ERCOT now has roughly 445 gigawatts of large loads asking to connect to the Texas grid, a figure so large that Joshua Rhodes says it might as well be infinite, because the system cannot physically build for all of it.

To sort real projects from speculative ones, ERCOT is launching a new screening process called batch zero, and stakeholders voted to advance it at last week’s Technical Advisory Committee meeting. On this episode, Rhodes walks through the mechanics with Tiffany Wu, an energy markets and regulatory consultant at McAdams Energy Group and a former adviser to Public Utility Commissioner Will McAdams.

The mechanism traces back to SB6, the 2025 law that standardized how large loads connect to the grid and set a 75-megawatt threshold for what counts as a large load. Wu describes a sequence built to thin the field at each step. ERCOT screens which projects qualify and studies what transmission they would require, then puts the survivors through a financial gate that filters out developers unwilling to commit real capital before final studies on whatever clears. The first batch is not expected to finish until late 2027.

Running alongside the batch process is a fight over who pays for the transmission. PUC staff want to charge large loads based on their contracted peak capacity rather than the four coincident peaks that currently let flexible customers shave their bills. Wu says this shift would make much of the demand-response incentive evaporate.

The episode explores:

* How ERCOT separates base load projects already in the queue from those still being studied and allocated.

* Why the shift from 4CP to a contracted-capacity charge changes who pays for transmission.

* How loads can use ERCOT pathways to pull more power than their allocation while transmission gets built.

ERCOT is moving to approve the framework now and tweak it as the first batch works through. (It’s the same build-it-in-motion approach ERCOT CEO Pablo Vegas described on an earlier episode.) The vote sets the rules. The studies will decide who actually connects.

Timestamps

* 00:00 - Introduction & Tiffany Wu

* 01:47 - Why SB6 Exists

* 07:42 - Batch Zero Status

* 10:03 - Who Gets Into Batch Zero

* 16:49 - Financial Obligations and Commitment Gate

* 22:44 - Batch Zero Study and Timeline

* 27:49 - Load Estimates and Flexible Load Options

* 31:37 - Transmission Build-Out and 765 kV Lines

* 35:46 - Batch One and Future Batches

* 37:43 - Transmission Cost Allocation and 4CP Reform

* 46:43 - Reliability Standard Study

Resources

People & Organizations

* Joshua Rhodes (LinkedIn)

* Webber Energy Group (Website - LinkedIn)

* IdeaSmiths (Website - LinkedIn)

* Tiffany Wu

* McAdams Energy Group (Website - LinkedIn)

Company & Industry News

* ERCOT’s TAC Sends Batch Zero Guidelines to Board

Books & Articles Discussed

* Texas Senate Bill 6, 89th Legislature

* PGRR145 - Batch Zero Process for Large Load Interconnections

* NPRR1325 - Related to PGRR145, Batch Zero Process for Large Load Interconnections

* PUC Project No. 58481 - Large Load Interconnection Standards Rulemaking

Related Podcasts by Energy Capital

* How Texas Plans to Serve ‘Infinite Demand’ with Eric Goff

* Who Pays for the New Grid with Pablo Vegas

* Is Texas Ready for Winter Now? with Will McAdams

Related Posts by Texas Energy & Power

* Energy Policymakers Grapple with Reliability, Fairness, and Flexibility

Transcript

Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. I’m really excited to have Tiffany Wu here to talk more about what all is happening in ERCOT, particularly around SB6, large loads, transmission cost allocation, all of the hot topics right now. Tiffany Wu is an energy markets and regulatory consultant with McAdams Energy Group. And for more background with McAdams Energy Group, you can go back and listen to Matt Boms’s interview with Will McAdams just a couple months ago. So before working at McAdams Energy Group, Tiffany was a DOE Solar Energy Innovation Fellow and also an advisor to Will McAdams while he was a commissioner at the Public Utility Commission of Texas. But between that, also was a senior project manager at TEPRI, the Texas Energy Poverty Research Institute, which is, I think we actually met. We had our first conversation when you were at TEPRI, and I was asking you questions about how these 9.9 megawatt batteries, what they were paying for electricity and how much they got paid for electricity, because that was a big deal for a while.

Tiffany Wu: That’s right. Yeah, I remember that there are a lot of questions around whether or not those batteries which support the grid, whether or not we should be paying for some of those distribution level costs as transmission level costs. Yes.

Joshua Rhodes: Yeah. Anyways, we probably won’t get into that, but we can leave that as a thing. But that was super helpful back then. Thanks. And I know you you also spent 10 years with Mitsubishi Heavy Industries as a process engineer, commissioning engineer. I’m really excited to have another engineer on this podcast. That’s kind of rare, to be honest. Well, thank you. You got your BS and chemical engineering at UT Austin before getting your masters at the LBJ School of Public Affairs. So Tiffany Wu, welcome to the Energy Capital Podcast.

Tiffany Wu: Thank you. Thanks for having me.

Joshua Rhodes: Yeah. So the day we’re recording this podcast, we we just released a podcast with Eric Goff where we talked we hit on some broad topics around how ERCOT policy is made. And we talked a lot about the large load process. I’d encourage folks to kind of maybe listen to that podcast first in terms of like kind of setting the broader goal. But with this one, I think I’d like to get a little bit deeper in this conversation around some of the intricacies of the process, kind of where it’s at. And to be fair, this kind of fits in my teaching philosophy of any time I give a lecture, I try to say the same thing three times in three different ways as a way of like some people learn one way versus the other way. So there will be some overlap between this and and the podcast with Eric, but I still think there’s so much there that I think this is gonna be, I think we need to be having a lot of conversations around this. But we’re gonna get deeper into some of these things. But let’s start bigger picture, maybe for folks who haven’t had the one with Eric. So The whole reason we’re having this conversation about large loads and batch zero and transmission cost allocations based on SB6 or Senate Bill 6. Can you lay out what problems Senate Bill 6 was looking to solve and kind of how the batch zero process, you know, fits into that effort?

Tiffany Wu: Yeah, sure. So Senate Bill 6 is trying to balance a few different things. So previously in ERCOT, most of the large loads were coming from the cryptocurrency industry. It wasn’t until recently that more of the data centers have been looking for interconnection into ERCOT. So historically, the way that you would connect into the system is you would go and talk to your transmission provider or your distribution provider and ask them, hey, I want to set up a business. Can I connect to the electricity system? And they would figure it out. But because there are so many loads coming in now, there was some concern that with the size. Historically they were working on one project at a time and TSPs were conducting the studies, but ERCOT started to see that there may be a reliability issue with how many loads are coming onto the system and how big each of these loads are. The other issue is that with the cryptocurrency miners, you may remember that a lot of people were worried that they were not paying transmission costs because the way that we paid transmission costs historically is based off of the four coincident peaks during the summertime. And so if you’re able to avoid that, then you don’t have to pay transmission costs. So, so in SB6, what they’re trying to do is provide more guidance and more standardization around how you interconnect into the system. So that would support business development. And on the other side, they’re also trying to make sure that whoever does come into the system will pay their fair share of the interconnection costs.

Joshua Rhodes: Yeah, no, totally. So there is that distinction in SB6 and I know there’s this distinction of like seventy five megawatts and above that defines kind of the large load. And I know the public utility commission can change that number in the future, I think if they want. Where did that number come from? Do we have a feel for kind of where that seventy five megawatts came from? I

Tiffany Wu: Honestly not sure where seventy-five megawatts specifically came from. But I think that what they’re trying to do is make sure that this is capturing the data center loads, which we know are potentially like hundreds of megawatts to gigawatts to even multi-gigawatts now. Yeah. Versus some of the traditional loads that are like the oil and gas industry, petrochemicals manufacturing. So not making it more burdensome for those traditional loads to interconnect into the system still. But PUC did try to reduce that threshold to twenty-five megawatts. They’re allowed to reduce the threshold that they think that it’s necessary. They originally wanted twenty-five megawatts for the load forecasting rulemaking, but that was gonna capture so many things and that was going to be so burdensome that multiple people push back against that.

Joshua Rhodes: Got it. When the seventy five megawatts like threshold kinda came out, a lot of people said, Well, we’re just gonna see a bunch of seventy four point nine megawatt, you know, data centers show up. Are there any of those? Are we seeing a bunch of those pop up under the radar now? Or I guess maybe we’re not seeing them. Do you know if they’re there?

Tiffany Wu: I think they are there and I don’t know for certain, but ERCOT had posted or filed a graph of load forecasts recently. Okay. And it had two bar graphs next to each other for multiple years and there’s a huge gap between them. And the bigger gap does include those medium loads that are less than seventy-five megawatt, but still fairly significant. So I am curious how much of that just wasn’t covered because we’ve been so focused on all of these larger than 75 megawatt loads.

Joshua Rhodes: So the latest numbers that ERCOT put out are around like of large loads. Got my cheat sheet up here too, because the numbers keep changing. Is four hundred and forty five gigawatts. So is there even more than that number, given that like these smaller just under the seventy five megawatt threshold? I

Tiffany Wu: I think that the four forty five gigawatt number that you’re talking about is the number of large loads that are trying to interconnect into the system, right? So that’s the number that would be included in batches. Cause there’s a portion of that, about three hundred and thirty gigawatts that likely won’t be included in batch zero, but want to interconnect. Okay. But yeah, I mean anything that’s less than seventy five megawatts is not gonna get captured from that table chart.

Joshua Rhodes: interesting. So these numbers that I’ve been making fun of and saying I don’t believe, like they’re even bigger. Possibly.

Tiffany Wu: Possibly. I don’t know. I wish that I knew

Joshua Rhodes: I mean, in my head, it might as well be a million. I just I think Eric put it well. He’s like, it’s just the numbers just infinite, right? Because we’re not going to be able to connect all of this. And so like the numbers just might as well be infinite. Okay. Well, that’s interesting slash terrifying. But we’ll we’ll see like kind of where where we go. All right. So let’s get to the batch zero process. So the batch zero process is kind of like, you know, how we’re potentially going to try to clear this backlog and connect these large loads. Now I think before we so hit record I said, Hey, the batch zero is not finalized, but then you said actually it kind of is so why don’t we just say, what is the status of batch zero? It was recently tabled to the June meeting, but can anything change between now and then or is it pretty locked in?

Tiffany Wu: so yeah, so it has to work through the stakeholder process. So it’s been approved through the PRS and ROS. And yesterday was the technical advisory committee meeting, the TAC meeting. Okay. And that’s when the stakeholders voted on batch zero. Okay. And leading up to that, there have still been a number of requests to change certain Parts of batch zero and ERCOT was pretty resistant against any changes, which makes sense because we’re getting up on the deadline. There was a move to try to have an alternate revision request language, but that was shot down. Only 30% of stakeholders approved that alternative. Then they brought up the ERCOT revision request, and that got 100% approval.

Joshua Rhodes: Okay. And so did anything change in the TAC meeting the other day or did it just get kind of approved there?

Tiffany Wu: No, nothing changed at TAC. Well, the latest revision was from May eighteenth. Right. Basically a new revision has been coming out every few days for the last few weeks, I feel like. And at the end of this, ERCOT was pretty resistant to even like small changes. And so that’s what’s been approved. So next it will move to the board of directors meeting and that’s scheduled for June first. Okay. And once They approve, which I assume they will approve, the revision request, then the PUC has to approve it.

Joshua Rhodes: Okay, so hopefully all the research I did on batch zero this weekend still holds as we talked about it.

Tiffany Wu: Welcome to my life.

Joshua Rhodes: Yeah, no, no, no. I’m just here to cosplay. So I want to get into some of the stages of kind of the batch zero concept. So there’s like five steps as far as like I understand. And tell if anything that I say has actually been changed, because I didn’t check yesterday. Maybe I should have. So the first step is like, okay, figuring out how much load actually gets into batch zero, how much are we going to study? There’s these the first step is like the inclusion criteria. So which large load projects are going to be included. So So what do we know about what these are? Do we have a feel for kind of like how is ERCOT gonna say which projects are in batch zero and which projects are not? Mm-hmm.

Tiffany Wu: And there’s two categories within batch zero too. So there’s the base load and then there’s going to be the studied and allocated loads. Okay. What ERCOT has been saying is that the only thing that they know is whether or not the transmission service providers have filed studies for those loads and whether or not ERCOT has approved those studies. That’s the basis of which ERCOT is using to approve. Specific loads for either base or batch zero or you just didn’t make it at all.

Joshua Rhodes: So baseload here, the term base load is used in electricity in a bunch of different ways. But in this specific case for batch zero, so are these projects that went through the previous way of getting large load connected? Like they went directly to the TSP and they got the study and they’re like, they’re just now part of they’re good to go, but they just need to be included.

Tiffany Wu: Yeah, so there’s history there. Okay. So last year there were multiple pathways to be interconnected into ERCOT. Okay. So one was the original way, which was you work with your transmission service provider and then they do a an RPG process. They go through the RPG process, which they study the loads that are necessary and the transmission projects necessary. To support specific loads within a specific region. That was one pathway. The other pathway was because ERCOT was now transitioning to also approving large loads, that’s called the large load interim process. And so they created a process to review those TSP analyses. And I’m not an electrical engineer, but there’s certain studies, steady state studies.

Joshua Rhodes: None of us are.

Tiffany Wu: Yeah, stability study, short circuit ratio study that they have to do for each of those loads. And so if a load went through that process by a certain time, then they were approved for base load. And they also had to sign an interconnection agreement with the utility as well. So it was two things whether or not you were approved through the ERCOT large load interconnection process. And you got a interconnection agreement with the utility, basically. What’s giving some people heartburn and was part of a lot of the controversy leading up to the TAC vote is that the other process, some utilities were telling their customers, we need new transmission in order to serve your load. So we need to go through the RPG process. And so they told those loads, hold on, let’s not do the large load interconnection process. Let’s go through the transmission process. Yeah. So that was totally okay until I guess December 15th when they transitioned to a large load interconnection study, the LLIS process, which is also known as PGRR 115. Is approved December 14th or December 15th. And I don’t think it was clear at even at that point that going through the RPG process was going to be enough to get you interconnected.

Joshua Rhodes: Okay. That is quite a bit of backstory on some of these. I mean, I know some of these loads are valuing the, you know, a megawatt not connected for a year in the billions of dollars or whatever, or a gigawatt not connected in the billions of dollars. So these are I guess loads that are being grandfathered in, but they’re not currently connected to the system. So ERCOT’s gotta study them as if they’re coming online. And then there’s like the studied and allocated load, and these are the loads that have not been approved just yet, but are try to work their way through the batch zero process. Is that right?

Tiffany Wu: Yeah. So first from ERCOT’s perspective, they were looking at two specific things for being eligible to be considered baseload, right? It was whether or not you were approved the studies were approved and if you had an interconnection agreement by a certain time frame. But the PUC also had criteria that were given to them by SB6, which includes financial obligations, site control. Whether or not you’re trying to interconnect at another location and developing a different project, whether or not you’re bringing backup generation and all these things. So there are other things that the loads are gonna have to attest to. And that I think it’s in July, they’re gonna have to provide that information. The biggest open question right now is the financial obligations that will get you into base load eligible. And then another thing that you mentioned for the base load. They have an agreement in place. So their utilities already told them, like, we’re going to be able to give you this much power by this time frame. And there’s like a certain schedule. So they’re going to be studied based off of that schedule. And then those that don’t meet all of the criteria to be included in base load, but are included and studied and allocated, they will be allocated a certain amount of additional load within the five to six year. Transmission planning process that’s gonna be evaluated as part of batch zero.

Joshua Rhodes: Okay. All right. So we gotta figure out who gets in. That’s contentious. None of this is gonna make everyone happy, right? But this is just the way it is. I mean, when we had Pablo Vegas on the podcast, he basically said, like, we’re gonna have to figure out something, we’ll tweak it as we go, but like we gotta do something. It’s probably the case that if like, you know, not everyone’s happy that it’s probably a hashed out process. And I won’t make you comment on that. But so step two. Yeah. All right. So it’s like

Tiffany Wu: Yeah, who are the winners and losers?

Joshua Rhodes: Yeah, but it’s like the electricity sector can only move so fast. I mean it’s real steel in the ground that that’s gotta go. Okay, so we got inclusion criteria, who’s gonna get in, and then they’re gonna do the batch zero study, which I presume is like a big electrical engineering stability, like we’re gonna run some power flow models to figure out like what is it gonna take to get all of these loads connected. Is that right? Did I get the second step right?

Tiffany Wu: Yeah, that’s right. And before we get there, there is a financial obligation for you to get into batch zero. So you have to pay a fifty thousand dollar per megawatt financial security. Not pay, sorry, post a fifty thousand dollar per megawatt financial security. And that’s before they perform any study, right? But in the PUC rule right now. There’s a possibility that after they’ve run the first initial batch study processes, that you’re not gonna get a very good allocation. So then you’ll get to choose whether or not you wanna move on to the next steps. So in the first step, it’s going to be studying all of the loads together, the steady state analysis and the stability screening. And then ERCOT’s gonna have to work with all the TSPs. There’s gonna be a lot of back and forth between them. Also For just a plug, if anybody wants to work on this, ERCOT just said they’re hiring like so many FTEs for this. So any electrical engineers out there. Okay. Yeah. So yeah. So they’re gonna do the studies. At the end of the studies, you’ll know what you’re allocated and then you’ll get to decide whether or not you wanna stay in the process.

Joshua Rhodes: The third step is the they’re calling it the commitment gate. So in the second part, they do the electrical engineering studies that you said, maybe you’re only getting so much load per year, right? Maybe you want five hundred, but you can only get a couple hundred per year, maybe. Do you know how far out that process is going? Like if they’re gonna allocate a certain amount, are we looking five years out? Like how far is this process?

Tiffany Wu: Yeah. So originally they were thinking that they would be looking five years and then within in the sixth year, magically you would just have all of the transmission that you need. But now they’re working on something else that is considering all six years. And I don’t think they’ve decided yet how they’re gonna figure out that allocation yet.

Joshua Rhodes: Okay. So there’s five, six years, something like that. We’re gonna look forward. And then I guess like if you like your deal, if you like what you get out of the study, then there’s like this commitment gate. So what does that commitment gate look like? So you’ve posted fifty K per megawatt. Does that mean that like you push that into escrow? Like how do you say yes to the commitment gate?

Tiffany Wu: Yeah, so that’s a big unknown right now. Okay. Yeah. So great question. Everybody’s asking that. So the PUC is working on rulemaking for interconnection standards. It’s project number 58481. And the latest proposal for publication for that was filed March twelfth. Okay. So that was the last, I would say, official guidance from the commission on where that rule might go. And in that proposal for publication, there were two agreements that you would sign. One is the intermediate agreement that you would have to sign and post the $50,000 per megawatt financial security before the start of batch zero. Okay. And then at the financial commitment point, you would have to sign an interconnection agreement and you would have to pay then the $50,000 per megawatt. Financial security becomes a fee. So you that’s a cash payment of fifty thousand dollars per megawatt, plus what we call a contribution in aid of construction, CIAC, which pays for the specific equipment that gets you connected to the transmission system. So it’s just what we call the driveway.

Joshua Rhodes: Yeah. The Gintai if we were talking about generators, right?

Tiffany Wu: Yeah, yeah, exactly. Exactly. So that was in the March twelfth proposal for publication. If you ended up backing out at the financial commitment deadline, only twenty percent of that fifty thousand dollars per megawatt would have been refundable. So you basically gave yeah, it’s a big financial commitment. So staff had Been getting a lot of feedback from stakeholders. Like that is a huge risk, right? We don’t know anything at that, especially think about like future batches. At least in this case, a number of these large loads that are going to be in batch zero have already done some amount of studies. Right. But in future batches, they’re going to be coming in for the first time and they would have to post that. So PUC staff did provide some guidance. As part of PGRR 145 and the interconnection process, but it hasn’t been written into the rulemaking and it’s not included in PGRR 145. And so we’re still kind of in no man’s land around how this is all going to work.

Joshua Rhodes: Okay, but we’re still voting on this thing in like a month, right? So it’s like

Tiffany Wu: Yeah. Yeah. So what we’re voting on for PGRR 145 is just that you have to post a financial security. Okay. But how much of it is refundable, what happens if you don’t get your full allocation? Yeah. None of that is detailed.

Joshua Rhodes: So we’re we’re voting on the process, but there’s still ongoing rule making and discussions and stakeholder and putting the meat on the bones of the process, as it were.

Tiffany Wu: Right, but you’re still putting a lot of capital at risk by doing it this way, right? It’s basically like, Yeah.

Joshua Rhodes: Well, I mean, when you’ve got four hundred and thirty, four whatever, a million megawatts, you know, trying to connect to the system, you gotta separate out the wheat from the chaff somehow, I guess. But that is a lot. That’s fair. If you’re only getting twenty percent of that back, I mean that’s you know, you’re essentially you’re any up forty K per megawatt. If I’m doing the math right in my head, I can see how that would be a hard pill to swallow. Fair enough. Okay, so that’s step three. Commit me gate. Yeah. Or step four is basically okay, so commitmigate

Tiffany Wu: Yeah. Sorry.

Joshua Rhodes: We see what clears and then I guess it sounds like we redo the study we did in step two, but now with just the loads that have cleared the commitment gate, which would have to be equal to or less, I guess.

Tiffany Wu: Correct. Yes. And part of the reason why we’re going down the batch process method instead of doing the serial study process, which we had been going through, is because the serial process, if you got on before or somebody else got on before you did, you’d have to get restudied. And so the hope is that after you we go through the financial obligation gate and there’s only so many loads left over for the batch refinement period. That this is not a full restudy because otherwise we’re just codifying restudies, but instead it is an actual refinement period of just like, okay, those loads went away. So the transmission projects are likely gonna be more like this.

Joshua Rhodes: Okay. All right. So in step four, we study the loads that make it through the commitment gate. And then, you know, maybe all of the upgrades that were identified in step two, maybe we only need a certain percentage of those because there’s presumably potentially fewer loads in the refinement study. But then there’s actually a plan that’s sent out to the regional planning group or RPG to say this is the transmission that we need to build to support this much load. And I think one of the things that Eric mentioned in the podcast was like this is a new thing than the previous ways, because the previous ways said like it’s possible to build this transmission, but there’s never a plan that was created. And so is that the whole reason for this thing is to get that planned RPG to be able to build?

Tiffany Wu: Yeah, so before there were so many different pathways to do this, but just stick to one. So let’s say that you went through the LLIS process and the transmission provider told you that you were able to energize within a certain time frame and you’re gonna need the like transmission project A to get to 200 megawatts, transmission project B to get to 400 megawatts and so on. So you’d be like, okay, cool, great. Maybe at the same time. That utility would be going through the RPG project to get those transmission projects approved. So they could either be going sequentially or at concurrently, which also goes back to like the controversy around who should be included in batch zero, because for the ones who went through the large load process, they were studied, but there was no transmission project behind it. And then for the projects that went through the RPG project. They have transmission projects, but they weren’t studied one by one by ERCOT.

Joshua Rhodes: Okay. I got a few questions. Say that it gets approved at the next meeting and this process kicks off. I know there’s some rulemaking that has to flush it out as it goes, build the airplane as it’s flying, but like how long does it take to get to here’s a plan RPG. How long does this process take, presuming that it gets approved, for the first batch to go through?

Tiffany Wu: From start until you know the results of the RPG.

Joshua Rhodes: Yeah, but what is the hope, anyways, of how long this take? Are we talking six months? Are we talking a year? Are we talking five years? Like what how long is this batch zero process gonna take?

Tiffany Wu: Yeah, it kind of depends on how they study years five and six. Like how detailed are they going to get around the transmission projects? Are they going to try to study like a ton of different transmission projects, or is it just what’s reasonable? That all takes time. So it could extend depending on like the amount of studies and the projects that they need to work through, it could extend the process another month month or two. So right now the schedule is if we had only just thought like, okay, we’ll study for five years, and then in year six, magically you have all of the transmission that you need. July was gonna be start of batch zero, and then it would be completed, like the RPG comment period and board approval would be in September. But if we’re doing more analysis around the future years for transmission projects. Then that could extend into December of next year. Wait. December of twenty seventh.

Joshua Rhodes: December of twenty seven. Okay. That’s a pretty big delta between like two months or

Tiffany Wu: no, no, sorry, sorry. I maybe that was confusing. It was either gonna be September twenty twenty seven or it’s December twenty twenty seven.

Joshua Rhodes: okay, sorry. I thought you meant it was g they’re gonna figure this out over this summer. And I was like, wow, that’s fast. Okay, that makes way more sense. I could just hear all the computers like running all the dynamic simulations in my head. All right, so we’re never gonna get off this first question, which is great. Yeah. All right, so it’s gonna take I mean we’re looking at mid to the end of twenty twenty seven. Do we never feel for how much load is gonna make it in the study? Like As base load or as like studied and allocated load, do we have a feel for how much load’s gonna get in the front of this?

Tiffany Wu: Now it’s looking like the maximum amount that would be base load is around thirty gigawatts. And then the amount that would be in a studied load would be about like 90 gigawatts. So in total, 130.

Joshua Rhodes: Okay. Okay. One thirty. But then we’ve forgot five or six year process and we’re maybe we’re kind of spreading that up. Okay. So this feels better than the chart with like the four hundred and thirty-five gigawatts by like twenty thirty or whatever. So that’s great. But ERCOT is also gonna create a couple of different kind of potential, I guess, ways you can do this. There’s this thing called the provisional controllable load resource, which ERCOT has these controllable load resources that can bid their load into SCED, the same program that makes generators go up and down, can make load go up and down. But there’s also this the ability of these loads to say I’m willing to be a provisional, controllable load resource. Can you kind of walk me through like what is that and what would be the advantage of doing that for these loads going into the batch zero process?

Tiffany Wu: Yeah, so there’s two potential pathways. One is the provisional controllable load resource, PCLR, or there’s what they’re calling the Withdrawal-Limited Private Use Network, WL-PUN, and that’s basically if they’re bringing their own generation.

Joshua Rhodes: That’s the B Y O G L that’s the other okay, yeah. Okay. Yeah, there’s two, right.

Tiffany Wu: Yes, there’s two. Saying that you are PCLR or a WL-PUN is not going to get you into the batch process faster. You still have to meet all of those other requirements that we had talked about. But what being a PCLR or WL-PUN helps with is that let’s say the transmission provider tells you you’re only getting a hundred megawatts in year one. You could say like, could I actually get 150 megawatts? And in tight periods, I promise to come down to a hundred megawatts or okay on the bring your own generation. It might just be like, okay, my net use from the grid is going to be that amount, but I still have my own generation. So it’s just a way for them to increase the amount of energy that they can use on a timeline that’s more business friendly.

Joshua Rhodes: Yeah, totally. One way is like I’m willing to like let some of my load be curtailed or I’m gonna bring my own generation and make it up from that on the other side. It seems like no one likes either of those and they really want this third option called like a netted network. But ERCOT is saying that it’s kind of not feasible for the batch zero because it my understanding of the netted network process, and you can tell me if I’m wrong, is that you still have like the limited point of interconnection. So you still have like a hundred megawatt limit, but You have load and generation behind that point of interconnection, but both of those things can fully play in the ERCOT market. You can be a CLR and have generation that can maybe get ancillary service revenues or other types of things. Cause my understanding that these other ones, these PCLRs and the provisional controllable load resources, the BYOG PUN type thing, you do not have access to the ancillary service markets, but people want that. Am I getting that right?

Tiffany Wu: So that’s beyond what I know at the moment.

Joshua Rhodes: Yeah, no, it’s fair. It’s like this is coming off of some slides that I was kind of looking at and just talking to some folks in the space. They’re like, Yeah, this is kind of what we wanna do. This is where we wanna get to. It’s my understanding that ERCOT says like, yeah, maybe we’ll get to that. That sounds great, but like

Tiffany Wu: Yeah, for them right now it’s one or the other and that’s something that they did clarify is you have to choose basically are you WL-PUN or are you P C L R?

Joshua Rhodes: Yeah. We’ve talked about batch zero for like a while. And so we have a study process. It’s either we’re gonna get through it by September twenty-seven or December twenty-seven, depending on how we decide to study like the latter years of that. Then it’s gonna take a while to build this transmission. We’re gonna have the plan, but then you know, it may take four or five years to build out that transmission. I guess it’s probably too early to say like how much transmission that’s gonna be. I mean, that would be the result of this whole thing, right?

Tiffany Wu: Yeah, exactly. Yes. What do I want to say about that?

Joshua Rhodes: I’m putting you on the spot, like, admittedly. So it’s like you don’t have to have an answer for that ‘cause I sure as heck don’t.

Tiffany Wu: No, I do want to say something about it. So a question around the batch process and why you wouldn’t just allow every load that wants to be in it to be studied is because there’s a limited amount of transmission that will be able to be built. And I think that the transmission service providers probably have the best idea around what they need, what’s possible, what could be the potential routes after the RPG process. A lot of these transmission projects are likely going to need permits. They’re gonna have to go through the CCN process at the commission to finalize what the routing is ultimately going to be. And so that will dictate what the final cost will be and which transmission projects are actually gonna get approved and built. So yeah, there’s still a lot to do after this batch.

Joshua Rhodes: The commission’s getting a lot of experience right now on routing of transmission with all the seven sixty five stuff going on. Those are pretty some of those dockets are chalk full of things.

Tiffany Wu: Can I say something about the 765 KV lines? So I think some senators sent a letter to the PAC recently asking them whether or not all of the 765 KV lines are even necessary for the Permian Basin reliability plan. So I do think there is a risk that if there’s too much discussion, and there has to be the right amount of discussion around like what’s a real load, what’s not a real load, how Far are we constraining the batch zero process? Like the reason why we need transmission is for these loads. There has to be a balance for that.

Joshua Rhodes: I mean, we historically we’ve built, you know, transmission for load in ERCOT while other regions have built it for generation or and load, but in we’ve always built I mean, pulling that thread a little bit though, I mean, but the seven sixty five like lines, like they predated a lot of this AI data center boom and other types of things, right? I mean, I remember that S&P study that came out about electrification of oil and gas and like the Permian and Delaware basins. I mean, it was blowing everyone’s mind that we were gonna get ten gigawatts of growth and now that would feel nice. It feels like if that were all, i am I getting that right?

Tiffany Wu: It is so strange how fast the industry is moving right now, because you are right that it was mostly the oil and gas industry that was pushing the transmission need in the Permian Basin region. And I think even within the industry, they were questioning whether or not seven sixty five KV lines were necessary because in Texas we’ve only gone up to three forty five KV lines. But The benefit of the seven sixty-five KV line is that eventually we’re going to want a backbone of electric highway, basically, right? So that was just the first step, but I think the ultimate plan was to connect all of Texas with these seven sixty-five lines.

Joshua Rhodes: No, totally. I mean, I think like and it was the thing that Eric said on the podcast last time is like the nice thing about seven sixty-five is you actually need fewer lines. If we were just stuck with the three forty five and we had all this load, like that would be more lines and more routes and more dockets. All right. So a little tangent there, but like is also a thing going on. It’s my fault. Okay, so we talked a lot about batch zero. But batch zero presumes that there’s a batch one or a batch next process. So is there any coalescing on like or thought about does that look similar? Does it look different? Like what would be different about post batch zero?

Tiffany Wu: Yeah, we need to talk about batch one or batch N, whatever we want it

Joshua Rhodes: we don’t even know what we’re gonna name it, right? Like we should come up with something.

Tiffany Wu: And actually they’re gonna be talking about it tomorrow. So I don’t know when this is gonna get posted, but at the May 21st LLWG meeting is when ERCOT will be presenting a framework, I think, for what batch one will look like. I think it will be very similar to batch zero. I think they’re gonna have to make some tweaks, though. I hope they’re friendlier to some tweaks of the criteria for inclusion since batch one won’t get started until I think the spring of twenty twenty seven or something like that. So there’s time to make that a nice policy.

Joshua Rhodes: Do you want to expand on that? What do you think would be a better approach for batch one or batch in or batch next or I don’t know what we’re gonna call it?

Tiffany Wu: Yeah. I think that with batch one, there was a lot of confusion around the LLIS process and the RPG process. I think with batch one, they’ll need to talk about what do we do with RPG and the other transmission planning process, the regional transmission plan RTP. How did those two conventional transmission planning processes work with the fact that we’re going towards studying large loads? or any load in batches going forward. There needs to be consideration for that. So I think hopefully there will be less confusion then since we’re talking about the policy for the future rather than building the plane as we’re in it. So yeah. So I think that that’ll be a big piece. The other thing is I hope we’ll know what financial obligations are required to get into future batches. By that point, right now those rules are still being written when we’re trying to get batch zero started. So it’s just kind of messy, confused time right now. So there’s time to make batch one clear.

Joshua Rhodes: True. Again, that’s what Pablo said is like, we’re gonna do something, we’re gonna move forward. You know, it’s not gonna make everyone happy, but we’ll tweak it as we go. I think I referenced that podcast a whole bunch every time I talk to folks. All right. So also part of SB6 was it told the PUC that hey, you need to study the transmission cost, like allocation issue. This whole thing with batch zero on connecting all of this load is like we gotta figure out how much transmission we’re gonna build, where it’s gonna go, because that’s what we need to do and well, we’re just gonna let the market worry about generation. But we need the transmission right now. So right now we allocate the cost of transmission with four coincident peak. We’re discussing how that may change. Tell me about four C P, what the issue is, why are we looking to study it and what should we be paying attention to?

Tiffany Wu: Sure, yeah. So historically, transmission infrastructure is based on the maximum potential size of the amount of electricity that we would use at any given point. So if you think about a pipe, it’s like what’s your maximum flow rate through that, right? But everybody is using electricity at different times. So I’m not necessarily switching on my dryer the same time that you are. And it’s the same thing with industrial loads. Like there’s going to be moments when they use a lot of electricity and moments when they don’t.

Joshua Rhodes: I’ve got a one year old at home, so the dryer’s always on because they’re just there’s always dirty clothes. Anyways.

Tiffany Wu: Like you know, there’s always something to be cleaned, yeah. Yeah. Okay, well maybe not you. You are

Joshua Rhodes: I base I’m base load dryer, yeah.

Tiffany Wu: Yeah, you’re a hundred percent capacity factor. So in the summertime, that’s when in Texas we’ve historically hit our peak, right? Everybody has their air conditioning on, the cooling towers are probably going crazy. Everybody’s at work, people are I don’t know, going to camp. I don’t know. Whatever else requires a lot of energy during the summertime. Probably mostly air conditioning. Yeah. Yeah. It’s air conditioning. Yeah.

Joshua Rhodes: It’s air conditioning, yeah.

Tiffany Wu: But with 4CP, what we do is we look at who was a transmission customer during the summertime. And in those four 15-minute periods that were at the highest use across the system, what percentage can be associated with each customer? And then that’s how we allocate transmission costs for the next year. And so For industrial customers that are transmission customers, they could be reducing the amount of their electricity demand if they can forecast when they think that’s going to be. So a lot of the steel mills do this. They just don’t run their arc furnace during those times, for example, to reduce their percentage requirement. I think it became a huge issue because of the crypto miners. And I think Eric talked about this too. Like, they could just shut off, right? It’s not like you’re producing anything that people are can’t just be shut off like that. And so they were able to avoid their transmission costs. But residential customers, we don’t have the option in competitive areas to avoid 4 CP. And so we end up paying for the transmission cost based off of our energy use. And it doesn’t matter what time we’re using electricity. So that’s Part of the reason why they’re thinking about shifting from 4 CP is to make it harder for people to avoid the transmission costs. Yeah. But there’s a trade-off because the point of the demand response is to reduce that peak load so that you don’t need as much infrastructure. They’re thinking about going to 12 CP with 30 minutes. And I think that there’s going to be discussion around whether or not that is the right call. But what is more

Joshua Rhodes: Yeah.

Tiffany Wu: impactful in the transmission cost allocation policy discussion is that the commission staff is proposing that rather than chasing these coincident peaks, the large loads are going to be charged based off of their contracted peak capacity. So if they’re going to come in at 100 megawatt or if they want 100 megawatts at any point of time, then that’s what the basis of the transmission cost is going to be. Even if in the summertime they could like reduce down to fifty megawatts or something like that. So it almost makes like the demand response piece of it completely evaporate.

Joshua Rhodes: Yeah, I wonder if there will be some kind of hybrid approach. Before maybe I try to pull that thread, do we know what it would look like for like a PCLR or these other because like a PCLR, going back to the batch, we can’t get out of the batch zero process, but like if you have a hundred megawatts, but you can flex above that if like the grid’s not stressed. So maybe you can actually pull in 150, but the grid’s under stress and they’re like, you gotta crank it down to a hundred. Do you know if they’d be charged on that hundred or the hundred and fifty?

Tiffany Wu: So a PCLR is a temporary. So it’s just to allow you to use electricity above your allocation until you have transmission built to your site. So your contracted capacity, like say for a large load that is 200 megawatts in size, and you’re only gonna be allocated 100 megawatts. And you say, I’m a PCLR, can I use 200 megawatts sometimes? I think that you’re still going to be. Charge at the 200 megawatts. Okay. But that rule’s not written yet, so it’s possible it may be different, but that’s how I expect it would go.

Joshua Rhodes: Okay, and so would the transmission cost allocation change for everybody or is it gonna just be different for the loads that are above seventy-five megawatts?

Tiffany Wu: So for the change from four CP to twelve CP, that’s going to change for everybody. But the minimum transmission charge, I think, will only be for the large loads.

Joshua Rhodes: Okay. And I think Eric was talking about there potentially also could be like the minimum transmission charge could even be a fraction of what your contracted is. So it could be fifty percent, seventy five percent. I’m assuming that will be a number that will be highly contested and argued over.

Tiffany Wu: Yeah. So in the interconnection standard rulemaking, I think there was a range between fifty percent to eighty percent as the minimum. So if you only used forty percent of the demand during coincident peak, you would still have to be charged fifty percent. If you use more than that, then it would just be based off of the coincident peak. But it’s basically like setting a minimum for the transmission charge.

Joshua Rhodes: Okay. So if the minimum transmission charge was like a hundred percent of your allocation, then there’s no reason to try to do any four C P demand reduction. But if it’s like fifty percent or well, if it’s below a hundred percent, then there would still be some, maybe not as much as it has been in the past, but there’d still be some incentive to do some DR. Yes.

Tiffany Wu: Exactly. And the other thing is that the reason why they want the minimum transmission charge is so that the large loads will pay for their portion of the transmission system that they’re causing to be upgraded. Right now, in the five eight, four, eight, one rule, which is the interconnection standard rule that I had mentioned, there’s the intermediate agreement and then the interconnection agreement, and that $50,000 per megawatt. Becomes a fee. Purpose of the $50,000 per megawatt fee, I think, was also to make sure that the large loads pay their fair share of the transmission system. Yeah. So if they’re going to be considering a minimum transmission charge going forward, then likely they don’t need the interconnection fee then. Cause then you’d be paying up front and you’d be paying after you’ve connected as well for, I think the same thing.

Joshua Rhodes: Okay.

Tiffany Wu: So they’re gonna have to work through that.

Joshua Rhodes: Okay. Or would it also maybe just be a difference in how much would be refunded? I guess like

Tiffany Wu: It could be, yeah. Yeah. There are so many ways that this could go, right? And y you brought up a good point. The fifty percent to a hundred percent, that’s gonna be heavily contested or debated. One of the other aspects of this is that the transmission cost allocation proposed language might require that minimum transmission charge for fifteen years. The first fifteen years of the large load is in operation, the number of years will also be negotiated. For debated.

Joshua Rhodes: Okay, yeah, there’s a I can see why this framework of this is gonna be I mean likely approved and then we’ll really see how the sausage is made as it goes down. Okay. I’m gonna talk about SB6, batch zero, transmission cost allocation. Is there anything else going on at ERCOT? What else do you do? I mean, with all your time.

Tiffany Wu: Yeah, there are other things that are going on. You brought up resource adequacy earlier and you were like, yeah, the markets is gonna deal with that. But actually this year is the first year that we’re going to be performing the reliability standard study. Yeah. And so the load forecast is going to matter. How much are we going to be planning for? Right. So the reliability study is there to determine the probability of an outage, right? So we’re looking at how many resources. How many generation resources do we have? And how much demand do we have? How much demand response do we have? All those things. And so the assumptions really matter. And so what they have decided is to wait until batch zero process kicks off so that they can use that as the load forecast for the reliability standard.

Joshua Rhodes: Okay, that makes sense. I’m a consulting firm, Ideasmiths, is an independent market registered entity and I got that notice from ERCOT the other day. It’s like we’re not gonna put out our assessment ‘cause we’re gonna wait to figure out like how much load that goes in this. So okay, that makes a lot of sense.

Tiffany Wu: Yep. And at the end of the reliability standard, the PUC and ERCOT may decide that we need additional market changes in order to meet the reliability standard that Texas has set. Yeah. So more changes to come.

Joshua Rhodes: More changes to come. I mean, we’re not the only grid that’s looking to change things. I know PJM just put out a big white paper on a big some big changes they may make too. They’re the other grid that’s also dealing with a lot of load growth and data center alley and other places like that. But it the numbers feel bigger in Texas. I mean, everything’s bigger in Texas, but we’re figuring it out, right? At least we’re going through the process. So

Tiffany Wu: Yeah, the good thing is we can move fast, we’re innovative, everybody knows each other for better or worse. So

Joshua Rhodes: is it better or worse? Which one?

Tiffany Wu: Yeah, the rest of the country will be able to learn from our successes and mistakes.

Joshua Rhodes: Yeah, totally. Awesome. Well Tiffany Wu, thank you for coming on the Energy Capital Podcast.

Tiffany Wu: Thank you.

Joshua Rhodes: Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make better sense of how the energy system actually works, share the episode with a colleague and hit follow on your podcast app. You can find us on Apple Podcasts, Spotify, and all the usual platforms. For deeper analysis and context each week, subscribe to Texas Energy and Power at texasenergyandpower.com. That’s where you’ll find every episode, every article, and our latest updates. We’re also on LinkedIn, X, and YouTube. Where we share clips, insights, and ongoing commentary on energy policy, markets, and the grid. Before we go, a quick note. The views expressed on this podcast are my own and do not represent the official positions of the University of Texas, IdeaSmiths, Austin Energy, or Columbia University. A big thanks to Nate Peavey, our producer. I’m Joshua Rhodes. Thanks for listening, and we’ll see you next time.

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How Texas decides which data centers to connect

Energy Capital Podcast (private feed for [email protected])

How Texas decides which data centers to connect