The largest oil producer in the US has found a way to make electricity cheaper

On the one hand, Texas’ oil industry is booming. Over 40% of all US oil production comes from the country, with 5.8 million barrels of oil produced in April alone, and the country’s revenue from oil taxes was estimated at about $27 billion in 2025, according to the country’s petroleum association.

While some of the oil is refined and consumed locally, mainly by vehicles, the vast majority is exported. Over 90% of US oil exports come from Texas, and the Hormuz crisis that boosted global oil prices only increased the trend, making the export markets particularly lucrative.

Despite the large production of oil in Texas, renewable energy occupies a large place in the local energy consumption. In recent years, solar energy has even overtaken traditional coal. Natural gas is still the largest source of electricity, but the tremendous growth rate of generation from renewables suggests that gas will also soon be overtaken by solar and wind.

40% green energy

About 30% of the energy in Texas is solar and wind based, and together with nuclear energy and other sources, about 40% of the electricity in the country comes from “low carbon” sources. In absolute terms, Texas is the largest US producer of renewable energy, generating 166 terawatt-hours annually from renewables alone.

This is even above California, the most populous state in the US and with much stricter environmental regulation, which produces only 105 terawatt-hours per year of renewable energies. And of course, far above other large states in the US such as New York (37) and Florida (19).

To understand the uniqueness of Texas in the region, Roi Shavit, renewables, gas and oil analyst at IBI gives some background to the energy market: “Most of the electricity in the world is produced by gas, it is a backbone that produces continuity and reliability in the electricity network. The main problem is that it takes a long time to build new gas power plants. There are a lot of permits and approvals until construction is reached”

Solar energy, on the other hand, is considered extremely cheap. At least during the hours when the sun shines. Vashit adds that “the ‘time to market’ in the US is up to a year”, however, the industry has a main problem and that is that “there is not enough fixed capacity throughout the day”.

To solve the gap between peak and off-peak hours, the storage batteries are needed. And the bigger the price differences between the ends, the bigger the profit from holding batteries. And this is exactly where Texas excels: “Electricity prices in Texas are particularly volatile between peak and trough” explains Shavit.

That is, during the peak demand hours in the evening the prices are particularly high, and during the low hours in the morning and at noon the prices are particularly low. This is because the Texas electricity grid does not offer its electricity producers money for their mere availability on the grid, similar to Israel or other grids in the US, but is a relatively free market of buyers and sellers of electricity, and the price may change dramatically throughout the day due to demand and supply.

The advantage of such volatility is that whoever owns storage batteries is able to charge them cheaply and sell them expensively. In addition, Shavit points out, “The average price is actually low. This makes it possible to experience servers, which consume electricity at all hours of the day and thus can benefit from the average.”

Indeed, Texas is the leader by a large margin in the establishment of “off grid” server farms, meaning those that are based mainly on local electricity production, and not necessarily from the main grid. These farms are becoming huge consumers of electricity throughout the developed world due to the progress of artificial intelligence.

At the moment, one of the main barriers to their establishment is the huge electricity consumption they require. Which makes places like Texas, with cheap electricity (on average), even if it changes frequently during the day, especially profitable for setting up such server farms.

Independent power grid

Due to its size, the US is divided into several power grids, most of which are shared by several states, which can back each other up if necessary. The Texas power grid, ERCOT, is unusual in that it operates completely independently.

On the one hand, the isolation makes it difficult in the event of extreme weather events, such as storm “Uri” in 2021. The storm created a crisis that even resulted in the death of over 200 people due to power outages that created a lack of heating, but since then Texas has significantly improved the ability to deal with such extreme cases. But the advantage of an independent power grid is the lack of subjection to federal laws regarding the construction of the power grid, allowing Texas to adopt an independent policy.

Among other things, Texas pays attention to extensive development of the network: “In Texas, the laws are less supportive of NIMBY (‘not in my backyard’) and it is more difficult to veto the development of the network,” explains Gilad Ben Zvi, energy analyst at Leader Capital Markets. According to him, this allows for a much larger free space in the grid, which is in sharp contrast to the situation in Israel, where the pace of building the grid is the main barrier to establishing additional production capacities from renewable energy.

In the US, networks that are built at a less rapid pace suffer from similar problems. The largest network in the US, PJM “is very expensive for consumers, and becomes even more expensive due to the demand for electricity from server farms, which leads to pressure against their further construction.” This is in contrast to Texas, where Roi Shavit from IBI emphasizes that the ability to establish a server farm is “almost immediate”.

According to Shavit, “there are 24,000 projects in the US that are supposed to connect to the grid, and the queue to connect to the grid is only 4-5 years” and this is the reason, according to him, that large Israeli solar companies such as Enlight prefer to focus on the power grids of Texas and Arizona and not on PJM. This is despite the fact that Texas hardly encourages renewable energies from its tax dollars, and in fact gas production receives more extensive government support.

A country of sun and wind

The ability to expand the grid at a sufficient rate is probably the main reason for the surge in renewable energy in Texas, which also allows renewable energy to be introduced at a much higher rate. But the climate also contributes greatly to this: “Texas is a sunny southern state, unlike other parts of the USA, and its northwestern part sits on a significant wind axis, so its natural environment greatly facilitates the output of these production sources,” says Roi Shavit.

Gilad Ben Zvi adds that the winters in Texas are less severe than in the rest of the US, which also eases the demand side. Roi Shavit also comments that the low taxation in the country (the corporate tax and the income tax are close to zero, beyond what is collected by the federal government) encourage the establishment of companies and energy production there.