state to fund a strategic cryptocurrency reserve. Arizona and New Hampshire have also passed laws to create similar strategic funds but have not yet purchased cryptocurrency.

Wisconsin and Michigan made pension fund investments in cryptocurrency last year.

The Comptroller’s office purchased the Bitcoin the morning of Nov. 20 when the price of a single bitcoin was $91,336, according to the Comptroller’s office. As of Friday afternoon, Bitcoin was worth slightly less than the price Texas paid, trading for $89,406.

University of Houston energy economist Ed Hirs questioned the state’s investment, pointing to Bitcoin’s volatility. That makes it a bad investment of taxpayer dollars when compared to more common investments in the stock and bond markets, he said.

“The ordinary mix [in investing] is one that goes away from volatility,” Hirs said. “The goal is to not lose to the market. Once the public decides this really has no intrinsic value, then it will be over, and taxpayers will be left holding the bag.”

The price of Bitcoin is down significantly from an all-time high of $126,080 in early October.

Lee Bratcher, president of the Texas Blockchain Council, argued the state is making a good investment because the price of Bitcoin has trended upward ever since it first launched in early 2009.

“It’s only a 16-year-old asset, so the volatility, both in the up and down direction, will smooth out over time,” Bratcher said. “We still want it to retain some of those volatility characteristics because that’s how we could see those upward moves that will benefit the state’s finances in the future.”

Bratcher said the timing of the state’s investment was shrewd because he believes it is unlikely to be valued this low again.

The investment comes at a time that the crypto industry has found a home in Texas.

Rural counties have become magnets for crypto mines ever since China banned crypto mining in 2021 and Gov. Greg Abbott declared “Texas is open for crypto business” in a post on social media.

The state is home to at least 27 Bitcoin facilities, according to the Texas Blockchain Council, making it the world’s top crypto mining spot. The two largest crypto mining facilities in the world call Texas home.

The industry has also come under criticism as it expands.

Critics point to the industry’s significant energy usage, with crypto mines in the state consuming 2,717 megawatts of power in 2023, according to the comptroller’s office. That is enough electricity to power roughly 680,000 homes.

Crypto mines use large amounts of electricity to run computers that run constantly to produce cryptocurrencies, which are decentralized digital currencies used as alternatives to government-backed traditional currencies.

A 2023 study by energy research and consulting firm Wood Mackenzie commissioned by The New York Times found that Texans’ electric bills had risen nearly 5%, or $1.8 billion per year, due to the increase in demand on the state power grid created by crypto mines.

Residents living near crypto mines have also complained that the amount of job creation promised by the facilities has not materialized and the noise of their operation is a nuisance.

“Texas should be reinvesting Texan’s tax money in things that truly bolster the economy long term, living wage, access to quality healthcare, world class public schools,” said state Sen. Molly Cook, D-Houston, who voted against the creation of the strategic fund. “Instead it feels like they’re almost gambling our money on something that is known to be really volatile and has not shown to be a tide that raises all boats.”

State Sen. Charles Schwertner, R-Georgetown, who authored the bill that created the fund, said at the time it passed that it will allow Texas to “lead and compete in the digital economy.”

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This story was originally published by The Texas Tribune and distributed through a partnership with The Associated Press.

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