2026.10.10 | GP | Power | ERCOT Data Center Power Outlook

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Viewpoint:

Competitor

Moderator: Brandon Weber (BW)

Jolly Hayden (JH), Vice President of Power Supply and Operations - East Texas Electric Cooperative

SUMMARY

Overview

The discussion examined how political uncertainty, grid limitations, generation shortages, and permitting challenges are affecting data center development in Texas and neighboring power markets. The expert contrasted the Texas grid’s cautious, politically influenced approach with a neighboring regional grid that continues processing projects despite study complexity.

The expert expects large data centers to rely increasingly on hybrid power systems combining limited grid service with substantial behind-the-meter generation. This approach could accelerate deployment while reducing dependence on delayed transmission upgrades and interconnection processes.

Key Insights

Political considerations are materially delaying Texas data center reviews, and the expert expects limited progress until after the election. Some developers with flexible locations are shifting toward neighboring power markets where projects continue to advance. Hybrid systems are viewed as the most practical near-term solution. Data centers can initially self-supply most power and expand grid reliance as infrastructure improves. Speed is more important than electricity cost for many large developers. The expert expects an eventual downturn after the current development surge. Only a minority of proposed projects are likely to operate. Modular facilities of 50–75 MW should be easier to site and connect than gigawatt-scale campuses. Large power producers have advantages through balance-sheet strength, equipment reservations, development expertise, and supplier relationships. Behind-the-meter generation could suppress wholesale prices while also allowing data centers to sell power during scarcity events. Major transmission projects will likely take substantially longer than announced because of landowner opposition and permitting disputes.

Competitive Landscape

10/11/2026 at 11:30 AM UTC

Participant type

Positioning and outlook

Texas grid participants

Constrained by political intervention, limited reserves, and uncertain review schedules.

Neighboring regional grid

Moving forward despite complicated studies and generation-matching issues.

Large hyperscalers

Best positioned to finance private generation and pursue hybrid campuses.

Major independent generators

Strong prospective partners due to scale, equipment access, and operating expertise.

Smaller developers

Face greater financing, interconnection, and procurement risks during a likely market shakeout.

Battery operators

Support peak management, but merchant returns have been weaker than expected.

Quantitative Insights

Metric

Expert assessment

Historical project queue

Up to 400 GW was discussed, but roughly half was considered unlikely to proceed soon.

Queue completion precedent

Only about 20%–25% of prior renewable queue projects reached operation.

Practical modular project size

Approximately 50–75 MW.

Illustrative initial grid supply

Roughly 200 MW for a much larger proposed campus.

Interconnection timing

Approximately 28 months in a favorable location.

Environmental permitting

Potentially around 18 months.

Large transformer lead time

About four years.

Island reserve target example

Approximately 40%, still below desired data center reliability.

Gas turbine pricing

Nearly 50% above an earlier quotation; later market indications were about 80% higher.

F-class turbine cost

Approximately $140 million for the machine alone.

Small modular nuclear estimate

Around $20,000 per kW.

Gas cost range

Approximately $2.50–$2.70, supporting production costs near $20/MWh for an efficient unit.

10/11/2026 at 11:30 AM UTC

BW: This is Brandon Weber. I'm an industrial advisor with Guidepoint. I want to welcome you to our data center powered ERCOT post-election outlook and energy pricing with VP of a cooperative generator, Jolly Hayden. If you have any questions for our advisor, feel free to email ask@guidepoint.com. Again, the email address is ask@guidepoint.com. We should be able to get your questions and they'll be asked anonymously. Before we begin, I want to introduce our advisor today, Jolly, if you'd like to give us a little background yourself to make you get started.

JH: All right. Thank you, sir. I appreciate it. Happy Friday to everybody. Yeah, Jolly Hayden. Yeah, that's my name. It's a maiden name I was blessed or cursed with. I've been in this industry, well, since I was a co-op engineering student in University of Kentucky. I've spent about half of my career in the IPP world... or excuse me, in the co-op world. I'm currently in the co-op world; before that, I was on a trade floor in Houston and did development and trading and etc. So I've been kind of all over and I've been in the ERCOT market for most of my career in the ERCOT market... so and yes, we are currently having numerous conversations with data centers.

BW: Well, thanks so much, Jolly. I really appreciate it. You've always been particularly attuned to the politics of power, I would say. And so we're certainly in that now on the data center side of the world. And I think one question people have is how much of what Abbott's saying out there is political posturing and could things change after the election? So maybe I'll ask you that and that'll probably tee you up to give us some thoughts.

JH: I think a lot of it is clearly politics. And, as an example, there was a conference that was here in Austin last week, which is where I am today in my home area. And on Sunday before that conference started the first of the week, Abbott sent a gag order. There were several speakers, I think 14, that were going to be at that conference that were either from the PUC chair to PUC staff to ERCOT CEO to ERCOT staff that were told to stand down and not to go to that conference. And he didn't want anything discussed about data centers in particular, as well as the message has been in essence sent or they interpret it this way with some of the TOs, the big guys like Oncor, who have all but paused even analysis that are before the Batch Zero process, but we're under 75 megawatts. They're not. Everybody's standing down. So I think there is obviously concern about the election. And to be blunt, nothing's going to happen, in my guess, until after the election. And then, of course, if there is a flip on who's in there, God only knows what's going to change.

BW: Mm-hmm.

JH: So, I think it's causing obviously a lot of concern and the data center folks that, you know, we're working with are just like, to be candid, in our case, because we're on the same, our service territory covers all 3 markets in East Texas. The guys that are talking to us sitting in certain land locations, they could go to the left or they could go to the right. They could go to ERCOT or they could go to SPP. Well, right now, guess where they're not going?

BW: They're going to SPP, I trust.

JH: Yes. So, again, who knows? And, BW: Whoa JH: If you live in Texas, you're getting bombarded right now with texts and emails big time from all sides and the commercials and all. So I think the Republicans are very nervous as we speak and the Democrats think they've got a real shot and they may, who knows? So again, what does that mean for the data center debate? I have no clue at this point.

BW: Well, how would you characterize the politics around SPP? I mean, has there been a shift there? Is there more opposition? Is it harder?

JH: There's a process. It's still, I mean, to be candid, the classic description analogy people use is we're flying at Mach

10/11/2026 at 11:30 AM UTC

1 and we're still building the airplane. So, things are moving forward in SPP. There is some confusion from the studies. Actually, I'm going to be up in Little Rock next week. We're trying to add some generation into our SPP portfolio, and there is, I think, a little bit of confusion, and I don't... I'm not faulting SPP. I mean, I would not want to be in their shoes. They got all these data centers they're trying to address, and there's generation they're trying to address, and some of that generation is supposed to be matched up to some of the data centers, and how do you properly study it? So, there's a lot of debate going on, but they are moving forward. Now, again, in ERCOT, I think I've said this before when I've chatted... they need to be a little more paranoid. I don't know if that's a bad word. They need to be a little more cautious. That's a better word. Just because at the end of the day, we're a relatively small island compared to SPP, even though from a load perspective, SPP is smaller than ERCOT. It's in the Eastern Interconnect. The Eastern Interconnect is ERCOT's about 10% of the size of the Eastern Interconnect. So, from the inertia and the mass and all that, you just don't have as much reserves to help maintain system reliability, to lean on the system per se. So, ERCOT needs to be a little more concerned. But right now, the politics is definitely driving the boat in ERCOT. So again, while we're seeing more activity in our area, there are people looking at the other 2 markets.

BW: Okay, so this is helpful. The ERCOT, like Batch Zero, and you know, we've done plenty of calls where it's, okay, that 200 gigawatts, and it had been 400, then it was 200, and they're getting back to 50, and then for all kinds of speculation about what's the real number that will clear, and by what time. I mean, today, what would be your answer to that?

JH: Well, again, it's... My understanding, and I have not actually, I traveled from my office here to Austin. I didn't grab something that was on my desk that I wanted to have, you know, but on the timing on Batch Zero, I think the Batch Zero process is slowed down a little bit, partly because of what I just described. And Batch One is definitely sometime next year, right? But again. I'm not going to put money on any schedule that I see right now until we see what shakes out with the election. And again, if there's a change in who's in charge, I would put even more hesitation on putting a wager on a schedule because it's all bets are off and it could be, think about what's happened in DC between the previous 2 transitions from the Republicans to the Democrats back to the Republicans, literally day one, what happened? Major things were canceled by the new administration. And could that happen here? I wouldn't be surprised.

BW: Okay, so, I mean, of that, what do you think is feasible? So the way I've heard it is that theory really covers the period from now to 2031. So in terms of actually building generation.

JH: So, well, BW: And then we'll get into whether we are interconnecting this or it's islanded and all that good stuff. But how much power can we build, you think, in ERCOT?

JH: I think it's the hybrid solution to me from a physics, from a realistic probability and all is the most doable situation. I mean, there is... I'm going to use the example with Fermi, and I'm sure everybody's got views on it, right? They've got a hybrid. They're going to have a couple hundred megawatts, I think, coming from Xcel, SPS, and the balance is going to be an island in essence. It's going to be behind the meter. And again, what I've been telling the data center guys is, look. You're in a position, you're already putting in the big guys, they're buying generation. And of course, the way they've been buying generation has just been raising my cost to serve my quote-unquote traditional members. But you've already taken positions. I'm not going to take a position on a machine that's going to be dedicated to a data center until you give me money. We're going to make sure that we kind of ring-fence it financially just to make sure that my membership is not going to have that risk if they walk away tomorrow. And so, again, you have the most control of your destiny. We can provide you with some power. The grid as it is may be able to provide you with some power, but the more you can put behind your fence, the larger your load can be sooner rather than later. So to me, and then over time, as the grid starts to catch up, you can have more being served by the grid rather than behind. So you could in essence add more to your data centers. That makes sense. So to me, the hybrid is really the path that

10/11/2026 at 11:30 AM UTC

these people need to be looking at. And if that means they got a partner because they don't want to be in the power generation business, I totally get that. But...

BW: Yeah.

JH: Again, it appears to me that the cost of the power supply is not their biggest issue. Time, it seems to be their biggest issue. They want to be on sooner rather than later. And I said, look, you want the most control of your destiny, you know? Build a lot of your own. Right now, most of your own.

BW: Yeah, okay. So if you have something that's behind the meter, do you want to still have, I mean, we keep hearing about more of a notion of co-location. It's like, listen, JH: Yeah.

BW: you build it as a potential to be islanded, but then you ultimately really do want to interconnect. Like, how do you think about that?

JH: No, I mean, and that's in essence what I'm talking about. So if it's truly an island, that's one thing. But it could be an island, but it has a small bridge. So, again, using the Excel example, SPS. They want to get to 11 gigawatts. There's no way in hell that SPS, anytime in the near future, can provide them with 11 or whatever their number is. But they said today, we can provide you 200. We have the grid and the capacity for up to 200 megawatts. So that's what my... and I haven't been following it closely of late, but that was the concept, right? So we can give you 200 today and your guys are going to do a bunch of contemporary stuff right now and then you can bring it in this combined cycle. They got to go nuclear as we all know, but from a ramping right now, I can give you 200 today, and I don't know what Excel says they can potentially do tomorrow... but BW: Now, it hasn't been very easy for them to sign a, you know, they have that.

JH: Yeah, well, I'm not talking about that. Yeah, they got to have an anchor tenant, my understanding they do now, don't they? I don't know, but BW: They do, but it's not like a huge hyperscaler type looking tenant. And so I don't know if it's enough.

JH: I'm not even going to get in. Well, but yeah, and I just use that as an example. Is it commercially going to happen? Who knows? But the point is from a physical technology, from a timing point of view, to me, and every location is going to be different. Where you are as far as how much potential you could take off the grid. In essence, in ERCOT, what the plan was, obviously, up to 75 megawatts. And, BW: Mm-hmm.

JH: Again, we had locations we could do that. So, and we were going with that. And obviously you've got the market, because there's not a capacity obligation, et cetera, et cetera, and it's an energy-only market. As long as you've got the ability on the grid to do it, in theory, you can plug in. But again, for obvious reasons, some logical and some not so logical. We are where we are in ERCOT right now.

BW: Yeah, okay. So if you... let's say you put an islanded solution in and you run it that way for a while, but you do want to interconnect, what is the interconnection process right now and the timing on that?

JH: In theory, in SPP, we ought to be able to get something done, assuming I have some generation I could serve you with, 50 megawatts, whatever it may be. In theory, through the SPP process, we could be on it. 27 would probably be, if I didn't have to, if there wasn't a lot of transmission to build to just get to your yard at the data center, potentially late next year, but I am going to say realistically 28. ERCOT was probably something similar again before all this stuff happened. It is a function of, it is about location. If there is a location that you can site that is not going to take a lot of

10/11/2026 at 11:30 AM UTC

added work to get to you and it is a good location where you can pull the existing grid nearby to handle that load addition, then again, you are not going to have a bunch of lead time because of construction. The bigger issue is long lead time items, transformers, breakers, that is assuming there is already that equipment on order. Because we are looking at lead times on GSUs of 3, 4 years, actually more like 4. We are in the middle of that right now.

BW: Yeah, but let's say you order that and can you start the interconnection process before you start building?

JH: Yeah, you have to. You are talking about the studies with the ISO. You put those studies in now.

BW: My understanding is, we had a call on PJM recently. We had a regulatory expert there who is also a similar kind of cooperative generator. And he is like, in PJM, it takes 2 years to get an interconnection study done and you would not wait for that. So his prediction was you are going to see more islanded stuff.

JH: Yeah.

BW: And so I'm not totally sure how it looks in ERCOT. You said 2028. I don't know if that's 14 months or 24 months. I guess somewhere in between.

JH: Well, I would say it's close to probably 28 months.

BW: Oh, okay.

JH: But again, if I'm doing an island, then, you know, I'm doing an island, right?

BW: Okay, but let's talk about an island. Okay, so this is the other big debate, behind the meter, are we going to see a bunch of these deals? We're building a gigawatt thing here, it's behind the meter, it's islanded, maybe someday we'll interconnect or not, we're willing to go for it. What are the technical and operational implications of that, the amount of backup power you have to build, because if you've got...

JH: Yeah. All right. I'm going to use the analogy of the Hawaiian Islands. Small islands, each island is its own little balancing authority. They target 40% reserves to help keep their reliability up. That's not going to give you the reliability that the data centers want, right? But I think the bigger issue you have is, you know, you're going to have more time from a time perspective. So I'm an SPP, let's say, and I want to do, I'm doing a data center, it's in Arkansas, or it's in Texas. Well, the governor, one of the things he's doing is permitting. I can't stop you from doing it because you are FERC regulated, but I can sure slow your butt down because I can slow down the TCEQ, the Texas Environmental Quality, et cetera, process. So you get the permit to build your gas unit. So, you know, there's the other hurdles that you've got to deal with.

BW: Yeah, no, fair, fair.

JH: And then... and even if that wasn't an issue, I mean, the environmental permitting doesn't happen overnight. It's... I think we could get it, I'm thinking on our timeline, we could get it done in 1.5 years. But again, it's still, if I'm doing a microgrid, I'm doing an island. And it's in Texas. Right now, that's not a slam dunk, even though I'm not in ERCOT as a data center.

BW: Is that Project Jupiter in New Mexico? Is that an SPP or that's further west?

JH: I'm not 100% sure. I think it's SPP, but I could be wrong.

BW: Yeah, I think there's been a debate about why that would have air permit issues.

10/11/2026 at 11:30 AM UTC

JH: I'm forgetting. In theory, it probably shouldn't. It's a non-attainment area, SPP, but New Mexico is not Texas as an example. So, unless, again, we got some politics going on there that I'm not aware of. You would like to think that would not be as difficult, right? I think right now Texas is a little bit of a problem again, and a lot of it's political, unfortunately.

BW: STP is a big place... rolling north and then there's some additional markets coming in. Are there some areas that are more favorable than others?

JH: I'm not. I'm no longer doing the kind of development in multiple states like I was when I was NextEra as an example. So I'm not 100% up to speed on some of the other states, but every state has had data centers becoming a little bit of a target on their backs for all the fears, some of it is misaligned fears, but it is the concern that people have. Water is a big one as an example, even though they are closed loop systems, et cetera, they can be air cooled, but again, the concern that citizens have.

BW: Well, how do you think it shakes out ultimately?

JH: Well, I think.

BW: Okay, maybe let's say Abbott wins, that probably smooths things, but can you overcome this kind of societal backlash?

JH: I think.

BW: Is there a good analog for this in your mind?

JH: Well, I think education goes a long way. And I think it's like anything else, there are pros and cons, and you need to candidly, transparently lay out the pros of this from economic development, tax base, et cetera, some jobs, not a ton of jobs, but jobs. I think you can lay that out. And, of course, the big guys seem to be at least saying some of the right things and trying to address the water issue. We're bringing on our own power issue, but we also have politicians from the White House down to the governor here in Texas that are saying we're going to cause cost allocation, where data centers are going to pay for everything, your power bills will not go up. Well, I'm sorry to say that's not true because the rising tides raise all boats. The fact that the generation I'm building today is a hell of a lot... the same generator that I'm building today is a hell of a lot more expensive than that same generator that I built 10 years ago or even 5 years ago, right? And therefore, your rates are going to go up. That's just the way it works. So there's transparency, it needs to occur. When you're talking politics, we all know there's a lot of smoke being blown and it doesn't matter what side of the aisle we're talking.

BW: Obviously we have a pretty big backlog almost everywhere. There's a general question, is this the kind of thing where we need to just not grow the amount of data centers going in for a little bit as we absorb all these issues, we clean this backlog up of turbines, et cetera? Or is there still some embedded growth in the amount of gigawatts we're going to put in every year?

JH: It's one of the biggest things. I don't know if I'm from history and while it's not data center, you look at wind and solar and look at the queues over the years with wind and solar and how much got entered into the interconnection queues and how much actually come online. Low 20%, maybe mid 20s of those put in are actually online today. You're sitting there going, we know there was 400 gigs, I think at one point, right? We know 400 gigs went in. Half of it... I would argue 200 gigs ain't gonna happen anytime in the near future. And so, are we going to see the same boom bust with data centers that we saw with gas plants back in the early 00s? We saw... I can think of a couple of outfits; I was with one of them that went bankrupt because of that boom bust. And some of the IOUs ended up able to

10/11/2026 at 11:30 AM UTC

buy some brand spanking new, state-of-the-art combined cycle plants for 25 cents on the dollar. So do we expect to see some of that with this? It may not look exactly like that, but I'm going to put money it's going to have its bust. And I think that's part of the big guys who want to be the early movers because they think that's going to give them an edge and then they may be able to buy some, do exactly what happened to gas, the gas plants and be able to buy some projects on dirt cheap down the road to add to their fleet.

BW: You referenced the 75 megawatt cutoff earlier. Do you see a lot of more projects that could come up at that level or below that don't have the same issues?

JH: I mean, yes, the modular concept. I don't need as much infrastructure if I can get as efficient on making these things more prepackaged and the like. It's a hell of a lot easier to site a 50 megawatt, 75 megawatt facility than a damn gig, right? It's just a hell of a lot easier. You got more options, and I think that's something that more modular approach they can get more done scattered about. Absolutely, absolutely.

BW: Are you... These kind of gigawatt plus type projects, hyperscalers have got them. And of course, we talked about some of these bigger ones. Are you skeptical of those or you think we're going to see some of that realized? The technical challenges are, of course, high.

JH: I think you will see some. The big guys are going to do it, right? And they got the money. To do it, they're going to sit there and say, "We're building an island." We've got it. We'll have a small bridge with the interconnecting utility there in the neighborhood. But we're not going to wait 10 years. We're going to do this today. And then as they start improving the interconnection and their capability, we'll grow that interconnection with them. And at that point, number 1, we can do a couple of different things. We've got... maybe we've got some bridge generation we're going to get rid of or just use as backup as an example. The smaller, less efficient that could become a kind of a backup. I can see a lot of different things happening or they could sit there and say, "You know what, we like our existing fleet." We now have grown our interconnection with the utility and so we're going to add more capacity in our data center. I see a combination of things happening.

BW: So you said earlier they don't really want to be in the power game, but in some ways they're getting into it. A related question is always, do the big IPPs, the Constellations, the Vistras, the NRGs, Talen up in PJM, do they get their share because they know how to manage big power projects? They're the partner you want when you need to start repurposing units, doing interconnection. And so, we're going to hear agreements with those kinds of players.

JH: Well, isn't that what the NextEra deal is? That just got announced, I don't know, a couple weeks ago maybe? I forget. Recently? I mean, you're sitting there, the big guys to me, they 1, NextEra. That's unbelievable. I refer to it as an aircraft carrier, right? It's got a lot of scope scale capability and a lot of firepower. And they can scale up to meet a big island project like what we're talking about here, the Fermi types or 1 gig to whatever gigs. The big guys have that capability and I'm sitting there, mad at Google, whoever, and I really don't want to be in the power business unless I have to. I mean, to me, it's just natural for them to go over to the fellow aircraft carriers in that space and say, hey, let's talk about can we get a partnership and that works for both of us. And you're going to serve our needs. So, yeah, absolutely.

BW: Anyone in particular you think is more active in this space among...

JH: Well, BW: some of the names I mentioned and throw NextEra in there?

JH: I think Calpine is doing a deal with their project, the Tad Hill... excuse me... Hill Project here in Texas. You got some nimble, big... Calpine is now part of Constellation. That's a lot of firepower. You mentioned Vistra. They're in

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there. There are definitely some players that qualify. It makes sense. I'm sure the negotiations are fun because you've got 2 entities that both have very sharp elbows sitting around a table trying to negotiate a deal... both sides have baseball bats they're using... but it's, again...

BW: I'm sure the lawyers are winners here.

JH: Oh, my God, yes. Absolutely.

BW: Yeah.

JH: They're making out like bandits. But it can make sense because they've got NextEra... my time that was there, it was very common for them. They went out, they were ahead of the game picking out, taking positions with GE on turbines. They started with gas turbines, and then when the gas... the burst hit with the gas turbines, they converted all those to wind turbines, which is really how they ended up big time in the wind business. And now they're taking positions on gas again. They had the balance sheet and the capability to sit there and say, yeah. And, of course, they used to brag, I'm not sure it works right now because the OEMs are in the driver's seat on this... where they got below MSRP... they got below dealer's cap cost is what they used to brag about. But the point is, they've got some clout with the OEMs when they're buying... they put down reservations on a lot of breakers, a lot of GSUs, a lot of turbines.

BW: And speaking of this technology and solutions, is there a technology array you think will end up being a winner? It's going to be really just all of the above.

JH: Well, I do think it's an opportunity to get some of the newer technology... developing technology—there we go—that is kind of like getting DOE money. So fuel cells... I mean, I would love to see this as a catalyst to get the SMRs in. The TVA, I think, is getting $400 million for that 300 megawatt... I can't remember the name of the unit that they're trying to do there in Tennessee. I mean, this could be an opportunity for that to really... see if that... right now, that's like $20,000 per kw, the number I just looked up yesterday. I can see where that potentially could help be a catalyst for some of this and get this stuff jumpstarted. I think it'd be great. My biggest concern right now is we're getting very heavy into gas. We're losing coal, so our fuel diversity is becoming a problem. You've heard me say I look at power supply; I like to look at your investments, whether you're a hedge fund or your personal investments, you like a diversified portfolio for very obvious reasons. It applies not only on your investments, but it applies on power supply. Every technology has its strengths, every technology has its weaknesses.

BW: I mean, you mentioned fuel cells. Have you assessed Bloom in any way?

JH: We haven't yet. I mean, the realities of the co-op is we have a tendency not to be the alpha or beta testers. But again, back to—we've been hearing about the fuel cells for a long time, like we have in their SMR. These data centers, the big guys, they could sit there and go, "Let's see if we can jumpstart this on a couple of our locations." BW: On turbines, you referenced earlier lead times and all that. What are you seeing across different turbine sizes on leads and on prices?

JH: Well, I can't give you specific price, but I can give you a range. I know when we started our integrated resource plan process, or actually we knew what we needed, and we were starting to evaluate what technology. What size gas turbines. The price that we were quoted at the end of 23 versus what we end up locking in at, it was almost 50% more. And then we've heard since then, and we locked ours in early part of this year, that the same machine is being quoted, in essence, about 80% higher than it was in December of 23.

BW: So what's that price? You said you're... Would you get a raise or got JH: It is, we're talking, it is somewhere near 140 million for just an F-class machine. So frame of reference, the same F-

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class machine, which the F-class, I jokingly refer to it as the 737 of generation, is the most common generator out there, right? And going back, 12 years ago, I built, we built 3 of those machines when I was with Golden Spread for less money and I'm going to be building 1 machine today. Same machine, same F-class machine.

BW: Yeah, I see. Okay. What's the situation in Texas on the renewables and batteries, and how are people deploying those?

JH: I would argue we really don't, and I think the Q supports this, we don't really need any wind, any more wind. We're seeing some repowering. And in our case, we got 2 wind contracts in SPP, Oklahoma, that are being retired because the PTC expiration, et cetera. Solar obviously has value, but if you're in a capacity market such as SPP or MISO and you're a winter peaker, I don't have as much interest in solar because winter, the valuation, the accreditation for solar in the winter is nonexistent. Batteries, 4-hour batteries is definitely something; they get up to 6 or 8-hour batteries, I would feel much better about, but it's not cost competitive yet. The next thing we probably add realistically to our fleet, particularly in the MISO and SPP markets because of the capacity issue, would be batteries. And I would distribute them out probably. We're a small team, so we depend heavily on the big IOUs and the TDUs or the transmission owners and put batteries in strategic locations to help chop my peak and cut my transmission costs.

BW: Yeah, okay. This kind of brings us a little bit to these energy prices in ERCOT. It's been under pressure. PJM is a very different story. When do we see that tightening up?

JH: You talking about an ERCOT for an energy BW: Yeah.

JH: price?

BW: Yeah.

JH: It's a good, this is where wind and solar has helped. It does have value. And again, but it's because we've had a hot summer. It's not the hottest summer we've had, but it's been a hot summer and prices have been pretty soft.

BW: Mm-hmm.

JH: And wind and solar and the battery storage, they've gotten better with the batteries. Earlier on, I used to shake my head and laugh. I said, the guys that own the batteries ran out of ammo too early in the day. They didn't save enough of that storage to get across that peak when solar came off before the wind kicked in. So you see an SPP, you'll see that spike that occurs on a price when that disconnect between solar going away and wind coming up. They've gotten better at that, but you still see some spikes. And again, it's that variability, the problem with intermittent resources, the unpredictable variability of those. And yet in the middle of the day, all of a sudden you'll see this big spike, and it's because wind didn't show up like they thought, or solar, big cloud layer came through, and all of a sudden you got a big ramp that the gas units are having to pick up. So it's again, I think some of it's education that's still going on. I think the concern I'm having on the batteries right now is you're seeing the returns on those batteries for the independent guys is not what they hoped. So are we going to lose some of that? Our case would be different. We're going to sit there to manage our peaks. So I'm not trying to, I'm taking my trader hat off and I'm focusing on my load and managing my cost to serve load. So it's a little different frame of reference on how you operate, at least in my opinion.

BW: Have you seen any other novel battery deployments, like behind the meter, where we're maybe not measuring those additions?

JH: We know we're starting to see that. Again, you get behind the meter. I'm getting hit even in Austin here, Base Power, Michael Dell's son, Zach. He's trying to sell even in a municipal market; he's selling the batteries to put in your

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closet or in the garage like the Tesla batteries. And it's just for battery backup, and where you got retail choice markets, obviously you're seeing batteries that you can use to help you sit there and trigger them based on a price. So serving your home is like, if you're on a real-time market, kind of more of a market-based price, you can use it to cut your peak demand at home. So are we seeing that in more businesses? Absolutely. As the prices dictate and it becomes more cost competitive, you'll see more and more of that.

BW: Well, this is what I think about a little bit.

JH: It's part of it, right?

BW: It's putting together the narrative you laid out. You're going to see more islanded by definition, there is an all of the above-y thing, there will probably be some batteries running around. It could be that this... if you are a power generator at ERCOT, and you said, CalPi, your share, you're a sophisticated player, you're going to have some PPA- type agreements, where you'll get a decent return on these probably if you're able to bring the solution to market fast enough on one hand. On the other hand, maybe the notion of a really tight energy market won't play out because we're adding a lot of solutions that we're not able to measure in the classical supply demand and it will be actually depressed energy prices even if there's a lot of data center development in Texas. So the question is, is that possible? Yeah. Is that world plays out? I'm just thinking, are we missing out? Are we underestimating the amount of generation capacity that's getting added? Because it's all of the above, there's going to be islanded and actually what's playing out in the grid with respect to energy prices, we will see this depressed scenario going forward.

JH: Yeah.

BW: Yeah.

JH: I think, again, to your point, the behind-the-meter stuff, it has been a concern in this industry for a while. On a smaller scale, utilities will tell you, hey, I need to understand what's behind your meter at home, right? You've got solar, you've got batteries, that kind of thing. In this case, you're talking some big stuff. And I think it's important that the IOU, and by the way, if I'm a data center, I think I would like to be able to have this ability, but as the ISO, I need to know, you're an island, and you got X amount of generation, you got a gigawatt, whatever it is. And as the ability to interconnect the grid to you gets stronger, not only does that allow you to bring megawatts in, but it allows you to push megawatts out. So if prices in the ERCOT grid are going through the roof and you've got the ability to turn down your demand because I got data centers... I'm a Google, I got data centers scattered about and I can kind of shift load over to the data center in MISO as an example, and I can turn around and sell megawatts into the ERCOT grid and sell it for a lot of money. I'm going to look at my value proposition. And as a data center owner, you're damn right. If it makes more sense for me to sell megawatts into the grid because prices are to the moon right now, I'm going to do it. And the example that sticks out in my mind, I go back to PJM. They allow... I haven't been in that market in a long time. But in a prior life, I helped set up for Oxy where their production facilities, processing plants that were up in PJM, where they sat there and looked at, they knew the cost of power to make their product. They knew their profit margin on their product and on certain days when the prices in PJM were such, they would sit there and shut down the product, go to low load, and sell back to the grid because they were making more money doing that, right? So, again, I think data centers, I can see them arbitraging with their own generation. Do I go full load at my data center or do I back off and sell back to the grid? If you're not looking at that... but we need to set up the market to allow that. Like I said, it's being done elsewhere. And the tools are there where you can sit there as Google or whoever can sit there and check every day what's going on in the ERCOT market.

BW: This reminds me, we had a data center boom in the 2000s and into the 10s. Efficiencies increased dramatically and it ended up power consumption, despite a lot of additional data center capacity, didn't grow. That could be something that happens in the future. We get past this period of time and then things get... there's inference, there's

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training, the training is more mature, I'm not sure, technology changes.

JH: Yeah.

BW: I'm thinking about this question, if I'm modeling Vistra, everyone wants to know are they going to strike a bunch of behind-the-meter deals for new gas plants? Will they operate, of course, nuclear? Can they operate gas? And what is the PPA price on those arrangements? Okay, that's one thing I need to model. But the other thing I need to model is energy prices in ERCOT. And there could be a world where that's, despite all this activity, there actually could be downside there, maybe I don't know, or it looks like it's looking today, which is pretty depressed.

JH: Yeah, no, price-wise, it's been a pretty mild summer, like I said earlier. But on the flip side, we've got an arrangement on a gas unit that is a grid switcher and in spite of the depressed market relative to the heat, we've seen enough little volatility that BW: Right.

JH: it's worked out really nice for us. Gas is down to the 250 to 270 range. So you got a 7 heat rate machine. And we're about $20 on production costs. And we're able to flip back and forth with the unit and it's really done nice for us.

BW: The other political question I had for you is on the 765 KV lines and where that's going to go over time and then how much within Batch Zero is reliant on those getting done.

JH: Yeah, you know, I cannot speak for Batch 0, but I do know because I am in the middle of the GIA process, the 2020 core GIA queue with our gas adder, our gas speaker we are trying to add. And you know, I am in arguments with SPP right now on what they are saying it is going to cost us to interconnect, and the 765 is, you know, when is it going to hit? And what is that impact when it hits? And of course, you know, in SPP, they are sitting there trying to do the studies, and yeah, they have got a target for when those are going to happen. But whatever the target is, I am going to take the under; it is going to happen at that time. Texas right now is really pushing back on the 765. You know, as far as the landowners... and I go back to the CREZ, which was, you know, 15 years ago now when it got started. Out in West Texas, it is not so bad; the Panhandle, they saw the benefit of it. But as you start getting into the metropolitan areas, you know, number 1, the opposition just grows exponentially. So, yeah, I may be dead and buried by the time it is all done. It is just getting harder to do it. And, you know, we tried to advocate 765 when CREZ happened because we knew it was going to get more difficult. And there are a lot of reasons why that did not happen then, and it is unfortunate. But yeah, a lot of people are banking on that. I am not. I mean, I think it is all getting done, but the timeline is the part that I have no clue on. And whatever they are saying, I am going to take the under on that. It is going to take much longer, in my opinion. Yeah.

BW: I mean, some of that has been approved, but then there is 1 particular holdup, and you are saying even with that, this stuff takes much longer than anticipated.

JH: I mean, it's... you haven't gotten decided. There's going to be a lot of opposite opposition, right? They're going to be contested cases. You're going to be, you know, nobody wants... they don't like condemning land. But you know, that's, yeah, yeah.

BW: Yeah, I see.

JH: It's going to be tough.

BW: Okay.

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JH: It's going to take time, a lot of time. I mean, there's opposition in Texas for the one from West Texas, you know, Permian Basin, in and out there, nobody lives. But as you, you got to connect, you know, it's the classic, you got to connect to where the load is. There's a lot of people, you know. Oh.

BW: Yep. Yeah, understood. Okay. Well, plenty to watch, that's for sure.

JH: Yeah.

BW: Okay. Well, look, thanks so much, Jolly. I really appreciate catching up and always thankful for your thoughts and good luck with it all. We'll revisit down the road if that's all right with you.

JH: All right. Sounds good, sir. Have a blessed weekend, everybody.

BW: Take care. Thank you. Bye-bye.

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