Texas is unique in that it’s the only state in the contiguous U.S. to operate its own independent power grid. Not only does this shield the state from the purview of federal regulations, but it also allows it to rely on its abundant natural resources and ability to generate large amounts of electricity to ensure that residents get the power they need.

Still, Texas’s strong energy market has recently met a formidable opponent: the hyper-scale data center. Artificial intelligence projects and cloud services from major tech companies, along with cryptocurrency processing, are the primary drivers of this power demand.

The Disaster of 2021 and the Shock of a Lifetime

Texas is no stranger to power grid issues.

In February 2021, Winter Storm Uri caused a disaster of epic proportions, knocking out power across the state and causing damage to the grid and individual properties. Just as officials were about to get the grid back on track after years of labor, they were hit with the news that power grid demand is expected to double in the next six years.

Lawmakers are worried that this will have a negative impact on residents’ ability to access power to their homes at a fair price. They question whether the economic benefits of data centers are worth breaking the grid.

Still, the data center market is showing no signs of slowing down. In the last few years:

• Dallas has become the second-largest data center market
• Austin-San Antonio has become the largest secondary market
• Austin’s “under-construction activity” has quadrupled in the last year
• The number of megawatts of power in use has risen 77% in four years

Data center developers love places like Texas because power costs are low and incentives are high. Infrastructure is also plentiful for these new gigawatt-level projects. If nothing is done to disrupt this trend, data centers are on track to account for more than half of Texas’s expected new load.

In the words of Enchanted Rock Chief Commercial Officer Allan Schurr, “We’re not talking about 50-MW data centers anymore. We’re talking about 500-MW or gigawatt-scale data centers.”

At the same time, Texas lawmakers have become increasingly hostile to the idea of data center expansion.

After $11.2 billion in losses following Winter Storm Uri, they’re rightfully worried about the increased demand on an already fragile grid system. While the state is expanding its support for the grid, accurate estimations of how much support will be necessary have been thwarted by the sudden surge in data center construction. 

The Electric Reliability Council of Texas has adjusted its 2030 projections from 110 gigawatts of demand to 150. For now, many wonder how they’re going to meet that demand.

Are Texas Lawmakers’ Fears Legitimate?

Some fear that with data centers pushing the grid to maximum capacity, another weather disaster could send it over the edge again.

There are also concerns about the unpredictability of resource demands that result from Bitcoin mining. And some worry that not knowing when mining centers might shut down in response to high power prices could spell disaster for the energy load balancing process.

Unfortunately, these issues aren’t all that keep lawmakers up at night. There’s also the problem of rising energy costs for consumers. More data centers mean more monetary investment in the grid, and Texas residents will likely foot the bill for these upgrades, putting even more financial pressure on economically strained families.

Worse yet is the fact that not all of ERCOT’s projections will materialize. Just because a developer says they’ll build a data center project doesn’t mean they will. What happens when residents are stuck paying for expanded infrastructure that never actually gets used?

From Open Arms to a Cold Shoulder: Will the Data Industry Survive the Backlash?

Texas is often considered one of the most business-friendly states in the nation, and data centers have been no exception — until now.

Some have suggested allowing transmission providers to tell ERCOT which developers they believe are serious and which are wasting time and resources. Other solutions include charging hefty fees for submitting connection proposals to weed out those who have no intentions to build.

Still, some lawmakers want to limit data center growth altogether, at least until they can figure out how to regulate the industry. Whether the state’s leaders decide that attracting new business is worth the risks to the grid remains to be seen.

For now, the hostility to the industry remains, leaving the future of data center expansion in limbo. Read the original article by Dan Rabb and Maddy McCarty to learn more.