Texas built one of the country’s biggest data center booms by offering cheap land, abundant energy resources, tax breaks and fewer regulations. Now the state is slowing part of that expansion down.
Governor Greg Abbott has declared a moratorium on all new power grid connections for data centers until developers provide more detail about how their projects could affect the grid and nearby communities. The move comes less than a year after Abbott described Texas as the “epicenter of AI development.”
Why Texas paused new data center grid connections
In an August 3 announcement, Abbott directed the Public Utility Commission of Texas and the Electric Reliability Council of Texas, known as ERCOT, to conduct a “comprehensive verification and audit of all data centers advancing through ERCOT’s interconnection process.”
ERCOT is the independent system operator for a power grid that runs separately from the rest of the United States and serves most of Texas. That makes its planning choices especially important when a single industry begins requesting huge amounts of electricity.
The pressure point is the interconnection queue. ERCOT currently has more than 1,800 projects seeking to connect to the Texas grid, representing over 474 gigawatts of requested capacity. That is more than five times Texas’ record peak electricity demand, and about 90 percent of those requests come from data centers.
Abbott’s office warned that “That unprecedented load growth could endanger the reliability and stability of the Texas electric grid.”
Some projects in the queue may never be built. Even so, ERCOT has forecast that data center demand and other factors could cause statewide electricity demand to double the current demand record by 2032, according to The Texas Tribune.
What regulators now want to know
The new review is designed to separate paper demand from projects that are better defined. Abbott’s directive asks regulators and grid operators to gather more complete information on how proposed data centers would use the ERCOT grid and how much power they expect to consume.
The audit is expected to include:
- How much each project would rely on ERCOT for power.
- Projected annual electricity consumption.
- Projected peak electricity consumption.
- How much individual data center projects depend on state financial assistance.
- Details on project ownership and controlling interests.
The directive also calls for review of measures intended to reduce effects on neighboring property owners and communities. Those include noise mitigation, light controls, setbacks, traffic improvements, emergency response coordination and other community protection measures.
That scope shows how data center growth is no longer only a question about power supply. It is also a land use, infrastructure and local quality-of-life issue, especially in communities asked to host large facilities and related transmission projects.
Water, pollution and the limits of the review
Abbott also told regulators and grid operators to examine how data center cooling systems and water usage may draw from local supplies needed by communities. That concern is already visible in parts of Texas, including Corpus Christi, which has faced a yearslong drought.
The source article notes a potential gap in the review. The directive addresses direct water use by data center cooling systems, but it does not mention that data centers can also be tied to large amounts of water use through the power generation sources they depend on. Researchers such as Shaolei Ren at the University of California, Riverside have highlighted that issue.
A Sierra Club report looking at federal data showed that Texas natural gas plants used 56 billion gallons of water in 2024. Coal plants consumed an additional 34 billion gallons, and nuclear plants used 26 billion gallons. By comparison, Texas data centers directly used 8 billion gallons of water for cooling purposes, while many of those facilities rely on water-intensive power generation.
The directive also does not mention local air pollution or greenhouse gas emissions associated with data centers. Floodlight has reported that AI companies used a local permit loophole in Texas to install gas-powered turbines and backup diesel generators at new data center campuses without more extensive environmental reviews or outreach to local communities.
Behind-the-meter power remains outside the pause
The moratorium does not apply to data center projects that build their own on-site power generation. That approach, known as “behind-the-meter power,” lets projects move forward without waiting for a new grid connection.
According to research by market intelligence platform CleanView, that strategy has become increasingly common among tech and AI companies including Meta, Microsoft, Amazon, Oracle, OpenAI and Anthropic. CleanView says such power typically relies on natural gas.
Because of lengthy order backlogs for combined-cycle gas turbines, CleanView says developers are turning to other options, including “mobile gas generators strapped to semitrucks” and “aeroderivative turbines originally designed for aircraft and warships.”
Texas leads all US states in total announced behind-the-meter capacity for data centers, with 40 gigawatts of announced capacity. CleanView attributes that to the Texas Permian Basin gas supply, “extensive pipeline infrastructure” and the “state’s permissive regulatory environment.”
The politics of the data center boom are shifting
The pause also changes ERCOT’s near-term planning. E&E News reported that the moratorium “throws a massive wrench into ERCOT’s plans to bring data centers online.” ERCOT had been preparing to connect data center projects in groups, with notifications for the first group, called “Batch Zero,” expected by the end of this week.
ERCOT officials said they will postpone the Batch Zero process while working with state regulators on Abbott’s directive.
The move comes as political pressure around data centers rises in Texas and nationally. E&E News reported that Abbott has “seen support erode over concerns about data centers and extra-high-voltage transmission lines built in rural areas.” It also pointed to polls showing Texas voters generally opposing data centers in their communities and to Democratic challenger Gina Hinojosa running just one percentage point behind Abbott in a recent Fox News poll.
Hinojosa called Abbott’s pause inadequate and urged a full moratorium on data center development until the state legislature can pass stricter rules. She and Democratic US Senate nominee James Talarico have both called for tighter regulations on Texas data centers.
For Texas, the core tradeoff is now harder to ignore. The same conditions that attracted the AI data center boom have also forced the state to confront how much power, water, public subsidy and local disruption it is willing to absorb.