Why Renewable Energy Is Booming in Texas

Zac: Hi, Zac Padgett here, partner at Orrick. I'm here with Sean Voigt, founder of the Austin Climate Hub, Director at EarthX Capital. We find ourselves here at South by Southwest 2025. Lots of people in town to talk about tech and innovation, in particular around clean tech, climate tech, energy tech. What are you hearing about the most? What's top of mind for everybody?

Sean: Yeah, one thing that everyone's been talking about for a while, and obviously including here at South By, is load growth. Just to put this in context, here in Texas, our peak load is about 85GW. And we've been adding maybe like 1 to 2GW a year for quite a time now. We are set to almost double that amount in the next five years. So up to 150GW on the low end up to 110, maybe 130, up to 150GW. So that's like 50GW of new load by 2030.

Zac: And what's driving that generally?

Sean: So great question. You hear a lot about the role of data centers and AI and compute. That is a big deal. But it's actually also just other economic growth in particular sort of at the industrial and the commercial levels. So for instance, Houston, is set to literally double its entire you know, energy, demand. And that's primarily actually sort of the port, other types of commercial industrial, not so much actually data centers. So it is a whole mix.

To get a kind of a sense for where this load is going to get filled all you need to do is take a look at the interconnection pipeline. The interconnection pipeline is about 200,000MW or 200 gigs of different types of projects that are trying to basically get you know, interconnected into the grid. Of those 200,000MW, like 10,000 to 15,000 are gas and everything else is wind and solar. Probably some battery in there as well. Meaning so basically 95% of everything the market is telling us it is trying to build in and is going to build is basically wind, solar and battery.

And the reason for this is multiple but very simple. Number one, they are the cheapest and the fastest to build sources of energy end to end from sort of idea to sort of you know, electrons flowing. It's about three years for solar and wind minimum five years for a gas project.

Zac: There's a huge backlog for getting gas.

Sean: Exactly. And so even taking that aside, the supply chain for gas is, you basically can't buy a generator.

So, you know, Texas has this energy fund, this $5 billion sort of slush fund of super low-cost loans, pretty much, I think, thrown as a bone to the oil and gas industry to build these guys peaker plants.

Zac: Ostensibly to build some more baseload, right?

Sean: Yeah. Exactly. For dispatchable load. We've seen NG basically pull out saying we can't actually fulfill this.

NRG, which is the largest energy producer integrated energy producer and utility in the state of Texas, 100% gas company in terms of like what they build in their portfolio, they had to literally sign an agreement with GE Vernova that makes gas turbines and another company, almost to like vertically integrate back into gas. And if you look into that contract, they were going to only get two turbines delivered before 2030.

Zac: Just before we were looking at the ERCOT app right.

Sean: Yeah.

Zac: It showed what the current fuel mix is for power generation in Texas. And it's currently 80% low carbon, which is really interesting, on a regular day.

Sean: Yeah. Texas is number one in solar, number one in wind, about to be number one in battery. So we dominate California and basically everyone else. This is a state where we have a market design, which is 100% just based on price and a competitive market. Right? We don't mandate renewables, we don't subsidize renewables. We simply say, if you can build generation capacity, I don't care what it is, and you can get it in there, we'll buy it if it's the cheapest thing. And in that context, renewables win every time.

Zac: Yeah, I mean we were talking a little bit about just trying to break down why these renewables projects are a lot cheaper in the long run.

Sean: Solar, wind, battery. They eat everything. You simply cannot compete. You cannot compete with zero marginal cost. Ten years ago, cost for energy storage was about $1,000 per kilowatt hour. We just hit $50 last year. And we are rapidly approaching 25 bucks per kilowatt hour for storage.

Zac: Yeah, and then battery storage can also be located in strategic places.

Sean: 100%. The transmission and distribution grid to basically get generation to the point of load, I mean, we basically build this entire machine in order to… it is designed for the one minute out of the entire year when you've got all the air conditioners on or it's super cold. Right. And so this issue around congestion and how do I get my generation over here to there is incredibly elegantly solved by I think the second big theme that is a really big deal, but not being talked about as much as the load discussion, which is the role of distributed energy resources.

Batteries are a really important one. Rooftop solar is another one. And, you know, I think a really exciting theme that I think I am excited about is the way that we are starting to see these decentralized resources start to actively participate in the grid edge. This is one thing where it is truly, at least at a system level, truly, win-win. It is deflationary on costs, it is massively stabilizing to the grid in terms of reliability, and it inherently favors clean energy.

Zac: Yeah, it's an incredible time. Well Sean, thank you so much for joining us. It's really good to talk to you about all of this.

Sean: Yeah, I love talking about this stuff. Thanks so much for the opportunity.