Texas’ battery market is entering a new phase.
Capacity deployment reached record highs last quarter, but low revenues to date in 2025 are presenting headwinds for existing investors.
On top of this, the current administration’s One Big Beautiful Bill Act (OBBBA) is putting the future of clean energy investments under scrutiny.
At the same time, the launch of ERCOT’s Real-Time Co-Optimization market design change and a shift towards longer-duration storage are presenting opportunities for market participants.
In our livestream, “The State of Energy Storage in ERCOT”, Brandt Vermillion and Ovais Kashif explore four key trends coming out of the Texas market. Keep reading to learn how these factors impact battery energy storage investments today.
A recording of the live stream is available below, and Modo Energy subscribers can download the full presentation at the end of the article.
1. Longer-duration batteries are arriving in ERCOT
Texas saw a record 2 GW of battery capacity deployed in Q3 2025 - 90% of which came from two-hour sites.
This is part of a growing trend towards longer-duration storage in ERCOT, with four-hour systems scheduled to achieve commercial operations as soon as 2026.
Looking at long-term projections, two- and four-hour batteries show the potential to surpass investor hurdle rates, earning IRRs above 12% according to Modo Energy's ‘Central’ ERCOT revenue forecast.
To learn more about how falling CapEx costs and extended evening price spikes are paving the way for longer-duration storage, continue reading Modo Energy’s investment case for four-hour batteries in ERCOT.
2. Low revenues today are leading to a rise in off-take agreements
Battery revenues year-to-date stand at $24.5/kW as of the end of September 2025 - half of what they were at the same point in 2024.
In the absence of significant weather events and muted price volatility this summer, batteries have had far fewer opportunities to generate revenue than in previous years.
This year-to-year inconsistency in revenues has driven newer, smaller market participants to opt for tolling agreements and other third-party offtake arrangements.
As of September 2025, 25% of operational battery capacity in ERCOT is optimized by third parties, up from 16% at the start of the year. Of these, 320 MW (2.5%) are part of publicly announced tolling arrangements.
3. ERCOT launches RTC+B this December, introducing revenue opportunities on the margin
This December, ERCOT will begin procuring Ancillary Services in real time, as the system operator’s new Real-Time Co-Optimization plus Batteries (RTC+B) design goes live.
This is ERCOT’s biggest market design shift since the introduction of nodal pricing 15 years ago.
For batteries, there are two key takeaways:
- New state-of-charge requirements limit Ancillary Service stacking. Operators are more constrained in choosing which service to participate in.
- Ancillary Service clearing prices will reflect Real-Time constraints. The top-performing optimizers will react in real-time to prioritize between Ancillary Services and Energy arbitrage strategies.
The example below walks through what a battery’s AS strategy could look like today - and how it would change under RTC+B.
Read our full analysis to find out how batteries could find opportunities in the Ancillary Services markets under RTC+B. And if you want an overview of what’s actually changing, read our guide to RTC+B.
4. The OBBBA prompts batteries to shift away from Chinese suppliers
The current U.S. administration’s One Big Beautiful Bill Act (OBBBA) has cast uncertainty over the future of clean energy investments. However, compared with Wind and Solar, batteries face fewer challenges.
For batteries, the most significant impact of the OBBBA is a restriction on sourcing from foreign suppliers.
For batteries to be eligible for investment tax credits, they must ensure that less than 75% of project costs are attributable to suppliers connected with prohibited countries (chiefly China).
But alternative supply chains are more expensive, raising the question: when is it more economical to switch suppliers and retain the tax credits?
To find out, read our complete analysis on the OBBBA and how it impacts battery developments.
