Texas governor Greg Abbott (R) has halted approvals for new data center projects seeking to connect to the state's power grid until regulators complete an audit of the facilities, directing the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) to expand its review of all projects advancing through the interconnection process.
Under the order made Monday, regulators must collect information on power consumption, water use, on-site generation plans, tax incentives, ownership structures and potential impacts on local communities. Projects that fail to comply with the review must be denied connection to the Texas grid.
The order comes as opposition to data center development spreads across Texas and pressure mounts on Abbott to take a tougher stance on the industry. Local governments across the state have pursued moratoriums and proposed new restrictions on data centers, while elected officials from both parties have called for greater scrutiny of facilities' effect on the grid, water supplies and rural communities. Against that backdrop, Abbott's directive expands an ongoing effort by ERCOT and the PUCT to vet large-load projects, broadening the review beyond grid planning to include resource consumption, incentives and local impacts.
ERCOT is currently considering approximately 474GW of requests to connect to the Texas grid, more than five times the state's record peak electricity demand, Abbot said. Roughly 90pc of those requests are associated with data centers, according to the governor. "That unprecedented load growth could endanger the reliability and stability of the Texas electric grid," Abbott wrote in the directive.
The review is necessary in part because some data centers failed to comply with a state survey measuring water and power usage, he said. He also cited concerns raised during legislative hearings and public meetings regarding the sector's impact on local communities and critical infrastructure.
The Data Center Coalition, which represents major data center operators, said it supports the review if it helps distinguish legitimate projects from speculative proposals.
"We are hopeful this directive from the Governor will help separate those who are responsible water and energy stewards from those who are not," said Dan Diorio, the group's executive vice president of state policy and government affairs. "With billions of dollars in investment and hundreds of thousands of jobs on the line, we urge the PUCT and ERCOT to move swiftly."
Behind the hype
Texas officials have been struggling to determine how much of the state's projected load growth is genuine and how much reflects speculative filings, duplicate applications and so-called "ghost load" requests.
Regulators have warned that inflated interconnection queues make it difficult to forecast future demand and risk prompting unnecessary spending on generation and transmission infrastructure, potentially saddling consumers with the cost of investments that ultimately prove unnecessary.
In an effort to streamline the process, the state launched Batch Zero, which was developed to help separate credible projects from speculative proposals by imposing stricter requirements on large-load customers. Under the framework, projects seeking 75MW or more that meet certain financial commitments are grouped into a single system-wide study intended to identify which projects are prepared to move forward and what transmission infrastructure may be required to serve them.
In a notice to market participants Monday, ERCOT said it was pausing the process and would not issue the 7 August classifications scheduled under the study, delaying a key milestone that would have informed developers whether their projects had been selected for evaluation in the first batch.
"ERCOT is reviewing governor Abbott's letter concerning data centers and will work with the Public Utility Commission of Texas to implement the governor's directive, including postponement of the Batch Zero transmission planning study," the grid operator said.
ERCOT said it would consult with the commission on next steps before the PUCT's 20 August open meeting.
