Solmar Insights
Texas could see $3 billion to $9 billion shaved from upfront costs for its next wave of high-voltage transmission projects if competitive bidding is implemented, according to a new study by Aurora Energy Research. Over the project lifetimes, the total savings for ratepayers could reach $7 billion to $22 billion, translating to hundreds of dollars per household.
Key figures
$3 billion to $9 billion projected in upfront construction savings
$7 billion to $22 billion in total lifetime ratepayer savings
Transmission charges now up to 15% of ERCOT residential bills
Scope of Texas transmission expansion
The Electric Reliability Council of Texas (ERCOT) is preparing for its largest transmission buildout in more than ten years, guided by the 2024 and 2025 Regional Transmission Plans. The Strategic Transmission Expansion Plan (STEP) alone is estimated at $36 billion, with the centerpiece being a new 765-kilovolt “backbone” system. Over the past two years, transmission charges have climbed roughly 34% and now comprise up to 15% of the average residential bill in ERCOT.
Existing Texas law tends to allocate new transmission build to incumbent utilities via a right-of-first-refusal process, which typically bypasses competitive procurement. This regulatory framework shapes both the pace and the ultimate price of grid expansion.
Comparative project analysis
The Aurora Energy Research study, released by Texans for Affordable Transmission, benchmarked Texas’ approach against 47 completed projects in six U.S. grid markets: SPP, MISO, CAISO, PJM, NYISO, and ERCOT’s Competitive Renewable Energy Zones (CREZ) program. The analysis classified 27 as non-competitive and 20 as competitively procured, matching for length, voltage, and terrain.
Findings demonstrated a clear performance gap. Competitive projects finished ahead of schedule more frequently and were less likely to face unexplained delays. In five out of six markets studied, such projects reliably entered service ahead of their projected in-service dates. Moreover, three-quarters of competitive builds reported no significant delays, whereas only just over one-third of non-competitive builds could claim the same.
Savings mechanisms and precedent
Cost benchmarks from established grid operators underline the magnitude of potential savings. In both SPP and MISO, competitive transmission builds concluded about 25% under initial cost estimates from the grid operators. The report used these figures as a baseline for Texas projections. Within ERCOT, the CREZ program previously welcomed new market entrants to compete with incumbent utilities, resulting in new entrants delivering lines at an average of $150,000 less per mile. Notably, these projects typically finished under budget, while incumbent builds tended to exceed cost estimates.
Examples include Lone Star Transmission’s 330-mile line, which was completed ahead of schedule and 7% under its development budget, illustrating the impact of competition on cost and timeline certainty. However, the report stresses that competitive procurement alone does not guarantee favorable outcomes. Key drivers of success include a defined procurement process led by the grid operator, enforceable hard caps on costs with real financial penalties for overruns, and transparent public disclosure of developer commitments.
Potential candidates for competitive procurement
The study identified four major transmission components within the STEP plan as well-suited for competitive bidding due to their greenfield status and broad regional benefit. These are the $20.5 billion Eastern Backbone, the $1.4 billion Central Texas Euclid-Hillje line, the $0.7 billion Western Loop, and $13.8 billion in Permian Basin Reliability Import Paths. Notably, for the Permian Basin, incumbent utilities have already filed certificates, but the report suggests allowing competition here could unlock an additional $3 billion in upfront savings.
If only the 765-kilovolt lines outside the Permian plan are competed, savings could still reach $3 billion up front and $7 billion over the project lifetimes. If the entire STEP program is subject to competition, potential ratepayer savings climb as high as $9 billion in capital expenditure and $22 billion across project lifespans, or up to $660 per household.
Market impact and implementation hurdles
The outcome of whether competitive procurement is embraced at scale in Texas will directly affect the cost burden for developers, institutional investors, and end users. Transmission costs are a significant driver of power prices and development timelines within ERCOT. The three-pronged approach backed by Aurora’s analysis, procurement model, hard cost caps, and full disclosure, places pressure on regulators and policymakers to revisit the status quo.
For incumbent utilities, the study’s findings present both a challenge and an opportunity: adapting to competitive conditions may require revising business models and collaborating more closely with grid planners. Developers eyeing Texas for future entry will weigh not only the financial prospects of lower costs, but also the transparency and accountability promised by the recommended framework. As anticipated deployment of renewables and data centers accelerates in ERCOT, the structure of upcoming high-voltage builds could play a pivotal role in regional energy infrastructure economics.
What this means for buyers
Transmission and grid interconnection in ERCOT are directly affected by whether Texas opens its $36 billion STEP plan to competitive procurement. The report shows potential for $3 billion to $9 billion in upfront savings if competition is embraced, shifting projected project costs and future ratepayer liability. Buyers in this quarter should assess ERCOT transmission contract structures and factor in possible future cost reductions or delays in development depending on regulatory decisions.
Reporting via the original publisher
