The rapid growth of artificial intelligence, the digital transformation of the economy, and the increasing necessity for computing power in daily life have significantly accelerated the expansion of data centers. This development has led to a notable rise in electricity demand, particularly in Texas and throughout the United States.
According to forecasts from Texas’ primary grid operator, anticipated power consumption will nearly double by 2030. This surge can be attributed, in part, to the increasing energy requirements of major consumers, including data centers, cryptocurrency mining operations, hydrogen production facilities, and traditional oil and gas enterprises.
Recently, a significant announcement revealed the formation of Stargate, a collaborative venture involving OpenAI, SoftBank, and Oracle, which aims to invest up to $500 billion in AI infrastructure. Texas has been designated as the central hub for this initiative, with 10 data centers already in construction and an additional 10 planned. The first of these facilities is set to be located in Abilene. Each facility will encompass approximately 500,000 square feet.
This development highlights the increasing demand for data centers and a long-standing initiative to enhance data capacity. According to Oracle CEO Larry Ellison, the collaboration has been in progress for several years. The newly built data centers will provide services such as managing electronic health records and facilitating knowledge sharing among hospitals.
“With the growing need for digital services, it’s essential for enhancing our capabilities in the 21st-century economy,” stated Dan Diorio, senior director of state policy at the Data Center Coalition. He emphasized the unique position Texas holds to capitalize on this trend.
The expected expansion, alongside other significant energy consumers and factors like population growth and extreme weather conditions, is anticipated to put immense pressure on the grid over the next ten years. This situation raises concerns about Texas’s ability to satisfy soaring electricity needs while ensuring affordability and reliability for its residents.
Data centers are energy-intensive installations that continuously operate to house servers and the necessary cooling systems. Large data centers can consume over 100 MW of power annually, equivalent to the electricity requirements of around 350,000 to 400,000 electric vehicles, according to the International Energy Agency. In other terms, a larger facility can demand as much electricity as a medium-sized power plant, as per the U.S. Energy Information Administration.
The increasing demand for data centers in Texas is propelled by the state’s relatively low energy costs, convenient infrastructure for connecting to the power grid, and a favorable business climate regarding taxation and regulations. Each data center typically employs between 50 to 150 individuals and supports additional jobs in construction and maintenance, according to the Data Center Coalition. The coalition estimates that each data center job fosters six jobs elsewhere in the economy.
As of September, Texas boasted 279 data centers, with approximately 141 located in the Dallas-Fort Worth region. The energy consumption by data centers in Dallas and Fort Worth translated to approximately 591 MW last year, ranking second nationally, with nearly 190 MW in Austin and San Antonio.
The Electric Reliability Council of Texas (ERCOT) reports that 1 MW of electricity can supply roughly 200 homes. The U.S. Energy Information Administration foresees a 60% increase in power demand from large users, with data centers expected to comprise around 10% of the overall forecasted demand on Texas’s primary grid.
Recent ERCOT approvals allow 5,496 MW of power for large users, encompassing data centers and crypto mining entities—the latter being the most significant contributor to demand. By the end of the year, ERCOT anticipates total approvals for large-user requests to reach 9,500 MW, representing a substantial 73% increase. Several other major projects are also pending ERCOT’s evaluation, potentially utilizing up to 56,458 MW annually
While some large users, particularly crypto miners, have agreed to curtail energy use during peak demand periods, most data centers require a consistent power supply and typically do not engage in demand response initiatives, as noted in a recent Texas Senate Business and Commerce Committee report.
Nationwide, data centers are predicted to consume between 11% and 12% of U.S. electricity by 2030, up from approximately 3% to 4% currently, according to an analysis conducted by McKinsey.
Resolving how to accommodate the escalating electricity demand will become a key topic during the upcoming legislative session in Texas. In response to growing concerns, state legislators have aimed to enhance the supply of natural gas with the Texas Energy Fund, which is poised to offer up to $10 billion in low-interest loans to facilitate the construction of gas-powered plants. However, any new plants are unlikely to be operational for several years.
Mark Bell, president of the Association of Electric Companies of Texas, highlighted the critical role data centers play in providing essential services for consumers. He expressed confidence that the industry is ready to address the challenges posed by significant electricity consumption.
The increasing power demand raises questions among lawmakers regarding the necessity for more oversight of large users of electricity. State Senator Charles Schwertner, who chairs the Business and Commerce Committee, underscored the need to prioritize the power needs of Texans and expressed concerns about the balance between industrial consumption and residential needs.
On social media, Lt. Gov. Dan Patrick indicated the necessity for legislative scrutiny over data centers and crypto mining enterprises to prevent undue strain on the grid. He expressed support for the Stargate venture, suggesting that Texas should aspire to lead in AI and data centers while ensuring that these industries do not adversely affect the power grid’s stability.
In response to these challenges, some companies have initiated on-site power generation to lower their impact on the grid and ensure reliable energy sources. Additionally, legislative discussions may consider mandating large electricity consumers to implement strategies to offset their energy usage impacts during peak periods.
Experts who advised lawmakers indicated that predicting whether large projects would establish operations in Texas remains complex, complicating ERCOT’s demand projections. The Texas Senate Business and Commerce Committee has recommended measures to ensure that regulators have thorough knowledge about how these large users intend to function to better assess potential impacts.
A recently approved rule requires crypto mining establishments connected to the ERCOT grid to register their energy consumption. ERCOT CEO Pablo Vegas has noted that an increase in demand will necessitate more transmission lines, acknowledging the challenges of balancing growth with infrastructure development.
The investments required to expand transmission and distribution systems prompt discussions about cost allocation among consumers. Lawmakers have indicated a desire to protect smaller energy users from bearing excessive costs while ensuring that industries with higher electricity needs contribute their fair share.
Representatives from the Data Center Coalition have reiterated their commitment to pay the actual costs associated with their service use, emphasizing the importance of equitable cost distribution and the industry’s dedication to supporting Texas’s power infrastructure.
