Texas lawmakers are taking a closer look at the rapid rise of data centers and the strain they could place on the state’s power grid, as industry leaders and regulators warn that demand is accelerating faster than existing systems were designed to handle.
At a recent hearing of the Texas House State Affairs Committee, chaired by Ken King, discussion centered on how the explosion of large-scale computing facilities—many tied to artificial intelligence and cloud services—is reshaping energy planning across the state.
Leaders from the Electric Reliability Council of Texas and the Public Utility Commission of Texas outlined just how significant the surge has become. According to ERCOT CEO Pablo Vegas, the grid’s large-load interconnection queue has ballooned to more than 410,000 megawatts of proposed demand. A major share of that growth has emerged in just the past several weeks, with tens of thousands of megawatts added recently. The overwhelming majority of those projects are data centers.
That surge is exposing weaknesses in the current approval system. Historically, developers worked with local transmission providers to study how a new project would affect the grid, then submitted those findings to ERCOT. The process functioned smoothly when requests were infrequent. Now, overlapping proposals in the same regions are creating cascading complications.
As multiple large projects cluster together, each new proposal can alter grid conditions, forcing repeated studies and shifting requirements. This has created uncertainty for developers investing billions of dollars, who may secure approvals and financing only to see technical requirements change midstream.
To address this, ERCOT is proposing a major shift in how projects are evaluated. Instead of reviewing applications one at a time, the grid operator plans to group them into batches based on projected timelines. By analyzing system capacity several years into the future, ERCOT aims to identify how much transmission capability will be available and allow developers to secure a portion of that capacity upfront.
This approach would mark a significant departure from current practice, where approval does not guarantee access to transmission resources. Under the new model, developers could effectively reserve capacity, reducing uncertainty and helping projects move forward more predictably. Vegas indicated the goal is to have the system operational by the end of summer, with an initial group of projects—referred to as an early batch—targeting completion between 2026 and 2028.
Beyond grid logistics, lawmakers also heard from industry representatives seeking to address public concerns about the impact of data centers on local communities. Executives from major firms, including Black Mountain, Lancium, Skybox Data Centers, and the Data Center Coalition, emphasized the economic benefits these facilities can bring, such as job creation and infrastructure investment.
They also acknowledged growing unease around artificial intelligence and its physical footprint, noting that data centers have become a visible symbol of broader technological change. Industry leaders argued that hosting these facilities in Texas allows for stronger domestic oversight and positions the state as a leader in emerging technologies.
Water usage—one of the most common concerns—was another focal point. Representatives said modern data centers are designed to minimize consumption, both for environmental and financial reasons. Many facilities rely on closed-loop cooling systems that reuse water continuously, requiring only small amounts of replenishment over time.
They also pointed out that in other regions, such as the Southwest, data centers often consume less water than industries like manufacturing, beverage production, or mining. By choosing locations carefully and using efficient technologies, developers say they can reduce strain on local water supplies.
As Texas continues to attract large-scale digital infrastructure projects, the challenge for policymakers will be balancing economic growth with reliable energy and resource management. With demand expected to climb sharply over the next several years, decisions made now could shape the state’s energy landscape well into the next decade.
