A Changing Power Mix in Texas
The Electric Reliability Council of Texas (ERCOT) system that covers most of Texas has historically provided electricity by using “dispatchable generation” resources whose outputs can be adjusted by grid operators as needed, such as natural gas, coal, and nuclear power plants. However, most of ERCOT’s electric capacity added during this decade has come from solar and wind farms — both resources with outputs that vary with the weather — along with batteries to provide flexible storage.
For example, according to ERCOT, solar capacity has more than quintupled since 2020 while natural gas capacity has grown only 4% — even though no other dispatchable power plants have been built. Three coal-fired power plants closed in 2018, and most remaining coal plants are over 40 years old and lack state-of-the-art emissions controls. Thus, variable renewable resources, such as wind and solar, provided 35% of ERCOT’s power generation in 2024, alongside 44% from natural gas, 13% from coal, and 8% from nuclear power.
Reliability Gains and Remaining Vulnerabilities
This trend toward variable renewable resources has coincided with improvements in resource adequacy, i.e., the ability of the system to meet consumer demand under various conditions. ERCOT’s summer reserve margin has doubled since 2020 despite rising power demand and scant additions of dispatchable power plants.
The Texas Reliability Entity (Texas RE) noted that new solar and battery storage facilities were pivotal to helping ERCOT meet high summer peak loads without any energy emergency alerts in 2024. The grid also avoided significant disruptions during winter storms of moderate severity each year from 2022 to 2025 as the availability of stored power continued to grow.
Figure 1 — ERCOT Electric Generating Resources, 2020 Versus 2025
Lessons From Winter Storm Uri
Widespread blackouts during Winter Storm Uri in February 2021 — caused mainly by outages at gas- and coal-fired power plants and wind farms before recent additions of solar farms and batteries — drew global attention to electric reliability in Texas. Despite frequent outages, fossil-fueled power plants in Texas top the nation in emissions of greenhouse gases and other air pollutants, contributing to climate change globally as well as excess levels of ozone and particulate matter in Houston and other Texas cities. Those emissions reflect a large energy-intensive industrial sector, growing population, lack of investments in energy efficiency and the state’s national ranking as sixth in energy use per capita.
Policy Responses and Investment Priorities
Nevertheless, perceptions that more dispatchable power plants are needed to maintain reliability, together with disinterest in reducing emissions, have motivated Texas legislators to subsidize new fossil-fueled power plants. In 2023, the state legislature established the Texas Energy Fund and appropriated $7.2 billion to finance dispatchable power plants. Most of the funding is expected to provide low-interest loans for new gas-fired power plants. Meanwhile, developers are seeking to build transmission lines connecting ERCOT to neighboring power grids, easing the isolation of the ERCOT grid. However, the currently proposed projects would transmit only a few percent of the grid’s generating capacity.
Other researchers from the Baker Institute have recommended investments in dispatchable generation, storage, and transmission to enhance electric reliability in ERCOT. For the purposes of this analysis, a simulation on how such investments would affect resource adequacy and emissions in ERCOT was used, based on a capacity expansion model to explore how new and existing resources would respond to those investments.
Modeling the Future of ERCOT
The confluence of trends described above motivated modeling of the impacts of potential investments in gas-fired power plants, battery storage, transmission lines, and energy efficiency measures on resource adequacy and emissions in ERCOT. In results published in “Energy Strategy Reviews” in July, our research team showed that investments in any of these resources would increase the availability of electricity in ERCOT. Each of these investments would also reduce air pollutant emissions and associated health impacts by allowing existing coal- and gas-fired power plants to retire or operate less often, although new gas-fired power plants would show a slight increase in greenhouse gas emissions.
This analysis modeled meteorological conditions from 2020 to 2023, along with projections of electricity demand in 2030. Prior to applying scenarios for new dispatchable resource or transmission additions in 2030, an assumption was made that no new policies would be introduced to deter additions of solar, wind, and batteries.
Anticipated additions of solar, wind, and batteries are forecast to keep pace with most of the growth in electricity demand through 2030. These additions would allow ERCOT to satisfy growing power needs during repeats of recent record heat waves or moderate winter storms, so long as investments continue to be made in improving transmission within ERCOT. However, the analysis also projected that ERCOT would remain unable to avoid blackouts during a repeat of the extreme cold conditions of Winter Storm Uri.
This is consistent with ERCOT’s estimates that, under Uri-level weather conditions, load shed (i.e., strategic shutdowns of specific grid sections to avoid a system-wide outage) would remain likely even with this year’s power demands. Analysis also found that additions of gas power plants would be more effective than battery storage for reducing outages during an extended winter storm like Uri because most batteries provide just two to four hours of storage.
A Smarter Path Forward for ERCOT
Investments in any of the options considered — dispatchable power plants, storage, transmission, or efficiency — would improve resource adequacy while reducing air pollutant emissions in Texas, so long as additions of solar and wind power are not restricted. Despite their variability, additions of solar and wind power, together with batteries, have been crucial to enhancing electric reliability amid rapid demand growth, since solar and wind farms tend to generate electricity at complementary times.
What this analysis did not examine is the cost and time needed to add new resources, which impacts ERCOT’s shorter-term future. For example, wait times for gas-fired turbines are now up to seven years, not considering the time needed for permitting and installation. The Southern Spirit transmission project has been under consideration for 14 years but has yet to commence construction. By contrast, solar farms in ERCOT typically take just 3.5 years to get approved and built.
The cost of building new natural gas power plants has tripled in the past three years amid a shortage of turbines, according to some analysts. That has pushed the capital costs of natural gas power plants per-megawatt to roughly two-and-a-half times the capital cost of solar farms, even before counting fuel costs for natural gas. The much higher capital and fuel costs can only be recouped if natural gas power plants run more often or receive much higher power prices than solar farms.
However, analysis of ERCOT’s fuel mix reports shows that single-cycle gas plants averaged an 18% capacity factor — the ratio of actual electricity produced by a power source compared to its full rated capacity — in 2024, lower than the capacity factor for solar or wind farms, while combined cycle gas plants averaged a 41% capacity factor. Continued growth in solar, wind, and especially battery storage may ease the frequency and severity of high wholesale power prices, limiting the revenue that costly new power plants can receive. However, the high costs and uncertain utilization and revenue rates have already led several companies to withdraw gas power plant proposals from the Texas Energy Fund.
Thus, while the analysis shows little near-term environmental harm from new natural gas power plants, thanks to their ability to displace older coal- and gas-fired electricity sources, costs and delays could make subsidized additions of new gas power plants a costly proposition with substantial risks of stranded assets. A strategy that includes rapid additions of solar, wind, and storage — along with investments in transmission and efficiency while maintaining existing gas and nuclear resources — is more likely to enhance the reliability and affordability of electricity in ERCOT.
Author’s Note
Research for the associated paper in “Energy Strategy Reviews” was funded by the Cynthia and George Mitchell Foundation. However, the viewpoints expressed in this brief are those of the authors alone and were not reviewed by the foundation.
This publication was produced on behalf of Rice University’s Baker Institute for Public Policy. Wherever feasible, the material was reviewed by external experts prior to its release. Any errors are the responsibility of the author(s) alone.
This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author(s) and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s) and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.
