It didn’t take Hurricane Beryl coming ashore in southeast Texas to remind everyone about the vulnerability of the Texas electric power grid, but the widespread outages that lingered for a week following the catastrophic July storm sure did.
“Power is probably the biggest factor impacting Texas right now,” says Susan Arledge, senior managing director for Newmark in Dallas. “The Electric Reliability Council of Texas (ERCOT) predicts that Texas’s electricity demand could almost double in the next six years due to the growth of data centers and artificial intelligence. ERCOT experts say that demand could reach 150 gigawatts by 2030, which is nearly double the 85 gigawatts of demand recorded in 2023. Data centers and AI are expected to account for more than half of the increased demand.”
A change in the prediction model used by ERCOT precipitated these updated numbers, says Arledge. “Before now, they had to base their predictions for growth on contracts they had in place,” she says. “House Bill 5066 allows operators to count potential users without a signed agreement. It unties the hands of ERCOT.”
The net effect is that the new predictions point to “our power demands doubling over the next six years, and it is coming from data centers, bitcoin miners and AI companies,” says Arledge. “Many Texas communities are second-guessing whether they want a data center or a bitcoin mining company to come in and suck up power.”
The U.S. Energy Information Administration recently reported that Texas trails only Virginia in the growth of commercial sector electricity consumption from 2019 to 2023. During that period, Texas demand grew by over 13,000 gigawatt hours (GWh).
Waco-based economist Ray Perryman says that “the dynamic Texas economy and its growing population — and cold winters and hot summers — require increases in electric generation and transmission capacity well beyond what was expected even a few years ago. Basic patterns of growing power needs in response to population and economic expansion have been in place for decades. However, there are profound changes underway which are shifting power demand growth into an entirely new gear. The recent and projected surge in electricity-intensive industries is driving rapid increases in current and projected demand.”
“Power is probably the biggest factor impacting Texas right now.”
— Susan Arledge, Senior Managing Director, Newmark, Dallas
Besides data centers, Perryman points to emerging industries such as the Tesla gigafactory in Austin and LNG (liquefied natural gas) facilities across the Gulf Coast. All of them require substantial electricity. “Developments on the horizon to deal with climate issues, such as hydrogen production and carbon capture, will also require enormous resources,” he says. “It is probably not surprising that Texas is at the forefront of many of these trends given the economic development success of the state in recent years and its regulatory framework that is conducive to emerging industries. While electric vehicle adoption will likely be slower in Texas than elsewhere, the area is a leader in data centers — including those developed to support AI — and crypto mining. It also has a strong and growing presence in electric vehicle manufacturing across the supply chain.”
About a third of the increased demand is expected to come from the Permian Basin where oil and gas companies are converting from gas and diesel to operations run on electricity.
Expert: ‘All of the Above’ Approach is Needed
The solution to the state’s power needs will have to be comprehensive and multi-faceted, says Perryman.
“Texas will need generation and transmission capacity. ERCOT has 1,775 active generation interconnection requests totaling 346 GW planned for the next few years, including 155 GW of solar, 35 GW of wind, 15 GW of gas and 141 GW facilitated by battery capacity. Benefits of this diversity of sources are that they can be built faster and with more location options. However, given that 190 GW is dependent on wind or sun, the batteries, as well as additional gas-fired capacity, will be crucial to dealing with surges in demand in response to weather extremes. It will necessitate an ‘all of the above’ approach, and policy should accommodate all types of power resources.”
John Boyd Jr., principal of The Boyd Company Inc., a national site selection consulting firm with offices in New Jersey and South Florida, says that “it is incumbent upon cities in Texas and elsewhere to be able to provide the peak power needs of site-seeking companies as peak power requirements have become leading-edge site factors for many firms.”
For Texas, Boyd notes, the power factor takes on heightened importance. “Keep in mind that Texas is a land of climate extremes, ranging from frigid winter storms that paralyze power plants to blistering summer days that overload the grid, not to mention the state’s exposure to severe storms like tornadoes along with hurricanes coming off the Gulf of Mexico, like we have seen recently.”
Moreover, he says, Texas is in a unique position because of its independent grid. “Texas, unlike every other state, has its own power grid and lacks major connections to other regional power grids outside its borders,” Boyd says. “This doubles down on its vulnerability to the wide range of severe weather that Texas deals with. Developing additional in-state power generation has been a focus of the Abbott administration and the legislature, especially since that over-the-top winter storm three years ago that almost brought the state power structure to its knees and blacked out a large portion of Texas.”
Boyd was referring to the winter storm deep freeze of February 2021, when Texas suffered its worst energy infrastructure failure in state history. Widespread shortages of water, food and heat lasted for days and even weeks in some portions of the state.
Compared to that disaster, the weeklong power outages in Greater Houston following Hurricane Beryl in early July were less severe, but they were no less impactful as they led directly to strong reactions from those in charge.
Governor Abbott is Seeking Answers
On July 16, Texas Gov. Greg Abbott fired off a stern letter to the CEO of CenterPoint Energy demanding answers and accountability.
“In the wake of Hurricane Beryl’s landfall, CenterPoint Energy has lost the faith and trust of Texans,” the letter stated. “Indeed, nearly 2.2 million residential and commercial customers in Southeast Texas lost power during the peak of the storm, and many continue to suffer without electricity more than a week after the storm. Texans deserve better from their electrical companies, especially during hurricane season. The adequacy of your preparation will be analyzed in the coming months, but the time is now for CenterPoint Energy to improve its practices.”
Abbott was not alone. Harris County Commissioner Rodney Ellis blasted both state and Public Utilities Commission officials in the aftermath of Beryl. “The state’s response was clearly inadequate this go-round,” Ellis told TV station WFAA in Dallas-Fort Worth. “It’s going to have an impact on economic development for this state. And this state is such a driver, is such an engine for economic development in America. I think that’s why you’re going to see state leaders willing to make some investment on their end.”
Texas is a national chipmaking leader.
Getty Images/SweetBunFactory
Texas Puts its Stamp on Semiconductor Training
Already ranked second in the nation both for semiconductor manufacturing and semiconductor employment, Texas has hundreds of billions of dollars’ worth of chipmaking fabs that are poised to come online in the coming years. To continue to staff these massive labs of immense complexity, leaders from government, industry and academia are coming together in a statewide effort to train new legions of semiconductor workers. These educational initiatives are sprouting with increasing frequency from K-12 systems up to master’s level programs.
According to the University of Texas at Austin, the Lone Star State accounts for 17.5% of all semiconductor employment in the U.S., amounting to more than 43,000 semiconductor workers. More than a quarter of those jobs require a graduate degree, UT says, with a third of the workforce expected to retire within the next decade. The math says Texas will need to pad its robust semiconductor workforce within the neighborhood of a thousand new master’s graduates each year.
In response, UT is unveiling a new master’s level semiconductor program that’s to launch in the fall of 2025. A collaboration of the school’s Cockrell School of Engineering and its College of Natural Sciences, the program will offer a new Master of Science in Engineering with a major in semiconductor science and engineering. It will leverage UT’s history of semiconductor education and its ties to industry leaders such as Samsung Austin Semiconductor, with which it formally partners on workforce development.
Photo courtesy of Samsung
“Nowhere else will students have the opportunities to work with leading semiconductor companies, access to world-class facilities for education and research, and the chance to conduct hands-on research like they will as part of our semiconductor science and engineering program,” said Roger Bonnecaze, dean of the Cockrell School of Engineering. In addition to the master’s program, the Cockrell School and Texas Engineering Executive Education (TxEEE) — the school’s professional development and continuing education arm — are to offer a new certificate providing training in semiconductor manufacturing and a path to enter the industry from other fields.
Federal Funds Coalesce for Coalitions
Led by UT Austin and funded by the Texas Legislature to the tune of $552 million, the Texas Institute for Electronics (TIE) is a consortium of state and local governments, semiconductor companies, national labs and academic institutions focused on semiconductor and semiconductor workforce development. Founded in 2021, TIE’s industry partners include Intel, Micron Technology, Applied Materials and Advanced Micro Devices.
In March, TIE was announced as a partner with UT and Austin Community College District in a program that’s to serve as a one-stop shop to address multiple skillsets across the semiconductor workforce continuum. At the center of the effort is the joint Semiconductor Training Center (STC), envisioned as a delivery system for hands-on training combined with academic theory designed to transition current workforce talent into the semiconductor industry and to advance the careers of incumbent workers. The first training programs are expected to launch in January.
In July, TIE was chosen by the Defense Advanced Research Project Agency (DARPA) to receive $840 million to build a DOD Microelectronics Manufacturing Center. “Under the agreement, TIE will establish a national open access R&D and prototyping fabrication facility that will enable DOD to create higher performance, lower power, light weight and compact defense systems,” said a release. “Such technology could apply to radar, satellite imaging, unmanned aerial vehicles or other systems.”
Austin Community College is a player in its own right in semiconductor workforce development. Late last year, ACC developed the Semiconductor Technician Advanced Rapid Start (STARS) program, a four-week upskilling curriculum in collaboration with the Austin Regional Manufacturing Association and regional employers including Samsung, NXP, Applied Materials, Tokyo Electron and Infineon. The short-term program is designed to create pathways to entry-level employment in the semiconductor manufacturing sector as equipment maintenance and repair technicians.
“Austin Community College is a regional leader for workforce development training programs that build direct paths for students to train and get the skills needed to meet the growing needs for Central Texas’ manufacturing workforce,” said Jon Taylor, corporate vice president, Samsung Austin Semiconductor.
In late July, the Texoma Semiconductor Tech Hub of North Central Texas and Southern Oklahoma (TSTH) — one of 31 federal Tech Hubs designated last October under the Biden Administration’s CHIPS and Science Act — was awarded a $500,000 Consortium Accelerator Award from the U.S. Economic Development Administration. Coupled with a $400,000 federal strategy development grant the consortium received last fall, the awards will support the hub’s aim of creating equitable training opportunities — particularly targeting historically underserved communities such as women, girls and rural communities.
The TSTH consortium is led by Southern Methodist University. The centerpiece of its strategy is the construction and distribution of “fablets,” shared mobile lab facilities, to provide communities across 29 counties with access to semiconductor training resources typically available only to those with access to expensive clean rooms.
— Gary Daughters
ExxonMobil’s Baytown site will soon hold the world’s largest low-carbon hydrogen project to date.
Photo courtesy of ExxonMobil
Baytown Goes for Blue Hydrogen
Could Texas become an epicenter for U.S. hydrogen production?
Ideal ingredients — location, workforce, availability of clean energy resources, geological storage potential and over 900 miles of installed hydrogen pipelines — present a promising recipe for commercial success.
ExxonMobil has operated on 3,400 acres outside of Houston in Baytown for more than 100 years. The site has become one of the globe’s largest integrated advanced petroleum and petrochemical complexes.
With sustainability at the forefront of corporate decision-making, the company’s Texas operations will soon welcome a new hydrogen production plant, representative of the world’s largest carbon capture and storage project to date.
“It’s exciting but expected, given ExxonMobil’s industry leadership and dominance over time,” says Baytown-West Chambers County Economic Development Foundation President and CEO B.J. Simon.
In April 2023, the U.S. Department of Energy announced a $34.15 million award to engineering company John Cockerill for the construction of a new electrolyzer gigafactory in Baytown, producing technology that uses electricity to split water into hydrogen and oxygen.
“We anticipate we’ll see what we’ve always seen vis-à-vis the economic impact and multiplicative cascading effects of a project of this magnitude and scale,” says Simon. “In addition to the Blue H2 Project, we have a growing cluster of hydrogen-related manufacturers locating in the Baytown – Chambers County region.”
Unlike many green hydrogen projects in the works globally — which use renewable energy to power operations — this blue hydrogen facility will use natural gas. ExxonMobil states that the project is anticipated to produce up to 1 billion cubic feet of hydrogen per day and store up to 10 million metric tons of carbon dioxide annually.
In order to meet oxygen demand, ExxonMobil selected Air Liquide to establish a new low-carbon industrial gas platform. With $850 million in hand, the company has made its largest industrial investment in history to construct four Large Modular Air separation units at the Baytown site.
The platform will produce 9,000 metric tons of oxygen and 6,500 metric tons of nitrogen per day for ExxonMobil, in addition to gases such as argon, krypton and xenon to be made available to Air Liquide customers.
“This partnership with Air Liquide further strengthens our Baytown project by enabling hydrogen distribution through existing networks and securing key feedstocks,” said ExxonMobil Low Carbon Solutions President Dan Ammann.
As of press time, ExxonMobil has not disclosed its final investment decision.
— Alexis Elmore
For its part, CenterPoint Energy said it brought in over 12,000 utility workers from outside Houston to help restore power to 2 million customers, but could not do so until it was safe to send them in. CEO Jason Wells told reporters that over 2,100 utility poles were damaged during the storm and that more than 18,600 trees had to be removed from power lines.
“The impetus for STEP Ahead is the unprecedented growth in Southeast Texas.”
— Eliecer Viamontes, President and CEO, Entergy Texas
Following the governor’s letter, CenterPoint Energy issued this response: “We have work underway to address the governor’s requests and are committed to collaborating with the state, local government, regulators and community leaders to increase the resiliency of the electric grid. This work is integral to ensuring that we are creating and sustaining an environment in Texas where people want to live and build their businesses.”
The company announced on July 16 that it had restored power to nearly 96% of impacted customers and remained on track to restore power to all customers by July 19. The company also released a three-pronged strategy to mitigate outages next time. The plan includes resiliency investments; improved customer communications; and closer alliances with various governmental agencies.
Perryman estimates that total losses nationwide due to Beryl were at least $12 billion, with about $8 billion of that economic loss coming in Texas alone.
For now, Texas lawmakers are surging full speed ahead to fund new power plants. They recently passed legislation authorizing $5 billion to fund low-interest loans to firms that plan to build gas-fired power plants.
Earlier this year, Gov. Abbott said that for Texas to keep up with growing demand for power, the state would need to grow its supply of electricity by as much as 15% each year. The problem is that it takes three to five years to plan, permit and build new transmission lines in Texas, and that is about half the time needed in most places in the U.S.
“With current expectations, these projects must receive priority status,” says Perryman. “The crypto and data center users are also working to limit consumption in peak hours while running continuously at other times, which can facilitate the situation because Texas does not have a capacity market in the deregulated areas and thus generators only receive revenue when they sell power. Large users that are active most of the time can create a market incentive to develop new generation resources.”
Entergy Texas, which operates in the Midcontinent Independent System Operator (MISO) power grid and is not part of ERCOT, released its STEP Ahead grid modernization plan on July 1. The plan includes a $335 million investment in the Southeast Texas power grid.
“The Texas economy and its growing population require increases in electric generation and transmission capacity well beyond what was expected even a few years ago.”
— Ray Perryman, Economist, Waco
Entergy has also proposed the construction of two new power plants in Southeast Texas: $1.46 billion to build the Legend Power Station, a 754-megawatt combined-cycle combustion turbine facility in Port Arthur; and a $735-million investment to build a 453-megawatt combustion turbine plant near Cleveland, Texas, on the northern outskirts of metro Houston.
Eliecer Viamontes, president and CEO of Entergy Texas, tells Site Selection that “the impetus for STEP Ahead is the unprecedented growth in Southeast Texas. We have one of the largest industrial corridors in the nation, and more large projects are being added to the region. This leads to the need for additional generating capacity. There is a need for 40% additional capacity in four more years. We must stay a step ahead of that growth because we produce the electrons needed to serve it. We saw Hurricane Beryl affect our territory. It highlights the need to add capacity. That is what STEP Ahead is all about.”
Viamontes says that Entergy selected its locations for new power plants based upon where the increased demand is originating. Most of the new demand, he says, is coming from the Golden Triangle — an area of southeast Texas between Beaumont, Port Arthur and Orange.
He adds that Entergy chose natural gas-fueled power plants because his company is “technology agnostic. Energy needs to be affordable, reliable and sustainable. It is about helping our customers achieve their goals.”
Perryman: The Time to Invest is Now
Ray Perryman says the state has no choice but to supply more power: “Texas no doubt faces a daunting task, but the scope of what will be required has been acknowledged and work is underway to meet the need.”
Newmark’s Susan Arledge says that only an “all of the above” strategy will work in Texas.
“Where the power is coming from is a major concern for everybody,” she says. “Texas is lucky in that we have many providers. We are not going to be able to meet demand the way we are currently generating power. Texas has stood alone because we have gas, wind, coal, nuclear and solar. We have been able to generate more wind energy than most. We are going to have to increase how that energy is generated and transmitted.”
Arledge adds, “The number one conversation I have with a large power user now is about power. Right now, if I am on a site tour with a client, we want the utility provider on site to explain how they will deliver power. We want to know what is realistic and how much time it will take. That is impacting site selection right up front from day one.”
With a 36-MW to 50-MW substation costing $10 million to build, and transmission lines costing $2 million per mile, lead times are more critical now than ever.
“I have seen projects delayed two to three years solely because of the power issue,” says Arledge. “Getting power to remote sites can be expensive. There will be companies that will be unable to open a plant because they cannot get power.”
