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ERCOT's Batch Zero process is reshaping how AI data centers and other large loads connect to the Texas grid. But what exactly is Batch Zero, who does it affect, and what happens next?
Gridmatic's Kise Shannon, Vice President of Sales & Business Development, and Rice Lummis, Senior Director of Asset Management, discuss the Batch Zero process, developer requirements, key milestones, WLPUNs, and the implications for battery storage, flexible load, and AI-powered energy optimization in ERCOT.
Kise (00:06)
Hi, I am Kise Shannon. I'm Vice President of Sales and Business Development at Gridmatic.
Rice (00:13)
And I'm Rice Lummis I'm the Senior Director of Asset Management at Gridmatic.
Kise (00:20)
Thank you for joining us as we discuss the latest information we know about ERCOT's Batch Zero process. A lot to talk about, Rice.
Rice (00:29)
Indeed, Kise. Crazy times in ERCOT right now.
Kise (00:35)
Please note that everything we're covering today is accurate as of today based off of what ERCOT and the PUCT has published so far. This process is still unfolding, so deadlines and information will change, and we'll keep bringing you more information as it comes available. So, Rice, before we start, can you give us a quick refresher on Batch Zero?
Rice (00:58)
Yes, yes. So Batch Zero is it's really this sort of once-in-a-generation interconnection study that ERCOT is pursuing with the transmission companies across Texas.
And the idea is to some extent clear the massive backlog that we see in the interconnection queue in the state, which is not a unique thing to ERCOT and to Texas, right? This is a national and perhaps even global phenomenon right now, as AI data centers begin to really get planned for and built and financed in a really meaningful way. And we're talking huge, huge numbers here they're gonna be associated with Batch Zero. So it's the state of Texas's really effort to position the state as a leader and attract more of these data center development projects to the state.
Kise (01:57)
So Rice, that being said, what is required for a developer if they want to have a site in Texas to enter into this Batch Zero process with ERCOT?
Rice (02:07)
Yeah, it's you know it's a process that is quite involved and it's taken a fair amount of time just to get to this point, which you know was July 10th was when the a lot of paperwork was due to the transmission companies by these developers in order to kick start the process. They had to post a lot of money, so it's $50,000 per megawatt is what was required for these developers to post with ERCOT. It's non-refundable. So yeah, serious capital is being deployed just to enter this process, the Batch Zero process. And then yeah, just a huge amount of paperwork, design documentation, proof of land ownership, all of those kinds of things have been required of developers over the past couple of months. So it's been a real rush on the developer's part to get everything ready in time. And then now most of that paperwork is now all in place and now it's with the transmission companies. And then in another couple of weeks, ERCOT will take over and actually begin the study. And so until then, the developer community has sort of submitted everything that they can as quickly as they could. And now we sort of wait and see so that these development companies will see how many megawatts are going to be allocated to them on the transmission system that ERCOT is starting to build.
Kise (03:37)
So a lot going on since July 10th. Process has already started. I think what I understand is that after the process is completed, there's like three categories, if you will, right? So they'll be qualified as Base Load, Studied Load and Excluded Load. Can you kind of explain what do those mean?
Rice (03:57)
Yeah, you got it. So the the the Base Load is that's sort of the first tranche of these projects that ERCOT will study. and these are you know these are large new interconnection requests that are greater than 75 MW that have all their ducks in a row, if you will. They have they've met all of the requirements to be studied in Batch Zero as part of this first tranche, this Base Load tranche.
What's amazing, Kise, to think back how quickly this is all moving in Texas. You know, you and I were in Dallas at a conference in early June talking about this topic. And at that time, we thought that the base load amount of megawatts that ERCOT would study was 30 gigawatts. Fast forward to here, late July, and that number has now grown even more. We're hearing now that 50 gigawatts will be studied just in this base load tranche. So that's that's the first the first category.
And then the second category, as you mentioned, is called Studied Load and this category includes projects that are still sort of, if you will, in motion. There are still things that the developer needs to submit to ERCOT. They're just a little bit less less developed or less ready perhaps to be studied in the Batch Zero process. And then Excluded Load, as the name would suggest, is someone who you know didn't have their ducks in a row. They they they attempted to enter into one of those first two tranches, and for whatever reason, you know, administrative or financial or otherwise.
ERCOT's going to elect not to study them. So that's the Excluded Load category. And presumably there will be several projects, you know, many projects perhaps in the excluded load tranche that will then move into Batch One Because I think it's important to note Batch Zero is simply to clear this massive interconnection queue of the initial projects that have been stuck with the transmission companies for now a couple of years. Batch One will follow Batch Zero and then presumably ERCOT is setting out this process where you know these type of Batch studies will will continue into perpetuity, at least as long as we have the demand that we see in the interconnection queue.
Kise (06:18)
So I think that's fascinating. Like we're already talking about Batch One, right? So not only have we had to have a solution for this, you know, queue of large loads, but we already know that in the future there's gonna be so much more, so we're already talking about Batch One. There must be some key dates that's associated with all of this process, right? Do you have any of those key dates so we could kind of communicate that to our audience?
Rice (06:46)
Definitely. So these are rough dates, right? but yeah, these are these are what are have sort of been broadcasted out by ERCOT in terms of the the timeline going forward. so we mentioned July 10th, that was the key date to get for the developers to get everything into the transmission companies. July 24 is when ERCOT will take over from the transmission companies, begin the study. you know, in March of 2027, there are certain projects, for example, those that have committed to ERCOT to being PCLRs, that stands for Provisional Controllable Load Resource. By March of 2027, the expectation is that those types of resources, the PCLRs, will need to start making some decisions in terms of selecting the QSE, that's the Qualified Scheduling Entity, that they'll be working with. So they'll need to, again, in the spring, they'll need to begin sort of thinking through more of, I would say, the more of the commercial and operational aspects of operating these facilities. and then by let's call it August, I've even heard September of 2027 is when we expect to start seeing letters from ERCOT actually being sent out to these Batch Zero participants, where it will ERCOT will give them sort of the results of the Batch study, you know, how many megawatts they are going to be guaranteed at what future date. so those are the ones that I those are the kind of key dates that I'd circle right now. again, all kind of subject to change as this process really gets going in a meaningful way.
Kise (08:25)
So ERCOT is turning these studies around in a year, that's amazing, right?
Rice (08:29)
It sure is. It's asking a lot of them, yeah.
Kise (08:32)
So you mentioned PCLR. We talk about PCLR and CLR within our organization. The other thing that you know we haven't touched on is the bring your own generation, right? Talk to us about WLPUN and PCLR, what's better, what's the difference? What what does this look like for our audience, right?
Rice (08:55)
WLPUN it is a mouthful. I think it's much easier to think about these types of resources as as you said, bring your own generation, bring your own capacity. That is a concept that's very much being talked about nationwide. PJM, for example, has a program they're trying to develop that's called bring your own capacity. So a WLPUN that stands for Withdrawal Limited Private Use Network. And you know, think of these as again large new interconnecting data AI data centers that are effectively going to have to build out an entire microgrid to support their facility operations because they will have a limited connection to the grid, hence the withdrawal limited, the WL part of the WLPUN. But it's gonna be much that point of interconnection to the grid is gonna be much smaller than the requirements that they expect to need when they're building these AI data centers. And so whatever the balance is that they need to build to operate the data center will all have to be built behind the meter. And these are going to be quite complicated resources. You know, in ERCOT today, we do have PUNs. We do have private use networks. That's actually been a construct, to my knowledge, that's been around since the very beginning of ERCOT. Something that actually does differentiate ERCOT from a lot of the other ISOs and RTOs around the country is that we have this ability to build these PUNs in ERCOT. So that concept is not necessarily new.
The WL part of this is new and so you know, ERCOT approving large projects but only giving you a small interconnection, it puts a lot on the developer who wants to operate this facility. Because, as you know, Kise, you know, the these folks that are building these facilities, the hyperscale data centers, the cloud providers, they're not power development companies, or at least historically they haven't been, right? And and they may need to become that because someone is going to have to finance, own and operate a very complex orchestration of power generation assets behind the meter. It's gonna include batteries, it's gonna include solar, might include some wind depending on where you're located, and it'll very likely include natural gas generating assets as well. So the orchestration of all of those things in order to meet the four nines or the five nines reliability requirements of these data centers, that's a very tall order. and again, it's something new that that I think this market hasn't quite dealt with yet. So it that's what's really exciting, I think, about this time in the market is we're having these conversations between these market participants that that really haven't happened before at the scale that it's going on right now.
And so yeah, back to your question. That's we have really two resource types: the WLPUN the PCLR, or as if you're a hyperscale developer, you could have elected neither of those things and you're just sort of crossing your fingers and hoping that you'll get the megawatts allocated to you from ERCOT that you need on a firm basis to operate your new facility.
Kise (12:11)
So with the WLPUN I think we know of a couple of third-party companies that are coming out proposing some of these solutions with the generation and the assets. Maybe on our future podcast we can bring some other talent to discuss how they're looking at it. But I also know we as Gridmatic are very interested in this kind of application because there's an opportunity for optimization. So I think that's more that we can talk about with our listening audiences.
What does Gridmatic want to do that we're doing already with our battery storage and we're doing it very successfully?
Rice (12:47)
Yeah, you hit it, Kise. We're excited at Gridmatic because you know, we really shine when we have the ability to operate the most advanced energy assets in the market. Our technology is proven to be top tier when working with such types of resources and assets. And so when we think about these AI data centers, they really are very similar to a battery when the battery is discharging, right? So when the battery is pushing power back into the grid, pushing megawatts back to ERCOT, that's the exact same from the grid operator's perspective as a large data center curtailing its usage, or reducing its electricity consumption. Our technology is very well suited for exactly those types of resources. We are working as fast as we can this quarter. Actually, we have some really big engineering milestones that we're building toward to support these types of resources. We know they're coming, we know what their needs are.
And so yeah, that's I think why we're very excited is we see these as the most sophisticated types of load resources that will be available in the state. We think our technology is really well situated to support them.
Kise (14:01)
Yeah, I totally agree. I'm excited about it as well. Let's talk about ERCOT real quick. We see throughout our country that everybody's trying to, other states are really trying to figure out how are we going to handle all this additional load? And it's a concern all the way to the consumer level. ERCOT specifically has this Batch Zero process, and we talked about we'll probably go into Batch One and and so forth. So what is your opinion about how ERCOT is handling the large load with this Batch Zero process.
Rice (14:37)
Yeah, it's a great question. I think that really the state leadership from you know the governor's office to the PUCT, Public Utility Commission of Texas to ERCOT, they really deserve a lot of credit for the speed and I would say the diligence at which they've gone about this. It's happened really quickly. A year ago, Batch Zero wasn't a talking point, right? And now it's in in in a very short amount of time it's it's come a long way.
And again, I think massive credit to the leadership across the board to getting us to this point. When you look at Texas compared to other areas of the of the country, it really stands out as a leader in terms of developing these processes that the data center community requires, right? These folks need regulatory certainty. They need a process that is understandable and repeatable to attract their business to this market. The other one that I hear a lot is SPP, Southwest Power Pool. They have also done, I think, a lot of really good work in the in the recent, let's call it the past year, to put these same kinds of rules and processes in place to attract data centers. So, you know, you think of you know, sort of Arkansas and up into like the southern plains. I think there is a lot of data center development that is being looked at in that part of the country because that market has moved quickly. You know, you have I'll just kind of point out two other regions that I think are very interested in this type of development, but are moving a little bit slower from a regulatory perspective, and that's MISO and PJM. You know, we can we can focus on those markets perhaps at a later podcast. But I think those those two markets still have a lot of work to do in a relatively short amount of time if they want to be in this game and landing these types of facilities. Otherwise, I think Texas and ERCOT and SPP will get a lot of these. Or, we know of developers that are looking elsewhere around the world, right? So it's really it's a kind of a global race to to try and attract and build these things as quickly as possible. And Texas is I would say right up there amongst the top markets where these facilities will end up.
Kise (16:59)
So much to talk about with this topic and so many other topics. And I look forward to us continuing the conversations going forward. I do have another question for you.
Rice (17:08)
Sure.
Kise (17:09)
What's one question about Batch Zero you secretly are hoping nobody will ask you about in the next week?
Rice (17:18)
I appreciate the question. There it's a lot to keep on top of.
Back to the WLPUN topic real quick. I hope I don't get asked too many pointed questions around the scheduling mechanics related with those resources because there's a lot when you consider the power generation stack that's behind the meter, plus the limited point of interconnection out to the grid, plus the facility operation, right? Because we've learned that these AI data centers they have a very different operating profile, load profile than a typical data center does. So there's the the actual scheduling that we'll have to do as the QSE. The mechanics there are quite complicated and I think the rules are still getting written. And so I'm hoping to get a little bit of extra time to to get my head fully wrapped around that one.
Kise (18:08)
So with that being said, what do you think we can expect in our future podcasts, Rice?
Rice (18:14)
Gosh, Kise, I think we should definitely do a follow-up on this topic in a couple of months because it's dynamic and it's moving. I think that, you know, Gridmatic is we're building a business in PJM as well. So I hope to focus on PJM in more detail in a future podcast because yes, as messy as the regulatory process is right there right now, it remains the largest power grid in the United States. it's a great place to do business. So we're also excited about the opportunities there. And then I don't know, what do you think? I mean there's a lot of I think like retail related topics that I think we can cover as well in future podcasts.
Kise (18:58)
I totally agree. I think for sure we need to touch on 4CP to 12CP. I think we continue to talk about Batch Zero. We bring in more information about PJM and then there's the opportunity for us to bring on our own talent within the company so people can get to know us. So I look forward to our future podcasts. Thank you so much for having this very difficult conversation because it's ever moving and I appreciate all your information and details and to all the audience. Thanks for listening and we will see you next time.
Rice (19:36)
Thanks, Kise. Bye.
Kise (19:38)
Thanks, bye.