ERCOT’s power grid is evolving - fast. Developers are rapidly building newer technologies, such as solar generation and battery energy storage systems, to meet growing demand. In fact, in the past year alone, installed solar capacity has grown by ~8 GW, or 44%. Meanwhile, the total installed rated power of battery energy storage has increased by ~2.5 GW, or 82%. And there’s no sign of buildout slowing down in the next few years.
In addition, the system is becoming more complex to manage. Fast-responding batteries and price-responsive demand provide increased flexibility. Meanwhile, wind and solar generation have little-to-no marginal cost, but aren’t inherently dispatchable.
But, what does this mean for the future?
Let’s start by breaking down how total installed capacity might evolve out to 2050.
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How much installed capacity will there be by 2050?
By 2050, Modo Energy projects that the total installed generating capability in ERCOT could grow by around 87%.
Increasing demand for electricity will continue to be the driving force for this growth in capacity. Texas’ economy continues to expand rapidly - its population has grown by around 13% in the past decade. With the continued electrification of society as a whole, and the explosive growth of new types of consumers (e.g. data centers), demand is set to increase rapidly over the next 25 years.
And this demand will need to be met by new generation. But what technology types will make up this growth in capacity?
What technology types provide the anticipated growth in capacity?
Using data from ERCOT’s Interconnection Queue and the EIA’s 2023 Annual Energy Outlook, we expect solar generation to take the biggest step forward in total installed capacity.
Today, around 25 GW of solar generation has been installed in ERCOT. By the end of 2050, we expect this may be as high as 113 GW.
Additionally, wind and battery energy storage capacity will also take significant steps forward.
- Total installed wind generation is expected to increase by 49% - from around 45 GW, to 67 GW in 2050.
- And the total rated power of battery energy storage systems is expected to increase by an astounding 6.5x - from 7 GW today, to around 45 GW in 2050.
Despite this increase in total installed capacity, some technology types will experience much slower growth - or be eliminated entirely.
For instance, coal generation will continue to decline - with additional retirements beginning in the late 2020s. And, by 2041, Modo projects that coal will have been nearly eliminated from ERCOT’s generation stack.
However, dispatchable capacity will still be an important part of meeting demand in ERCOT.
In fact, in part due to the access to low-cost capital provided by the Texas Energy Fund, total installed natural gas generating capacity increases by a net of 6 GW.
Much of this increase comes in the form of smaller open-cycle gas turbines, often consisting of a single standalone combustion turbine. These resources are better equipped to compete for Ancillary Services - such as the soon-to-be-launched Dispatchable Reliability Reserve Service - and respond to rapid net load ramps in the evenings.
How do power prices change alongside capacity?
In recent years, installed capacity in ERCOT has grown rapidly, while thermal generation retirements have generally been minimal.
Despite significant peak demand growth in recent years - 15% since 2021 - the capacity additions have meant that the grid has is able to maintain healthy reserve margins.
And this capacity buildout will continue in the next few years. Solar and battery energy storage buildout will continue to happen at a rapid rate. Meanwhile, thermal generation retirements again are expected to be minimal prior to 2030.
This makes it less likely that the anticipated demand growth of the next few years will immediately result in price shocks.
However, demand continues to increase rapidly through the late 2020s and into the early 2030s. At this point, more dispatchable capacity begins to retire.
As a result, average wholesale power prices rise, averaging $59/MWh from 2030-2039.
This peaks around 2040, as the last remnants of baseload coal generation exit the generation stack. Average prices reach $86/MWh, and remain around this level in the early 2040s.
However, the increase in demand begins to level off at this point. It’s anticipated that both data center construction to support AI and the continued electrification of residential and commercial facilities will largely have been completed by this point, slowing demand growth.
At the same time, additional installed capacity in the form of solar, wind, and battery energy storage continues to become operational.
This begins to bring prices back toward levels more in line with those seen today, with prices returning to an average of $42/MWh in 2050.
What does a typical day of operations look like in 20 years?
In many ways, the power system's future daily fuel mix will be very similar to that of 2024.
Baseload generation - like nuclear or combined-cycle gas turbines - will meet the majority of overnight demand.
During the day, solar generation will quickly become a key provider of energy as the sun rises, just as it does today.
Battery energy storage charges when prices are low during the day, and helps meet peak net load - when system conditions are tightest - in the evenings.
However, the contributions of technologies like solar and battery energy storage continue to grow.
For instance, solar generation is able to produce an eye-watering ~70 GW of power in the late morning. This allows battery energy storage systems to charge with low-cost energy.
Total instantaneous charging peaks at nearly 32 GW around midday.
In the evening, total instantaneous discharge peaks at around 26 GW. This happens alongside the ramping up of quick-fire natural gas units to meet the evening net load peak.
Battery energy storage discharge continues overnight. Long-duration batteries supplement baseload and wind generation until the sun rises.
Where can you learn more?
Our zonal forecast projects monthly and annual revenues - accounting for seasonality and long-term trends - out to 2050.
And, because it's built for batteries, it covers the co-optimization of Ancillary Services and merchant revenues - i.e. how batteries will actually operate in the market.
With a subscription to Modo's ERCOT forecast, you'll also get access to all of our relevant and timely research exploring the future of battery energy systems in ERCOT.
If you’d like to learn more, don’t hesitate to schedule a call with our team.