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Texas halts data center connections to power grid amid overwhelming demand
Governor who touted Texas as AI “epicenter” pauses data center grid connections.
Nowhere is the US data center boom bigger than in Texas. But less than a year after declaring Texas the “epicenter of AI development,” Governor Greg Abbott has declared a moratorium on all new power grid connections for data centers—at least until developers provide more information about their projects’ potential impacts on the grid and communities.
The Republican governor directed regulators in an August 3 announcement at the Public Utility Commission of Texas and the grid operators at the Electric Reliability Council of Texas (ERCOT) to perform a “comprehensive verification and audit of all data centers advancing through ERCOT’s interconnection process.” As an independent system operator, ERCOT oversees a power grid that operates separately from the rest of the United States and provides services to most of Texas.
Texas has aggressively courted data center development with its availability of cheap land and relatively abundant energy resources, along with offering state incentives, like tax breaks and fewer regulations. That puts the state on track to surpass Virginia in becoming the largest US data center market.
But the recent AI boom and the accompanying frenzy of data center development threaten to overwhelm the Texas grid on paper, despite the state leading the country in adding new power generation. The ERCOT interconnection queue currently includes more than 1,800 projects representing over 474 gigawatts’ worth of requests to connect to the Texas grid—more than five times Texas’ record peak electricity demand—and about 90 percent of those power connection requests come from data centers.
“That unprecedented load growth could endanger the reliability and stability of the Texas electric grid,” according to the statement from Abbott’s office.
Many of those data center projects may never materialize for various reasons. But ERCOT has still forecast that data center demand and other factors could drive statewide electricity demand to double the current demand record by 2032, according to The Texas Tribune.
The AI boom has led to additional consequences for Texas. A data center tax break that originally passed with bipartisan support in 2014 has ballooned into more than $1 billion in tax breaks annually for data center developers—and The Texas Tribune reported the state government estimates it could lose $3.2 billion in sales tax revenue over the next two years.
The new directive from Abbott requires audits of data center projects that include how much data centers would depend on the ERCOT grid for power, along with obtaining projections of data centers’ annual and peak electricity consumption. The directive further requires information on how much individual data center projects depend on state financial assistance, along with details on each data center project’s ownership and controlling interests.
Abbott also directed state regulators and grid operators to discover the extent to which data centers’ cooling systems and water usage may draw upon local water supplies needed by local communities. However, the governor’s directive does not mention the fact that data centers often use much more water through their power generation sources than directly through their cooling systems—a fact highlighted by researchers like Shaolei Ren at the University of California, Riverside.