Conduit Power Advances 200 MW Distributed Generation Strategy in ERCOT with Backing from Diamondback Energy and Granite Ridge Resources
Conduit Power, LLC (“Conduit”), a developer and operator of distributed power generation assets, has taken a significant step toward expanding dispatchable electricity supply in Texas by entering into financial agreements with Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback”) and Granite Ridge Resources (NYSE: GRNT) (“Granite Ridge”). The agreements support Conduit’s plan to develop, own, and operate a total of 200 megawatts (MW) of new natural gas–fueled power generation capacity within the Electric Reliability Council of Texas (“ERCOT”), the state’s primary power grid operator and one of the most dynamic electricity markets in North America.
The initiative is designed to address growing reliability challenges in ERCOT’s Load Zone West, a region of West Texas characterized by rapid load growth and an exceptionally high concentration of intermittent renewable generation, particularly wind and solar. While renewables have transformed the Texas energy landscape, their variability has increasingly highlighted the need for fast-ramping, dispatchable generation that can respond quickly to changes in supply and demand. Conduit’s distributed generation strategy is intended to meet that need by delivering flexible, efficient power resources that can be sited, constructed, and brought online more rapidly than traditional large-scale plants.
Under the terms of the agreements, Conduit will build, own, and operate the full 200 MW of distributed generation capacity across multiple strategically located sites in Load Zone West. Rather than concentrating capacity in a single facility, the distributed model allows Conduit to place generation assets closer to load centers and constrained areas of the grid. This approach can reduce congestion, improve system resilience, and enhance ERCOT’s ability to balance power flows during periods of peak demand or renewable output volatility.
Diamondback Energy and Granite Ridge Resources, both prominent upstream oil and gas producers with significant operations in the Permian Basin, will each commit to fixed capacity payments to Conduit. In exchange, the companies will receive a preferred share of the power proceeds generated by the facilities. This structure aligns the interests of all parties by providing Conduit with predictable revenue streams to support project development and operations, while allowing Diamondback and Granite Ridge to participate directly in the value created by power generation and ancillary services sales in the ERCOT market.
The projects will sell energy and ancillary services into ERCOT, including products that support grid stability such as frequency regulation and reserve capacity. Following installation and interconnection to the grid, Conduit will be responsible for operating and dispatching the facilities through its qualified scheduling entity (QSE). This integrated operational role enables Conduit to optimize performance across its portfolio, responding in real time to market signals and system needs.
Construction and deployment of the assets are expected to occur in phases, with the first sites targeted to achieve commercial operation in 2026. Phased installation allows Conduit to manage capital deployment efficiently, incorporate lessons learned from early sites, and respond flexibly to evolving market conditions. It also enables ERCOT to begin realizing reliability benefits sooner, rather than waiting for a single, large project to be completed.
The strategic rationale for the development is closely tied to structural shifts underway in West Texas. Load Zone West has seen substantial growth in electricity demand driven by population increases, industrial development, and energy-intensive activities such as data centers and oilfield operations. At the same time, the region hosts a large share of Texas’s wind and solar capacity, which can lead to periods of oversupply followed by sharp deficits when weather conditions change. This imbalance has contributed to price volatility and transmission constraints, underscoring the need for dispatchable resources that can smooth fluctuations and maintain system reliability.
Conduit’s generation assets are designed to be placed into service quickly and efficiently, leveraging high-efficiency natural gas technology well suited for distributed applications. By using natural gas—much of it associated gas produced in the Permian Basin—the projects can also provide a productive outlet for fuel that might otherwise face takeaway constraints. This dynamic creates potential synergies between power generation and upstream production, particularly in a region where pipeline capacity has at times lagged supply growth.
Matthew Herpich, Chief Executive Officer of Conduit, emphasized the strategic importance of the partnerships and the broader role the projects will play in the Texas power market. “This arrangement allows Conduit to scale dispatchable generation in ERCOT alongside two premier upstream companies, Diamondback and Granite Ridge,” Herpich said. “By pairing high-efficiency generation technology with disciplined commercial structures, we can deliver reliable power to the grid while creating durable value in Texas power markets.”
From the perspective of upstream producers, the agreements represent an opportunity to enhance well-level economics while supporting regional infrastructure needs. For years, the Permian Basin has grappled with limited takeaway capacity for associated natural gas, at times leading to flaring or discounted pricing. By linking gas production more directly to power generation, producers can create an additional demand sink that is local, flexible, and responsive to market conditions.
Granite Ridge President and Chief Executive Officer Tyler Farquharson highlighted these benefits, noting that the projects offer both economic and system-wide advantages. “For years the Permian has suffered from a lack of takeaway capacity for its associated gas,” Farquharson said. “We see this as a win-win opportunity for our shareholders to participate in enhanced well-level economics through power sales and bring up to 200 MWs of much needed new power generation to the ERCOT grid.”
The involvement of Diamondback Energy further reinforces the strategic alignment between power generation and upstream operations in West Texas. As one of the region’s leading producers, Diamondback’s participation signals confidence in the long-term fundamentals of ERCOT and the value of dispatchable generation amid an evolving resource mix.
More broadly, the Conduit initiative reflects a growing trend in the Texas power sector toward smaller, flexible, and strategically sited generation assets. While large-scale projects will continue to play an important role, distributed generation can complement them by addressing localized constraints and providing rapid response capabilities. In a market as competitive and fast-moving as ERCOT, such flexibility is increasingly prized.
As Texas continues to experience population growth, electrification, and the expansion of renewable energy, the need for reliable, dispatchable power is expected to intensify. Conduit’s 200 MW development, backed by Diamondback and Granite Ridge, positions the company to play a meaningful role in meeting that need. With phased deployment beginning in 2026, the projects are set to contribute not only to grid stability in Load Zone West but also to the evolving integration of the state’s energy and power markets.
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