Q4 2026  |  Market Outlook  |  ERCOT

Where to Build in ERCOT: A 20-Year Siting View for Solar, Storage and Wind

Load growth, the 765-kV build-out and the federal credit cliff are redrawing the Texas map. Our view on which ERCOT regions hold value through 2046, by technology.

The 20-year frame

ERCOT heads into 2027 with record demand and an unsettled forecast. Peak load reached a preliminary 91.1 GW on July 22, 2026, breaking the 85.5 GW record that had stood since August 2023, and batteries discharged a record 12.0 GW the same day. In April 2026 ERCOT filed a preliminary long-term load forecast of roughly 367.8 GW by 2032. ERCOT said at the time that the figure was likely higher than actual growth because it rolls up utility-submitted large-load requests, and it has since set that forecast aside while it reworks its method. A new long-term forecast is not expected until mid-to-late December 2026. In July testimony to the Texas Senate, ERCOT’s CEO put demand at roughly 175 GW within six years.

Other outlooks span a wide range. Modo Energy’s Q1 2026 central case has peak demand at 104 GW in 2030 and 129 GW in 2040. ERCOT’s 2026 Long-Term System Assessment (LTSA), which applies its own adjustments to utility-submitted large loads, plans for a coincident peak of 168.9 GW in 2036 and 176.6 GW in 2041. The spread between those numbers is the central uncertainty for any 20-year siting decision. Our base case sits between the independent and LTSA views: demand rises materially, the largest data-center requests arrive later and smaller than filed, and the timing of transmission matters more than the headline load number.

What ERCOT’s planning model builds

The clearest signal of where value moves is ERCOT’s own capacity expansion. The 2026 LTSA Current Trends case, as updated in August 2026, assumes solar and wind tax credits expire at the end of 2027, and it still adds 38.6 GW of solar and 28.8 GW of wind through 2041. Demand growth carries those resources without subsidy. Battery storage is the largest line by a wide margin at 106.6 GW, followed by 45.1 GW of gas across combined-cycle, combustion-turbine and reciprocating-engine units.

Solar: follow the load, not the sun

Solar and storage make up most of the new capacity reaching ERCOT. ERCOT had about 36 GW of solar at the end of Q1 2026. Solar output set new records during the July 2026 heat wave, reaching about 34.7 GW, and supplied 72.7% of load at one point on May 2, 2026. Midday saturation is the defining fact of the next decade. Capture prices fall fastest where solar is densest and transmission is thinnest, which today means West Texas behind the export constraint.

Projects that did not start construction by July 4, 2026 must be placed in service by the end of 2027 to keep federal credits, Treasury’s Notice 2025-42 had narrowed how projects could show they began construction, but a federal district court vacated it on June 6, 2026, restoring the 5% cost safe harbor; no appeal had been filed as of early September. Safe-harbored projects can reach service through about 2030. After that pipeline is built out, new solar competes on merchant and contracted value alone. That favors sites with three traits: a node east of the West Texas export constraint, a short path to a growing load pocket, and room to add storage on the same interconnection. North Central leads on all three. East Texas and the I-35 corridor follow, and Houston-area sites benefit from import congestion. The market monitor found ERCOT curtailed about 6% of solar output in 2025, concentrated in the west. Far West solar remains viable only as a hybrid.

Storage: the build that defines the grid

ERCOT reached 16.5 GW and 28.8 GWh of battery capacity at the end of Q2 2026, up from 7.8 GW at the start of 2025, and batteries discharged a record 12.0 GW during the July 22 peak. Growth is slowing: Modo expects 5.5 to 6 GW of additions in 2026, roughly matching 2025, and Load Zone North has overtaken West as the largest battery zone. The LTSA adds another 106.6 GW by 2041. Storage is also outside the wind and solar credit termination, which keeps the technology-neutral credit available on the statute’s longer schedule, subject to foreign-entity-of-concern sourcing rules.

Battery revenue in ERCOT is locational. Real-time co-optimization (RTC+B) went live in December 2025 and removed the separate scarcity adder, so a battery’s value rests more heavily on energy spreads and on how many scarcity days it captures. Spreads are widest on congestion seams. We favor four positions: the DFW and North zones, which receive 45 GW of the modeled build; the Houston import seam; the Permian, where export congestion and oil-and-gas load coincide; and any site adjacent to an admitted large load. As the fleet grows, two-hour systems give way to four-hour and longer duration, and we expect longer-duration sites with expansion rights to command the strongest valuations.

Wind: a narrower but real opportunity

Wind’s federal calendar is now set. Credits are closed to wind that did not begin construction by July 4, 2026, unless it is placed in service by the end of 2027. The June 2026 vacatur of Notice 2025-42 restored the 5% safe harbor for projects that began construction in time, which keeps a credit-eligible tail arriving through about 2030; ERCOT expects transmission-connected wind to grow from 40.6 GW in 2025 to 47.4 GW in 2027 as that pipeline completes. Two gates remain. The Department of Defense, whose airspace review every tall structure needs, had not approved a wind project since August 2025, leaving 54 Texas projects waiting as of May 2026; a federal court ordered reviews to resume nationwide on August 6, 2026, but determinations have yet to follow. And the PUCT’s firming rule (16 TAC §25.65) applies to generators whose original interconnection agreement is signed on or after January 1, 2027, with the first compliance season in March 2028. For new wind, the agreement date is now a valuation item.

The economic case after the credits rests on timing. ERCOT’s market monitor found wind ran at a 29.3% capacity factor during 2025 net-peak hours against 1.7% for solar, and that captured prices were near parity, at $19/MWh for wind and $21/MWh for solar. ERCOT’s 2026 LTSA, which assumes no credits after 2027 and caps wind at 3 GW a year, still builds 25 GW between 2027 and 2036 and 3.8 GW from 2037 to 2041; the cap, not price, limits the build in most years. Wind took only about 1 GW of ERCOT’s 2025 additions, so the gap between that modeled demand and actual development is wide. ERCOT’s wind fleet set an output record of 29.0 GW on June 29, 2026.

We see four defensible wind positions. First, the North zone, where ERCOT sites 10.3 GW of new wind, the resource is the strongest in the state, and data-center loads near Childress and in the ERCOT Panhandle are driving proposed 765-kV transmission. Second, load-side nodes in the Permian and Big Country, where Jones County (Abilene) and Permian electrification add demand next to the resource. Third, coastal wind in the Southern and Coast zones, which ERCOT credits with a 60% peak contribution, though the South load zone carries ERCOT’s most negative congestion. Fourth, repowering, which keeps an existing interconnection and its pre-2027 agreement; this is our view, as Texas repowering volumes are not publicly tracked. Greenfield wind dependent on export capacity out of the west is the position we favor least.

What would change our view

What it means for asset value

In a market adding more than 200 GW over 15 years, megawatts are plentiful and deliverable megawatts are scarce. We expect buyers to pay the strongest premiums for four things: safe-harbored solar with a credible in-service date; storage positions on structural congestion seams with expansion rights; interconnection queue position near admitted large loads; and existing wind and solar interconnections that can be repowered or hybridized, especially where the interconnection agreement predates the 2027 firming trigger. Developers holding projects in the far west without storage or load adjacency should consider timing a sale or partnership around the 2027 legislative session and the 765-kV approval calendar, while the market still prices the transmission upside.

This article is published by Odette Capital LLC (www.odettecapital.com) for informational purposes only. It reflects Odette’s views as of October 2026, which may change without notice, and does not constitute investment, legal or tax advice or an offer to buy or sell any security. Third-party data is believed reliable but has not been independently verified. Zone scores are Odette’s qualitative judgments.