March Madness: Tail Risk

It’s time for March Madness, with natural gas volatility junkies glued to their screens, hunting for the latest Cinderella team (tail risk). If you thrive on volatility, look no further than ERCOT. Renewables and Energy Storage Resources (ESR) are dominating the fuel mix supply during this moderate spring demand period.

Batteries are playing a pivotal role—tamping down the breakfast power price spike, charging as solar ramps up, then discharging into the evening dinner-time power hump. As solar floods the grid, natural gas demand declines sharply (see graph below). This trend will only accelerate as ERCOT continues its rapid deployment of solar and ESR assets in the coming years.

This raises critical questions:

✅ At what point does the market find equilibrium in fuel mix?

✅ When—if ever—will Small Modular Reactors (SMRs) enter the ERCOT grid?

✅ Will SMRs remain behind the meter for AI, data centers, semiconductor, and industrial loads?

✅ What will this mean for natural gas markets?

A case in point: Dow Chemical has partnered with X-Energy to deploy an SMR at its North Seadrift, TX facility to replace natural gas for power and heat. Construction starts in 2026, with the first of four 80 MW reactors—the first industrial-scale SMR project of its kind. Meanwhile, X-Energy and Amazon are eyeing a massive 5 GW deployment of their Xe-100 reactors.

This begs the question: If the U.S. industrial base moves to secure behind-the-meter power, what happens when these sites need grid power? And who should pay for the necessary infrastructure?

One thing is certain—the electric market is on the brink of dramatic change. Buckle up—March Madness is tipping off!

#ERCOT #Solar #Batteries #EnergyStorage #Renewables #NaturalGas #SMR #GridResilience #EnergyMarkets #XEnergy #MarchMadness