Texas Is Booming — But Can Its Infrastructure Keep Up?

Texas has spent decades selling itself as a place where businesses can build, families can prosper and economic growth has room to run. Now that success is creating a new problem: The state may be growing faster than its infrastructure can keep up.

Nowhere is that challenge more apparent than on the electric grid.

Population growth, new manufacturing plants, oil and gas operations and a massive wave of artificial-intelligence data centers are creating unprecedented demand for electricity. The Electric Reliability Council of Texas, which manages roughly 90 percent of the state's electric load, is confronting hundreds of thousands of megawatts in proposed new demand.

The numbers have become so large that state officials are questioning how many proposed projects are actually likely to be built.

ERCOT said in June that it was tracking more than 438,000 megawatts of large-load requests, with nearly 89 percent coming from data centers. By August, Gov. Greg Abbott said projects seeking connection to the Texas grid represented more than 474 gigawatts of potential demand — more than five times ERCOT's record peak electricity use.Approximately 90 percent of those requests are associated with data centers.

The figures represent requests rather than a prediction of actual future electricity consumption. Many proposed projects may never be constructed. But even a fraction becoming reality could fundamentally change the Texas power system.

On Aug. 3, Abbott ordered the Public Utility Commission of Texas and ERCOT to conduct a comprehensive audit of data centers seeking connections to the grid. No project subject to the directive can move forward until the review is completed.

The governor wants developers to disclose how much electricity and water their facilities would consume, whether they intend to generate some of their own power, what tax incentives they expect to receive and what steps they will take to limit impacts on surrounding communities.

"Texans must come first," Abbott said in announcing the directive.

The AI Gold Rush

The extraordinary demand is being driven in large part by the race to build the computing infrastructure necessary for artificial intelligence.

Data centers contain enormous numbers of servers used to train AI models, operate cloud-computing systems and process the growing amount of information generated by the digital economy. Unlike a traditional office building or warehouse, a massive data center can consume electricity on the scale of an industrial complex.

Texas has become one of the country's most attractive destinations for those facilities because of its available land, relatively business-friendly regulatory environment and enormous energy industry. The state is already the nation's second-largest data-center market and could eventually surpass Virginia for the top position.

But electricity is only part of the equation.

Large data centers can require substantial amounts of water for cooling, while new industrial developments require transmission lines, substations, natural-gas pipelines, roads and other infrastructure. Those costs have increasingly raised questions about how much should be paid by developers and how much could ultimately fall on Texas ratepayers and communities.

The debate is already spreading beyond the power grid. Landowners have pushed back against major transmission projects crossing rural Texas, while communities considering data centers are questioning water consumption, noise, tax incentives and the relatively small number of permanent jobs some facilities create.

For communities such as Huntsville and Walker County, the statewide debate matters. Huntsville sits along the rapidly developing Interstate 45 corridor between Houston and Dallas, placing the region within reach of the population and industrial expansion reshaping much of Texas.

The challenge facing state leaders is therefore not whether Texas should continue growing. Economic expansion has helped make the state one of America's dominant business destinations.

The question is whether Texas can build power plants, transmission lines, water systems, highways and other infrastructure quickly enough to support that success without sacrificing reliability or leaving existing residents to shoulder the cost.

For decades, Texas has been preparing for growth.

The growth has arrived.

Now the infrastructure has to catch up.