The petrochemical industry is the backbone of Texas manufacturing, with assets from the Golden Triangle to the Coastal Bend.
It transforms abundant hydrocarbons into the building blocks of modern life —plastics, fertilizers, medical supplies and countless performance materials. But none of this happens without one essential input: electricity.
Petrochemical facilities are energyintensive, continuous operations. They cannot simply power down during disruptions without risking safety, product loss and millions in damages. Equally important is affordability. Texas has long held a competitive advantage due to relatively low electricity prices, driven by its unique competitive market structure within ERCOT. This advantage has attracted and retained large-scale industrial investment. Any policy shift that increases costs without clear reliability benefits risks undermining this edge.
Concerns with capacity market proposals
Recent discussions to introduce capacity market mechanisms into ERCOT have raised significant concerns for industrial customers. While proponents argue these markets would incentivize new generation, experience in other regions shows they impose substantial costs without comparable reliability improvements. Texas’ existing market already provides price signals to attract investment during scarcity conditions. Industrial customers believe refining this system is preferable to adopting a costly and unproven alternative.
AI data center demand
A growing pressure on the grid is the surge in electricity demand from AI data centers. Texas has become a magnet for data centers due to its favorable business climate and historically competitive power prices, but the scale of demand is unprecedented. Current peak demand across the Texas grid is around 85,000 MW, while planned data center investments could require 4-5 times that amount.
As policymakers address rising data center demand, it is vital that changes to the ERCOT market do not negatively impact traditional manufacturing or undermine future economic growth.
Transmission expansion
Our industry has consistently supported new transmission projects, provided they are needed to accommodate residential, commercial and industrial demand. The surge in new interconnection requests has prompted regulators to approve construction of 765-kilovolt extra-high-voltage transmission lines. Accurate load forecasting will be crucial to prevent existing consumers from subsidizing new transmission investment. By building for new load, Texas can improve reliability and reduce congestion without increasing costs for existing customers.
Renewable and emerging technologies
Texas has long been a leader in renewable energy, particularly wind and solar. Battery storage is becoming a cornerstone of grid reliability, helping manage volatility, support demand response during peak periods and enhance resilience for petrochemical facilities and data centers alike.
Small Modular Nuclear Reactors (SMRs) also represent a promising next-generation solution. SMRs can provide consistent, dispatchable, carbon-free power near industrial sites or major load centers, with the flexibility to scale as demand grows.
Industrial grid support
Industrial cogeneration remains one of Texas’ greatest reliability assets. Petrochemical facilities often operate highly efficient combined heat and power systems that produce electricity and steam, with the ability to supply excess power to the grid during peak demand.
Our industry also supports grid reliability through demand response programs and voluntary load shedding during emergencies, reinforcing its role as a reliability partner, not just a consumer.
Texas stands at a pivotal moment. With rising industrial activity, rapid data center expansion and evolving energy technologies, the state must balance growth with reliability and affordability. With disciplined policy and forward-looking investment, Texas can continue to lead the world in energy and industrial innovation.
For more information, visit texaschemistry.org.
