Residential Demand Response Value Proposition

In two weeks, Texas will observe the five-year anniversary of Winter Storm Uri — the devastating 2021 freeze that drove electricity demand to unprecedented heights, froze gas lines and plants, and triggered a blackout that darkened nearly half of the state.

The anniversary will come just days after the latest arctic blast hits Texas; this coming weekend, people across the state will likely see lows well below freezing, as well as snow and freezing rain.

It’s meaningful that state leaders expressed confidence this week that “there will be sufficient generation to meet demand this winter,” thanks both to five years of weatherization efforts and burgeoning supplies of renewables, especially batteries.

But as this week’s Energy Capital Podcast shows, the defining grid issue in Texas is not simply whether it will survive the next extreme weather event.

It’s whether Texas can serve skyrocketing load growth without once again facing the systemic risk that Winter Storm Uri exposed.

Former Texas PUC Commissioner Will McAdams joined The Energy Capital Podcast to reflect on what really went wrong five years ago, how Texas legislators and regulators responded, and what has to go right next.

As McAdams notes, Uri was not a single failure — it was a cascading series of failures.

“There were a number of events that occurred that stacked on top of each other. You had generation outages, you had frequency issues, you had other generators tripping offline as they tried to arrest the frequency freefall of the system. And then that led to deep load shed, situations where power was curtailed to the entire energy system. So it was a series of dominoes that ended up falling.”

In the years since, the state has bolstered protections against extreme weather. ERCOT now conducts regular winterization inspections of generators, McAdams said, and the Public Utility Commission has authority to hold generators accountable.

“ERCOT has hired hundreds of inspectors that go out every season to inspect to those standards… the PUC can fine [generators] up to a million dollars per day per incident where they’re out of compliance.”

The state’s booming battery storage industry has also changed the game. In 2021, Texas had less than one gigawatt of batteries on the grid. Today, it has more than ten times that. McAdams said that dispatchable battery capacity can transform the way the system responds to a Uri-like emergency:

“If we had had the batteries that we have today during Winter Storm Uri, those batteries would have instantaneously reacted. They would have arrested the frequency freefall, stabilized the system, and bought time for other generation to respond. That doesn’t mean it solves everything, but it changes the dynamics dramatically.”

That helps ERCOT navigate extreme weather — and accommodate massive load growth.

ERCOT’s large load interconnection queue grew nearly 300% last year, with large industrial and data-center loads seeking service at a scale ERCOT has never managed before. But just as he expressed confidence about the state of the grid heading into next winter storm, McAdams said the state is well-positioned to serve the economic growth that’s coming.

“This feels unprecedented because of the size and speed, but Texas has gone through major load growth before. After World War II, with the buildout of air conditioning, we saw huge increases in demand. And we innovated our way through that. That’s what we’ve always done.”

Five years after Uri, Texas is more prepared than it was in 2021. The grid is bigger, stronger, faster, and safer. That will matter this weekend, helping keep the lights on when the cold temperatures arrive. It will matter even more down the road, as large loads come to Texas.

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Timestamps:

* 00:05 – Intro, Will McAdams

* 01:19 – PUC path, lessons from Uri

* 05:20 – Weatherization rules, what changed

* 07:33 – Demand growth, defining decade

* 09:38 – Building generation, lead times

* 11:45 – Why bills rose, T&D costs

* 16:32 – DERs and new grid tech

* 20:50 – ADER, dispatch at distribution level

* 22:38 – Flexible demand, smart load shifting

* 26:51 – Deferring wires, market incentives

* 30:31 – Batteries, volatility, price impacts

* 32:41 – Transmission vs DERs, politics

* 35:17 – What Will is doing next

* 38:52 – Final thanks and outro

Resources:

Host, Guest & Company

* Matt Boms - LinkedIn

* Texas Advanced Energy Business Alliance - LinkedIn

* Will McAdams - Linkedin

* McAdams Energy Group - LinkedIn

* Texas Lobby Strategies

Books, Articles, Reports Discussed

* The Value of Integrating Distributed Energy Resources in Texas - TAEBA

* Aggregate Distributed Energy Resource (ADER) Pilot Project

* Winter Weather Readiness - ERCOT

Related Podcasts • All Energy Capital Podcasts • Flexibility Driving Reliability and Affordability with Matt Boms• How AI Data Centers Can Go From Villain to Hero with Varun Sivaram

Transcript:

Matt Boms (00:00.0)

Hi everyone, I’m really excited to welcome Will McAdams to the podcast today. This is a really exciting chapter in our state’s energy history and I am very excited to be joined by an amazing guest today. So thank you so much, Will, for joining.

Will McAdams (00:22.156)

What a privilege, all right.

Matt Boms (00:24.088)

Will is a former commissioner at the Public Utility Commission of Texas. One of the architects of Texas’s modern grid reforms after Winter Storm Uri. At the PUC, Will helped establish some of the most stringent power plant weatherization standards in the country. He also led the creation of the ADER pilot program, the first program in the U.S. to allow virtual power plants to provide reliability services to a major grid. Will also represented Texas at the Southwest Power Pool.

Matt Boms (00:54.274)

shaped regional energy reliability policy, and he also served in senior roles in the Texas legislature. Will is also an Army veteran, and I want to thank him for his service on the podcast here, and really just for your leadership, Will, in the state of Texas, and just to say thank you on all of us who work in the industry, because we are all following your footsteps, and just thank you for playing such a pivotal role in our energy policy.

Will McAdams (01:17.784)

Glad I could help Matt. Thanks.

Matt Boms (01:19.714)

So I wanted you to take us back in time here. You stepped into a role in probably the most dramatic grid event in Texas history. We’re coming up on the five year anniversary of Winter Storm Yuri. So if you could just reflect on that and what was going through your mind in the first few weeks when you were appointed commissioner.

Will McAdams (01:39.554)

Yeah,

Will McAdams (01:40.034)

the first thing I had to do was try to figure out what happened. And, you know, there was information for public consumption and then there was information that we needed just to figure out the mechanics of the disaster, the crisis, how it unfolded, the sequence, how one step led to another that resulted in such deep and long lasting outages, which resulted in loss of life and property damage and just devastating economic effects for the state.

Will McAdams (02:09.695)

And we did that. So that first week was just a series of calling in, you know, former colleagues, friends that I knew in the industry and just asking them point blank in front of a dry erase board, what happened? And at some brutally honest answers, a lot of it was very fresh for them. A lot of them were picking up the pieces to businesses, to facilities that were damaged by the crisis, power generators that were wrecked.

Will McAdams (02:38.38)

We really had to rebuild the system, rebuild how the system operated together and take a look at how to hold people accountable and how to check that this never happens again.

Matt Boms (02:48.118)

Yeah. And obviously we’ve got a lot of folks now asking questions at the five year anniversary of how are we better prepared now than we were five years ago. And I can’t think of a better person to ask that question to.

Will McAdams (03:01.102)

Yeah, actually, I was speaking with a new commissioner not that long ago. And they asked me if I thought we were ready. And I said, point blank, absolutely. And the reason I said that is because in my experience in that first week, asking those questions, how did this happen? What happened? You got to remember how the event transpired. We had 14 days of...

Will McAdams (03:25.504)

weather forecast that showed that as that storm crossed the Great Plains, was building power, speed, force, temperatures continued to drop. As it moved into Texas, it brought freezing rain and we lost four gigawatts of power generation in less than 30 minutes, which is unheard of. That caused frequency variations and volatility on the system that ended up tripping up other essential generation as they were tried to arrest the frequency freefall of the system.

Will McAdams (03:54.464)

And then that led to deep load shed situations where power was curtailed to the entire energy system, the natural gas system that was moving gas molecules along the pipelines to power generation plants. And when those molecules stopped, when the power was cut off, they froze in place. And that led to even longer lasting blackouts. And we didn’t come out of it for another four days. So it was a series of dominoes that ended up falling. And I want to point out

Will McAdams (04:22.604)

Because of that frequency anomaly, because the stability of the system was the first trigger that began leading to the cascading outages, we only had one gigawatt of batteries on the system at that time. One gigawatt to 1.5 gigawatts. If we had had the batteries that we have today, then there would have been no frequency volatility on the system because those batteries would have instantaneously reacted. They would have arrested the frequency freefall, stabilized the system, allowed the gas fleet to catch up.

Will McAdams (04:52.722)

And we may not have had any outages at that time. mean, we don’t know. It’s really, you know, Monday morning quarterbacking five years later, but that was a critical capability that we did not have. And so today, instead of one gigawatt of batteries, we have 15 gigawatts of batteries, 11 to 15, many that are in development that will be energized in the next three months before summer.

Will McAdams (05:20.654)

And then, as you stated, we imposed the most conservative and stringent weatherization requirements in the entire United States in the aftermath of that. And we imposed an ambient weather temperature standard on our entire generation fleet, where if you’re in the panhandle of Texas, you have to weatherize your power plant to a minus 17 degree standard. That necessitates you wrapping pipes. That necessitates you putting up windshielding. That necessitates you putting in space heaters and making sure that

Will McAdams (05:49.428)

intake valves or steam vents don’t freeze up. You’re going to have to take steps and you’re going to have to have people there before these weather events to maintain them throughout the event. And our generators have done that. And not only that, but ERCOT has hired hundreds of inspectors that go out every season to inspect to those standards. And if those generators don’t meet those standards, there’s fines that start to apply. And the PUC can fine them up to a million dollars per day per incident.

Will McAdams (06:19.138)

where they’re out of compliance. That’s in the statute. So our power generators take this very seriously. The PUC takes it very seriously and ERCOT takes it deadly seriously. So you won’t have the catastrophic cascade of events like we had in URI. That sequence is disrupted. Now it’s not to say we’re not going to have outages in the future. We’ve got a lot of load growth. We’ve got a lot of

Will McAdams (06:45.664)

new industrial development in Texas, the economy is booming, it’s growing. And the grid hasn’t caught up to that. And it’s going to take years for that to catch up. So you’re going to, you may have temporary disruptions, but you will not have the long lasting outages like we saw in 2021.

Matt Boms (07:04.814)

Yeah. And so you hinted at this and we’re entering this new chapter in Texas Energy and it’s, think no one knows exactly where this chapter is headed. We have an idea of how much load is coming online over the next few years. Looking at the interconnection queue, about 2000 projects adding up to 435 gigawatts, which is more than five times the peak demand that we have today. And so the question I want to ask you is, are we entering

Matt Boms (07:33.452)

the most consequential decade in Texas grid history? Are these decisions gonna define what our grid looks like here moving forward?

Will McAdams (07:42.496)

Look, I’d advise everybody not to, you know, let the magnitude of the moment just cloud their perspective of history. We’ve seen this before. Load growth after World War II and air conditioners started becoming ubiquitous. It was pretty extreme. And Wall Street Journal has published graphs of basically the big spike in the 1950s and 60s after the home builders started building out all the ranch style homes for all the GIs coming back, settling in.

Will McAdams (08:11.66)

The middle class boomed and that drove large scale energy consumption growth for almost three decades, two and a half decades, 1950s and 60s leading into the 1970s. That’s why all the nuclear power plants were built during the 70s to satisfy all that load growth. But then globalization happened, industries moved overseas. We’re just coming off of 25 years of negligible load growth compared to that historic comparison.

Will McAdams (08:41.078)

And that’s why we think this is unprecedented, but we’ve seen this before and we innovated our way out of it. We grew our way out of it. And that’s what we’re going to do again. And that’s why you see the PUC policymakers, state legislature, and basically businesses of all shapes and sizes collaborating to become innovative. And how do we incrementally allow energy consumers to receive grid service over the next five years? And you threw out.

Will McAdams (09:10.146)

very large numbers, you know, the amount of energy consumers that we have in queue that want to receive grid service, they are not all going to be served in the next five years. There’s not enough capacity of either delivery capacity, like the wires capacity outside of your homes and towns, or the high line capacity to move power over great distances to serve that need at the moment. So we’re going to have to build that and it’s going to take time and there’s not enough supply right now.

Will McAdams (09:38.914)

So there’s not enough power generation units in the state to serve that amount of supply. So that’s going to take some time. Everybody’s going to have to be patient. And frankly, we need to be creative about old systems that we hadn’t, you know, looked at for efficiencies for 50 years. We’re going to need to reevaluate that and see if new technology can be brought to bear to more efficiently utilize existing systems in the intervening years. The grid that we have versus the grid that we will have.

Matt Boms (10:06.954)

Yeah. Well, I think on that point, we’ll take us through some of the load growth that’s coming because the one you hear most about is certainly data centers and AI. What you don’t hear as much about would be on the industrial side, on folks moving to Texas from other places. There’s a lot of other key factors here that are driving load growth in Texas, not to mention our booming economy. So the question I have is, do you have some really creative solutions for how you can meet that load moving forward?

Matt Boms (10:36.822)

And if you can touch on how you can limit costs to rate payers, think that’s going to be a really important piece of this, right? It’s like the pie is expanding for everyone. How do you keep the rates low for millions of Texans who ultimately have to pay their electric bills at the end of every month?

Will McAdams (10:51.916)

Yeah, everybody, and I was really sensitive to this when I was at the PUC, but all former commissioners are sensitive to affordability of power. And look, there’s two parts of the electricity bill. If you’re a Texan, there’s the energy and then there’s the delivery charge that it takes to move the power to you. Okay. The energy is by definition deregulated.

Will McAdams (11:14.786)

That’s basically going to be a combination of whatever the fuel cost is, know, whatever gas you’re burning to make the electricity to power your home or renewable energy, which is zero marginal cost. And it’s based on the market, wherever it settles. That’s what you pay. The delivery charge is regulated. Okay. So that’s based on how much that big power line cost over 30 years. You divide that up by 30 and you give a return on the investment to the utility to manage it.

Will McAdams (11:45.056)

And that’s what you see in the delivery charge on your utility bill. And, you know, that number stayed relatively constant with little blips over 25 years, but now we’re in a growth cycle. So we need new infrastructure. So the delivery charge is actually going to start to incrementally go up on people’s bill. Traditionally over the last 25 years, when we didn’t have big industries moving into Texas, other than oil and gas, which is traditional industries.

Will McAdams (12:14.712)

the big energy consuming industries. Basically, our load growth consisted of air conditioner based load growth of normal people living in their homes, turning on the AC at four o’clock in the afternoon in August. And they would get charged a lot of money for doing that because the energy is expensive and the delivery charges were applying. And there wasn’t a lot of other industries to spread the cost over. So there wasn’t a lot of other

Will McAdams (12:43.426)

Businesses to socialize the cost that average Texans were paying for because the average Texans were driving the need case for the new infrastructure. That’s how costs are assigned. So here’s where this moment is an opportunity for Texas. For the first time in a long time, we’ve got some big businesses moving in that are starting to put in some major pieces of investment. And they’re going to consume a lot of energy. And every electron that they consume, they’re going to pay a delivery charge on.

Will McAdams (13:13.792)

And because they’re consuming more, they’re going to socialize the cost of all the infrastructure that’s coming in across a broader base of ratepayers. Because of that, that should incrementally reduce the need for residential ratepayers to pay more of that regulated cost. It actually should bring down electric rates over time. But here’s the trick. You have to synchronize

Will McAdams (13:43.112)

grid of today and as they’re building out, you have to continue to allow those large industrial consumers to incrementally keep interconnecting and receiving grid service so that they can pay their regulated delivery charges and take the burden off of the residential consumer. And so there’s a tension there because you still need to safely integrate those large loads.

Will McAdams (14:09.43)

So you don’t want there to be a lag in the big new transmission lines being built and those costs being imposed on people and new loads coming in to help pay for it. And so that’s the situation we find ourselves in. We’ve never had loads of this size requesting grid service. When you have a facility that consumes as much power at a single point of interconnection, a single point of grid service,

Will McAdams (14:39.192)

that’s the same level of consumption as the greater Los Angeles area in California. That is something we’ve never seen before. And we are technically trying to figure out how to safely manage, that grid service to that consumer. And that’s something that our scientists, our industry, our researchers are all trying to figure out right now. So,

Will McAdams (15:07.714)

That’s why we, in these intervening years, in order to keep consumers’ cost down, we need as many innovative solutions as possible to support grid resiliency, to support grid reliability, to allow consumers to take themselves off the grid if they want to. That means solar panels on houses, batteries on the back of houses. Put that both systems on businesses.

Will McAdams (15:35.072)

allow them to take tax deductions, allow them to invest in the grid, and then create mechanisms like we did with the ADR pilot where they can participate in the market and help align their interests with the reliability and affordability of the system. And then hopefully, if enough of that starts to happen and allow technology to manage that, if enough of that starts to happen, that starts reducing costs in and around the concentration of those consumers for everyone else.

Will McAdams (16:03.17)

because they’re producing, storing, and discharging power when those people in and around that system most need it. And that’s the beauty of the sophisticated grid that we’ve built. There’s an opportunity. It requires our regulators and our grid operators to be innovative. And I know that’s a hard ask because they want to retreat to the means of providing power that they’ve known for the last hundred years. But we do have

Will McAdams (16:32.002)

brilliant new technologies coming into the system. We do see how these are being employed in other areas of the world. And it is supporting reliability and affordability. So we have test cases that we can follow. And frankly, Texas has always been a leader in these approaches and we need to continue that tradition.

Matt Boms (16:52.482)

That’s great. Well, and I was going to ask you about the AIDR program specifically. So I’m happy you brought this up. You played a really important role at the commission in spearheading the pilot program. It has grown to, I believe, seven aggregated DER pilots that are currently running over at ERCOT. And it feels like we’re at a pivotal moment now where it should be moving from the pilot phase to becoming just a fixture in normal ERCOT operations.

Matt Boms (17:20.907)

What do you see as the next logical step? mean, there were the discussions over telemetry, interoperability, all the technical hurdles, and it feels like we’re at a point now where most of those hurdles have been cleared, but is there some more unlocking that needs to be done as far as the real economic value of these distributed resources?

Will McAdams (17:43.04)

Yeah, I mean, especially now where you have these large industrial consumers coming in, that’s going to impact prices on a neighborhood by neighborhood basis on a very granular basis. right. And our market system in Texas is hyper sophisticated in that it receives price signals based on the substation that’s outside of your neighborhood. OK, that’s very locationally driven.

Will McAdams (18:10.274)

The ADR pilot was never able to receive what we call locational marginal prices, which is that nodal price at the substation that’s outside of your neighborhood. And the reason was, is because it’s based on aggregations. So you have a, could have a concentration of homes in disparate areas within a certain geographic territory. So take Centerpoint. Centerpoint covers what we call Houston zone. It’s the city of Houston.

Will McAdams (18:39.598)

3.3 million people, actually closer to four now. Most of the Houston Ship Channel, all that industrial activity, it’s the economic engine of the state. They only get a price point that’s settled on a regional basis. And that dilutes the overall value for anybody wanting to participate in the program. But if someone living in Pasadena, okay, right there on the ship channel, right there next to Exxon and Chevron’s industrial plants,

Will McAdams (19:08.782)

Those industrial consumers consume a lot of energy and the the nodal price at that substation is really high because they’re consuming a lot of energy and they need a lot of energy. So if someone was able to put solar panels and a battery in the Pasadena area next to the substation, next to the Chevron and Exxon refinery and produce more power, generate more power than they ultimately consume, if we had prices that were set just like we do on the regular market,

Will McAdams (19:38.346)

at that substation, that household would be able to make a lot of money. And that would demonstrate value for them. And that would demonstrate value for any of their neighbors who want to do the same thing. And then you have like a replicative effect across entire neighborhoods, cities, regions. And that is the system we need. And as these new loads come in that are so big,

Will McAdams (20:05.888)

If they should trip offline, if we have a system of batteries at every household or at every business that could help absorb the shock and help re-stabilize the system, those business owners and Texans are assisting in resiliency and reliability, which is the spirit of how the market’s to work.

Matt Boms (20:25.582)

That’s the competitive market that we have in Texas and that works so well. Yeah, so what’s stopping us from getting there? Like it feels like you can go down the list of categories that were number one and fill in the blank, number one in everything, but on distributed resources, it does feel like there’s more work to be done. It does feel like we could be setting the standard for the entire country. What is it going to take to get there?

Will McAdams (20:30.102)

a real world experience.

Will McAdams (20:50.754)

technology. ERCOT has been testing, expanding, and conducting exercises with new technology to see how safely they can settle aggregations of energy dispatch on these very small levels, in these distribution levels, to see if they can actually safely dispatch energy on a neighborhood-by-neighborhood basis, on an area-by-area basis.

Will McAdams (21:19.638)

so that they can actually apply those values on a nodal basis for the ADER. If they can, this opens up the entire distribution system for resource development. This would allow gas stations, warehouse owners and operators, apartment building complexes, residences of apartment buildings or cooperatives to experience the value off the energy system and tie the realization of that value

Will McAdams (21:49.518)

to reliability, resiliency, and energy security of the system. That co-optimizes and aligns everyone’s interests. And I think we’re right there. It is my hope in the next six months to 12 months, ERCOT is able to employ this technology and implement that.

Matt Boms (22:07.756)

Yeah, that’s really exciting. And I think it would set an example and a strong signal to the rest of the country because it shows that the free market, the competitive market works really well, right? When there’s an equal playing field and when customers have their resources set up, they’re able to generate their own energy. Essentially, they should be rewarded or compensated for that accordingly. So that’s, think we’re moving, we’re getting there. It’s going to take some time, but I think you deserve a lot of credit for the AIDR pilot program has come a long way since

Matt Boms (22:36.12)

when it was first launched.

Will McAdams (22:38.378)

I think we’re going to need this. Like I said, the numbers are just getting bigger. At single points of interconnection on what energy needs look like and are supposed to look like, that means we need to fully utilize every resource that we have at both the transmission level and the distribution level. We can’t leave any tools on the table now.

Matt Boms (22:59.34)

Yeah, I think that’s right. And the next logical question for you there would be, does the same principle apply to residential demand response or whether you have a smart thermostat, you’re able to pump up your thermostat a couple of degrees on a hot day in August. Should those customers also be getting some compensation if they’re able to have some more flexible demand than what we’ve seen traditionally?

Will McAdams (23:23.796)

Absolutely. So, here’s going to be the system that we see in the next two to five years. The system used to be, it would be down 90 % of the day, you’d have a system that basically ran at 30 % of your installed capacity. Consumers were consuming 70 % less than they normally would. Because during the morning hours it’s cooler, or in the winter the afternoon hours are warmer.

Will McAdams (23:53.346)

Your heating system or your cooling system would have to run less. But then as the sun rose and it got hotter or colder, depending on the season, all those appliances would crank up and they’d move up and the system would be very peaky. Now, with these consumers who consume energy all hours of the day, OK, the system is going to run much more efficiently. Those generation resources are going to try to produce power much more consistently.

Will McAdams (24:23.438)

70 % of the time, but the peaks are still going to be there because AC load is going to fill in right on top of that. So that’s going to present a value proposition for anybody wanting to participate in the energy market. And that’s where aggregations and most especially demand response are going to serve a vital purpose. It will allow us to shave off those peaks at the most critical time so that the impact of air conditioning load or heating load isn’t so acute on the system.

Will McAdams (24:52.972)

and grid managers can more accurately prepare for how those demand response systems are going to engage and assist the system through those tight moments. So they should experience value. The systems are already in place for them to be able to do that at ERCOT. But like the ADER, they just haven’t been allowed to settle on the most valuable points within the market. Once that is completed,

Will McAdams (25:23.192)

we’re going to have a lot more capabilities. average residential consumers should be able to be part of the value proposition of the system unlike today.

Matt Boms (25:32.172)

Yeah, it’s really exciting because what I hear you saying is customer empowerment and handing the keys over to the customer and saying, look, if you’re able to make your demand more flexible during these key hours, then you’ll be rewarded accordingly. If you’re able to have a battery in your garage or a backup generator, whatever it might be, they also will be rewarded. Right. So.

Will McAdams (25:54.24)

And the key thing between all of the capabilities, is why was it different a year ago for energy efficiency versus where it’s going next year? What I would say to that is technology. What makes this more dependable for ERCOT to count on today? There was the threat in the past when you said residential demand response that a consumer would override a thermometer.

Will McAdams (26:23.66)

that had been adjusted to take demand off the system. Technology is available now to manage that consumption over not just that consumer’s home, but across tens of thousands of consumer’s homes. So that whatever is provided to the utility and ERCOT, for ERCOT to be able to count on, they will build in a margin to where they know they are going to hit their number. And ERCOT can actually plan for that load to be reduced.

Will McAdams (26:51.522)

That will negate the need for future transmission potentially, distribution infrastructure, saving costs for every one of the ratepayers along that system.

Matt Boms (27:02.38)

Yeah, we just did a study on the value of DERs in ERCOT and it came out to about $1,850 per customer over the next 10 years in savings. So there’s a lot of money on the table potentially if you’re able to unlock that value and give customers, know, Texas don’t get enough credit, I think, because they’re extremely savvy energy customers compared to the rest of the country, right? We’ve got a competitive market where they already have an existing relationship with the retail provider.

Matt Boms (27:32.566)

And I think that what you’re saying is the retail providers are going to have to innovate, right? The free market forces them to innovate. That competition is good ultimately for the customer.

Will McAdams (27:40.95)

Well, so the system we’ve set up is after Yuri, people didn’t want to have to be savvy, you know, about the energy market. They didn’t like it. The energy market had harmed them because of that catastrophic sequence of outcomes that I described earlier. But the beauty of our system is they actually don’t have to be that savvy. We have entire industry set up to empower the consumer to share value with them, as long as they will empower that industry.

Will McAdams (28:10.018)

to act on their behalf. And that’s where you have retail electric providers. That’s where you have municipal utilities or cooperatives that can innovate as well that participate in the market on their behalf. They take on the risk, shielding the consumer from the risk in exchange for the consumer allowing them to use their capabilities on an aggregated basis to engage in that market. And that’s, again, like I said, it’s the alignment of interests.

Will McAdams (28:38.752)

And so that retail electric provider has an interest in taking power needs off the system so that they can pay less for the next incremental value of energy. And they’re well incentivized to do that. And they buy and sell and trade power all day long, every day, 365 days a year. And it helps manage their exposure to the risks of the market. And that’s just business.

Matt Boms (29:03.054)

Yeah. Well said, Will. Well, you mentioned batteries earlier and that being one of the main differences in our grid, if you compare what it looks like today to five years ago. And I mentioned that the Q, there’s about 160 gigs of solar, 174 gigs of battery storage, about 53 gigs of natural gas. All of the Q is rising, but what does it say that storage is now the single largest category?

Matt Boms (29:32.94)

when it comes to the interconnection queue.

Will McAdams (29:35.63)

I think it’s great. One, I was in a debate with the independent market monitor. Oh gosh, I guess it was 10 years ago now, a long time ago. And I said, why are all these batteries coming in? And she said, because that’s what the market is telling the system is needed. And the reason is, is because we have very granular pricing. If something bad happens to anyone, like if a load trips offline or if a generator trips offline,

Will McAdams (30:04.81)

Outside of a substation, want that substation to scream loud and clear that something is needed at that location and that sets a value. The price either goes sky high or the price goes rock bottom. Batteries are the Swiss Army knife of utility tools. right. They can be located outside of every substation. They can be located anywhere. They can be as big or small as you want.

Will McAdams (30:31.468)

And that battery either absorbs power or it discharges power. And so, in effect, what it is, it acts as like a shock absorber to the system. It acts as a shock absorber on price. It also acts as a shock absorber on physical stability. And so, if something bad happens, that battery can buy you time. The more batteries we have across our system, in every disparate location through Texas, they will actually solve for volatility.

Will McAdams (31:00.352)

And consumers don’t like volatility. And that’s a good thing for Texans. So a lot of grids have criticized Texas that we love volatility, we feed off volatility. We’ve created a system that at its core is volatile, but it attracts innovative solutions to help solve for volatility. And I know that may not make sense, but think about it, it does. And the cure for high prices

Will McAdams (31:29.622)

are high prices and batteries follow that. since 2021, matter of fact, since 2022, and we really crossed a real demarcation line on batteries, I think we had, we went from five gigawatts of batteries to 10 gigawatts of batteries. After that point, we haven’t hit the system wide offer cap, but like two times, or we didn’t in all of 2024, which meant prices didn’t shoot to the roof, but two times.

Will McAdams (31:59.456)

And the reason they didn’t shoot to the roof is because batteries were sitting there, ready to go. And every time a price went higher than the next value, a battery was sitting there dispatching into the system, solving the condition. That’s exactly the way Texas is supposed to work.

Matt Boms (32:14.126)

Yeah, well, I’m going to ask you then a controversial question, which is, you know, we’re building these high voltage 765 lines, the first of their kind in Texas. And I think the commission deserves a lot of credit for their advocacy and for pushing for the high voltage lines, because we’re not going to grow as a state if we can’t move these cheap electrons around more efficiently. And a lot of the lines are just overloaded, as you know, in South Texas and different parts of the state. my question is, you know,

Matt Boms (32:41.484)

while we get those lines built, it’s gonna take time, right? Those lines don’t get built overnight. Couldn’t a utility come in and put some batteries along one of those lines in Texas? Now they’re not allowed to deal in generation, right? But should they be, right? Like that’s a controversial question. So shouldn’t a utility be able to come in and say, look, we can do this for a fraction of the cost. We can line up batteries. We can get those electrons moving through distributed energy versus the more traditional capital expenditure.

Will McAdams (32:54.446)

how to own the battery.

Will McAdams (33:12.886)

Well, one, that’s a political topic. It’s a subject for argument, certainly at the Capitol. I think a position that we should all agree to is a distribution operator. A wires delivery system operator should have access to the technology of batteries. Whether that is through owning it or renting it, they need access to batteries because they are, like I said, the Swiss Army knife of utility tools.

Will McAdams (33:41.944)

They can do amazing things. They can act as a substation if they need to. Basically converting power flows up and down. Whatever that area of the system dictates is needed. And as we enter the, I call this the Jurassic Age of grid evolution. Because everything’s just bigger. Think of dinosaurs. My kids like Jurassic Park. Everything is bigger now. And you’re gonna need batteries to help stabilize the system when everything is bigger.

Matt Boms (34:11.084)

Yeah, I think you’re right. And it feels like we’re moving in that direction. And I love what you said about batteries answering the call because you can see other states looking at Texas as the example and kind of building the roadmap for how you manage those peaks and valleys with batteries charging and discharging. But the way we did it is so unique, right? Like it’s all with competitive markets and there are very few parts of the country that can really do what Texas did.

Will McAdams (34:36.448)

No, and our queue has responded to the sense of urgency so quickly. Our queue expanded so quickly because they saw the need and it was based on the market signals. And our market is criticized, but one thing our market is, is hyper efficient. And you can see 40 gigawatts of natural gas generation installed over 10 years. And then you can see 10 gigawatts at a time have a signal to retire.

Will McAdams (35:04.706)

But that is what the market is signaling. Now, we will debate whether we need insurance policies and extra money in the system. That’s a political argument, but we are efficient.

Matt Boms (35:17.878)

Yeah, yeah, that’s for sure. Well, I want to wrap this up. I don’t want to take up too much of your time, but I do want to mention that since leaving the commission, you started your own firm. So McAdams Energy Group, that’s the plug for everyone who’s looking for great energy expertise. And, you know, I’m working at a trade association. We both have those relationships with companies that are innovating. I want to hear from you from, you know, the commission to advising some of these companies.

Matt Boms (35:44.332)

which side is moving faster, right? Like what are you seeing in the private sector that maybe you weren’t seeing on the policy side and vice versa? Like what can you give us a little bit of, what are the differences there?

Will McAdams (35:55.43)

companies, people are bringing their own tools. So Matt, when we were working together and I was on the commission, what was put in motion in the aftermath of Yuri driven by fear. Okay. Fear of it reoccurring again has only picked up pace, but it’s not fear. It’s I need these tools. You know, I need to provide for myself or at least have the capability to provide for myself because

Will McAdams (36:21.952)

I know that that next factory is going to come in next door to me and they may change up the level of service that I experienced. I just need to provide for myself. So the beauty of ERCOT is we can align the interests of everybody in a given area very quickly with a price signal or a market-based mechanism. And that’s loads of all shapes and sizes. I see them all. I see a factory come in to Texas because they’re reshoring. I mean, this is happening.

Will McAdams (36:49.954)

because the United States wants to have their own capabilities here. And they are bringing their own capabilities. They’re putting in their own behind the meter generation. They’re putting their own batteries in. They’re putting their own solar panels up. And it’s all of the above. It is not a one trick cony. There’s not just natural gas. It’s natural gas paired with battery, paired with solar, all this stuff. It’s an amazing time. And the reason I’m out of the commission and I feel for the commission because they have a lot of

Will McAdams (37:20.014)

truly consequential decisions left to make. But it is fun being on the outside, being able to innovate, work on what is the optimal configuration of capabilities at a given location and how does that serve the greater good of that entire area around that. That is a good feeling and I’m blessed to be a part of

Matt Boms (37:41.164)

Yeah, I completely agree. Like the private sector moved so quickly and a lot of times the technology pushes the policy, right? So it’s fun seeing where the technology is at and then anticipating where the policy is heading over the next five to 10 years. Well, thank you so much, Will. I want to say thank you again for your service to the country, to the state. I think you deserve a ton of credit for all of your leadership during your time at the legislature, during your time as a public utility commissioner. And you really got us to the place we’re at now, which is a state that’s leading the charge.

Matt Boms (38:11.296)

and welcoming all of these new innovative businesses. So thank you so much and just looking forward to rolling up our sleeves and getting to work.

Will McAdams (38:19.968)

Me too. Good to be with you, Matt. Thank you.

Matt Boms (38:22.958)

Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make sense of the energy world, share the episode with a friend and hit follow on your podcast app. You can find us on Apple podcasts, Spotify, and all the usual platforms. For deeper analysis each week, subscribe to the Texas Energy Empowered newsletter at texasenergyempowered.com. That’s where you’ll find every episode, every article, and all of our latest updates.

Matt Boms (38:52.834)

We’re also on LinkedIn, X, and YouTube, where we post clips, insights, and ongoing commentary. Big thanks to Nate Peavey, our producer. I’m Matt Bombs, and I’ll see you next time. Stay curious, stay engaged, and let’s keep building a stronger, smarter energy future.

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