• Solar and batteries are squeezing gas economics
• Data centers could boost natural gas demand but also raise costs

Despite natural tailwinds like data center growth and manufactured tailwinds like the Texas Energy Fund, consultants are projecting challenges ahead for natural gas growth thanks to ongoing market dynamics.

The topic was discussed at a panel moderated by ERCOT independent market monitor Potomac Economics Director Jeff McDonald at the ongoing Gulf Coast Power Association conference in Austin. The panel included Customized Energy Solutions VP of US Retail Services Gustav Beerel, Vistra VP of Origination Brandon Stanislaus, CIM View Consulting CEO Steve Reedy, and Energy Evolution Advisors founder Mark Egan.

Reedy noted that compared to even a year ago, price swings throughout the day in ERCOT are lower thanks to battery and solar capacity keeping up with demand. With 35 GW of installed solar, 40 GW of wind, and 20 GWh of storage at any given moment, Egan said this dynamic is likely to continue for the near term.

The result has been diminishing spark spreads for natural gas with shortage pricing contributing the lowest to revenue since the inception of the model, according to McDonald, despite a lack of new gas generation coming online in the state. Beerel said spark spreads for Summer 2026 in Texas were between 25 and 35 MW per hour, figures he said would be considered healthy in previous years.

Now, however, he notes that an exponential rise in gas component costs coupled with historically high interest rates and yearslong lead timetables for turbines makes those returns insufficient to support investment.

Making matters worse for gas generators, he says spark spreads have plummeted in the last three weeks to prices as low as 20 MW per hour.

[At that price,] we’re not going to build and get a return on investment no matter what we do,” Beerel said.

The pricing is particularly concerning given the heat of the Texas summer, the fourth hottest on record with 100 degree days pushing well into mid-September, which should be conducive to market returns.

Reedy confirmed that of the 20 highest net load hours ever tracked in ERCOT, 12 were in 2026, indicating overall growth of net load. But as solar and batteries provide a growing portion of that generation at cheaper prices, the landscape for gas continues to be challenged regardless of record demand.

“My takeaway is that batteries charged by solar are more than keeping up with load growth in Texas, so I would expect prices to continue to be soft,” Reedy said.

Tailwinds and hurdles

Potentially acting as a tailwind for gas generation is data center load, many of which McDonald predicts will be served by natural gas particularly as momentum builds behind a formalized requirement for data centers to bring their own load.

However, he also warns such a policy would still raise gas prices across the state and wider US based on supply and transport costs.

Beerel noted that while Texas is producing record amounts of gas, much of it is being exported with the expectation that exports will continue to rise with capacity before data centers are factored into gas forwards at all.

“There’s a lot of upside risk,” Beerel warned.

Beerel argued a bring your own generation policy is “not a panacea to the problem” considering the type of generation data centers must bring is not being specified. With a lack of turbine availability, he argues data centers will turn to other, less efficient options like diesel generation, which could spike prices at current record diesel costs.

“Just because they’re to bring their own generation doesn’t mean it’s going to be efficient generation,” Beerel said. “There just isn’t enough supply to meet that demand.”

With this uncertain landscape, panelists disagreed on load growth projections for ERCOT over the next five years. McDonald said ERCOT is on track to hit a 160 GW peak, up from the current 91 GW peak, over the next five to seven years, which Beerel said would be impossible without price shocks to Texas ratepayers. Reedy argued that such shocks would be unavoidable even if data centers are shut off during reliability events under SB 6.

Stanlislaus, though, was more moderate on his growth projection for ERCOT with expectations of 4% to 6% load growth through 2030 resulting in 30 or 40 GW of additional load with “maybe 10 or 15 GW from data centers.”

Egan was even more bearish, calling the current pace of connecting large loads in the state “remarkably slow” and “functionally a moratorium.” If this doesn’t change, he warns data center momentum in the state may be permanently stalled as developers look to other markets.

“There are a lot of people who believe that because we’re Texas, we’ll always be a magnet for this kind of development, but there’s nothing happening right now that is consistent with a 160 GW peak actually occurring,” Egan said. “I think there is concern that a colossal amount of money has been set on fire to bring data centers that aren’t going to materialize because of the current landscape.”

Reedy said even power generators are being faced with “a very weird future” in Texas because of the uncertainty over whether data centers will be required to bring their own generation in all cases via bespoke legislation. In that event, he argues prices will remain stagnant, disincentivizing further investment. On the other hand, he says if such a policy is not set in stone and data centers are allowed to interconnect to the statewide grid, “that’s going to be a lot of load coming online requiring generation to match.”

“The regulatory uncertainty really makes it difficult for this market to work,” Reedy said.