Texas Senate Passes Bill to Improve Grid Reliability, Ready State for More Data Centers
The Texas Senate unanimously passed a bill Wednesday that aims to improve the state's digital infrastructure and grid reliability, attempting to ready the state to take on more large loads like data centers.
Conversations about Texas' grid have heightened in recent years following Winter Storm Uri in 2021, when Texas' power grid — which is managed by the Electric Reliability Council of Texas and is not a part of the national grid system — failed, leaving millions of homes and businesses without power. The issue has grown more urgent as data center developments flock to the Lone Star State, including several backed by President Donald Trump and major tech companies like Facebook's parent company Meta, Google, Amazon, OpenAI and Microsoft.
The Electric Reliability Council of Texas, or ERCOT estimates the demand on the state grid will grow to about 150,000 megawatts by 2030.
A recent report from ERCOT indicated that peak electric demand would outpace supply by 2027 in the worst-case scenario. According to the report, projections show a power shortfall of 8.3% in summer 2027 that could grow to 32.4% in 2029.
Senate Bill 6, authored by Sen. Phil King, R-Weatherford, seeks to bolster grid reliability, enhance outage protections for residential consumers, adjust transmission cost allocations and improve ERCOT's load forecasting transparency.
"Businesses in the state are now seeking to bring facilities to Texas that consume unparalleled, tremendous amounts of power," King said during a Feb. 27 hearing of the Texas Senate Business and Commerce Committee. "This includes data centers, AI computing, manufacturing facilities and several other types of industries that can consume more electricity in a single building than an entire municipality."
Grid reliability and enhancements are priorities for both Texas Lt. Gov. Dan Patrick and Texas Gov. Greg Abbott, who urged lawmakers to pass legislation adding more power to the grid during his State of the State address i February.
“Texas is open for business like never before. As more people and companies move to Texas, our grid must become even stronger and more reliable to ensure the Texas Miracle continues uninterrupted. ...," Patrick said following the bill's passage. "While this growth represents humungous economic opportunity for Texas, we must ensure our grid is prepared to manage this tremendous growth."
"I am prioritizing SB 6 because it strengthens the Texas electric grid and will ensure its reliability while managing our state’s growth over the coming years. SB 6 will make our state more attractive for investors across the globe while protecting residential consumers from rising costs," he said.
The Texas Senate unanimously passed SB 6 Wednesday. It now moves to the Texas House for consideration.
Data centers boom in Texas
Over the past several years, and increasingly in the past few months, data center developers have flocked to Texas, with major tech companies preparing to build or buy-out data centers in the state.
Trump announced a private-sector AI infrastructure plan through $500 billion invested from a joint venture, Stargate, between Open AI, Softbank and Austin-based Oracle. The first of these data centers, which is currently under construction in Abilene, will be the size of New York's Central Park.
These data centers and artificial intelligence infrastructure efforts require large amounts of power.
Data centers operate 24/7, housing servers that provide computing power and require massive amounts of water, fans and cooling units to keep the equipment from overheating.
An October study by consulting firm Bain & Co. found that U.S. utilities will likely need to increase their annual generation by more than a quarter over the next three years to meet the rising electricity demand causing by AI and data centers. The study said data centers could consume 9% of U.S. electricity generation by 2030. The Electric Power Research Institute reported that ChatGPT requests and similar AI inquiries are estimated to need 10 times the electricity that traditional Google searches require.
As of December, data centers could be responsible for roughly half of new power demand in Texas, which is expected to drive summer grid peaks from 86 gigawatts today to 150 gigawatts in 2030.
Texas is home to the second largest data center market, with the Dallas-Fort Worth metro following only Northern Virginia. The Austin-San Antonio metro, however, is leading the nation in data center colocation growth, with a 300% growth rate over the last five years, according to a report from commercial real estate company JLL.
The data center industry supported more than 485,000 jobs and contributed $35 billion in labor income to Texas in 2023, according to a study from the Data Center Coalition.
"Data centers are proud to be part of Texas’ economic success story, providing the essential digital infrastructure that powers the 21st-century economy. ... We look forward to working with state leaders to ensure Texas’ regulatory environment encourages data center growth that will further contribute to local economies across the state, bolster national security, and solidify Texas’ commitment to innovation," Data Center Coalition senior director of state policy Dan Diorio said in a statement following the bill's passage.