ERCOT’s projected load growth ‘unrealistic and impossible’, Ascend Analytics says

The report anticipates that the market’s load growth forecasts may not be achieved because of practical constraints on supply expansion. ERCOT is expected to navigate a ‘weather-dependent knife’s edge’ as the tension between growing demand and power supply boils over in the late 2020s.

Ascend projects that this will result in increased electricity scarcity and heightened price volatility. Both of those are generally good things for battery energy storage system (BESS) resources on the grid, providing significant revenue opportunities.

Nelson discusses the report, providing insight into how it was put together and the key takeaways.

Nelson explains of Ascend’s ERCOT report:

“We’re trying not just to say what the market conditions are today, tomorrow, and this year, but how do we expect market conditions to evolve over the next 10 to 15 to 20 years? How does that impact what you might want to build, invest in, or lend to today? So we do that for all the markets in the US. As part of that, we develop our market reports.”

Nelson emphasises that the key takeaway from this report is ERCOT’s load growth forecasts, stating:

“The biggest key takeaway is that ERCOT is going to be tight for a while. Their load growth forecast is extremely high, we think unrealistic and impossible because you just cannot build enough supply fast enough to meet that load growth.”

“But what that means functionally is that the load growth is going to be constrained by supply additions, which means they’re both going to be tight, right up against each other.”

In the report, Ascend forecasts that ERCOT will reach 119GW of peak demand by 2030, which is short of ERCOT’s 209GW expectation of demand. The company notes that growth is limited by the market’s ability to supply new peak load resources.

Of new additions, Ascend forecasts that 75% will be represented by solar and storage through 2030, and the rest will be comprised of wind and natural gas.

Nelson says that while various factors will increase load growth in ERCOT, data centres are a primary concern.

Also, because of winter reliability concerns in ERCOT, data centre developers often opt to use natural gas over battery storage for backup generation.

Nelson says: “Most of the data centres that we’re familiar with are looking at gas being their backup generation behind the meter. There are some who are looking at storage, but almost everybody’s focused on gas.”

The report also highlights state legislation that poses a risk to energy storage investments. Proposed legislation, such as Texas Senate Bill 388 (SB 388), if passed, would require that 50% of the generating capacity installed in the ERCOT service region “be sourced from dispatchable generation other than battery energy storage” after 1 January 2026.

Nelson explains that when forecasting, Ascend is trying to weigh the most probable actions that could be taken and policies that could be put in place, saying:

“When it comes to Texas, our view was that some of these really problematic policies that were being introduced at the state, we’ve seen them before, and they did not get advanced. We were expecting them not to get advanced. This time around, it was possible that they would. We expected them not to, and as it turned out, most of them did not get advanced.”

He continues, “There’s an ongoing risk. But our view is that some of those laws were so problematic from either a free market perspective, a property rights perspective, etc. So there are such big problems with most of these bills that our view is that it would be unlikely to get passed at the end of the day, but that ongoing risk is still there.”

Actions from the federal government could also negatively impact energy storage development in ERCOT and the US as a whole.

The recently approved ‘One, Big, Beautiful Bill’ for budget reconciliation in the US House of Representatives would mandate that projects seeking eligibility for the 45Y PTC and 48E ITC must start construction within 60 days of the bill’s enactment. Once construction begins, these projects must be operational by December 31, 2028, to remain eligible.

This would end the previously proposed 2029-2031 tax credit phasedown period.

Nelson says these potential measures had to be considered as well. While the report was compiled before the House Ways and Means Committee first proposed the bill, multiple outcomes still seemed likely or most probable.

“We did not think it was realistic that these tax credits would go on indefinitely, which was functionally what would have happened otherwise. So we were expecting a firm sunset on the tax credits around 2030, we were expecting long run tariffs that are more manageable than the 150% on Chinese supply, and that was in place at one point in time.”

Nelson says, “A most probable future has to account for the fact that the Senate is going to have its say on the budget bill. Overall, in the face of uncertainty, we do the best we can in terms of what we think is most probable.”