How Texas decides which data centers to connect
ERCOT is implementing a new "batch zero" process, stemming from SB6, to manage the connection of 445 gigawatts of large loads, primarily data centers, to the Texas grid. This process will screen projects, study transmission needs, and establish financial commitments, with the first batch not expected to finish until late 2027. A key debate is also ongoing regarding a shift in transmission cost allocation from the four coincident peaks (4CP) to contracted peak capacity.
The Electric Reliability Council of Texas (ERCOT) is instituting a new "batch zero" screening process to manage an "infinite" 445 gigawatts of large load requests, primarily from data centers and cryptocurrency miners, seeking connection to the state's power grid. This initiative is a direct response to Senate Bill 6 (SB6) from 2025, which aimed to standardize large load interconnections and ensure fair payment for transmission costs. Tiffany Wu, an energy markets and regulatory consultant at McAdams Energy Group, explained the mechanics of the new system in an interview with Joshua Rhodes and Nathan Peavey.
The batch zero process, recently approved by ERCOT's Technical Advisory Committee (TAC) and slated for a June 1st Board of Directors meeting, is designed to filter projects through several stages. It begins with inclusion criteria, followed by extensive electrical engineering studies to determine necessary transmission and allocated load capacity. Developers then face a "commitment gate" requiring a $50,000 per megawatt financial security deposit, which converts to a fee upon signing an interconnection agreement, plus a contribution in aid of construction (CIAC). The first batch is not anticipated to conclude until late 2027.
Alongside this, a contentious debate is unfolding over transmission cost allocation. Public Utility Commission (PUC) staff propose shifting charges from the current "four coincident peaks" (4CP) system, which allows flexible customers to reduce costs, to one based on contracted peak capacity. Wu notes this change would significantly diminish demand-response incentives for loads. The new framework will be implemented and refined as the first batch progresses, reflecting ERCOT CEO Pablo Vegas' "build-it-in-motion" approach.