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Short queues help drive Texas clean energy boom

Jun 10, 2024
Illustration of a stack of cash with three windmills on top of it.

Illustration: Victoria Ellis/Axios

Wind and solar projects in Texas are hot. Short interconnection times, low development costs and rising regional power needs are fueling demand.

Why it matters: Companies are searching for the quickest way to get clean electricity to power data centers for AI, and Texas' shorter queues are increasingly attractive.

Zoom in: Both investors and developers are focused on clean energy projects in ERCOT, the Texas grid operator.

  • When it comes to new wind and solar projects, "it almost appears as if most roads are leading to Texas for the next two years," says Sam Scroggins, managing director of Lazard's Global Power, Energy & Infrastructure Group.
  • There's also an active M&A market for clean energy projects in ERCOT, and that's expected to continue for the next two years, said Scroggins.
  • The demand for clean energy is being driven by growing power needs in Texas, long interconnection delays in other markets, and the explosive growth of AI and data centers, said Scroggins.

Yes, but: The Texas grid can get pretty congested during peak times and has previously faced rolling blackouts.

  • Solar project developers need to be able to manage their risks for when clean energy is curtailed during peak times.
  • Texas is "a double-edged sword," says Brian Janous, co-founder of project developer Cloverleaf Infrastructure. "You can connect a lot there, but they have a 'connect and then figure it out' approach."

By the numbers: Last week, researchers at Wood Mackenzie said that Texas installed the second most solar panels out of any state in Q1 2024, with 2.6 GW, mostly in utility-scale projects. Florida just edged Texas with 2.7 GW installed.

  • Wood Mackenzie told Axios that there's a sunny solar pipeline of 65 GW for Texas thanks to companies and utilities contracting solar projects.
  • A report from real estate and investment firm CBRE in March found that the Dallas-Fort Worth region was the third most active data center market in the second half of 2023.

The big picture: Texas has long been a clean energy leader with ample natural wind and solar geography.

  • The state's local power demand has jumped in recent years due to new data center builds, onshoring of manufacturing, and hydrogen and energy projects under construction on the Gulf Coast.
  • The state has fashioned itself as pro-business, famously attracting Elon Musk and his EV maker Tesla to move its HQ there (and seek to reincorporate there).

What's next: All eyes will be on how the Texas grid performs this summer with a record-shattering hot summer expected.

  • ERCOT has already said it could face rolling blackouts in August.
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