Data Driven
Data Center Expansion Requires Balance, Guard Rails
The rapid expansion of the data center industry has alarmed Texans of all political persuasions. The hyper-local nature of data center advocacy, centered in town planning and zoning and city council meetings all over the state, has made developing a comprehensive advocacy approach challenging. But now both houses of the Texas Legislature have been issued interim charges to study the industry and its proposed buildout in Texas. Questions about economic development have been pitted against community environmental concerns. Worries about having enough water and electricity for Texas residents are compounded by a years-long drought, water supply crises in multiple jurisdictions, and an electrical grid that still feels shaky to many who lived through Winter Storm Uri in 2023.
Chevron and Microsoft have teamed up to build a new natural gas power plant, one of the country’s biggest, in West Texas. The power plant will be used only to generate electricity for a huge data center and not to supply electricity to the municipal electricity grid. It will also not be used to supply electricity to oil and gas infrastructure in West Texas, even as state regulators struggle to plan new transmission and other resources to supply additional electricity in that region.
Big Tech was once thought to be a partner in solving the climate crisis. An essay by Bill Gates in October of last year was one indication that priorities have shifted. Now, the rapid expansion of data centers, and the lack of interest in attention to the significant environmental impacts of those facilities, reflects a complete abandonment of any climate idealism from the high tech sector.
What are data centers? Why are there suddenly so many of them? And what kind of impact do they have on the environment? The climate? And residential energy costs and water supply?
The growth of the data center industry is driven by the growing dependence on the internet for all the things we do every day. Technology like cloud computing and storage, map apps on your phone, and artificial intelligence all require huge amounts of computing power. And data centers are like factories turning electricity into computing power.
There are currently four-hundred data centers currently operating in Texas
Dallas/Fort Worth (196)
Houston (43)
San Antonio (56)
Austin (50)
West Texas (59)
The industry has grown rapidly in the past decade. Projected growth of the sector comes with a massive projected increase in demand for electricity. The increase in demand for electricity is concerning for a state like Texas that is already struggling to meet growing demand for power.
According to a University of Houston report, data centers and other technology like EV chargers, are projected to increase electricity demand by 25 - 360% over 2022 demand by 2035. The range of projected increase in demand for electricity is huge. That uncertainty is driven by speculation from data center operators, who propose new data centers in multiple markets, trying to find the best deal before committing to a location.
Given this expected increase and the lack of certainty about the magnitude of the increase in demand, there is concern that Texas could face an electricity shortage of 40GW by 2035. Without major new investment in supply and energy infrastructure, generation shortfalls and supply chain constraints could threaten grid reliability.
Reflecting growing public concern about data centers in communities, both the House and the Senate Interim Charges include an item about data centers, reflecting the growing bipartisan movement to resist construction of data centers in cities across the state.
House State Affairs was charged with:
Data Centers: Study the development of data centers in Texas, including its importance to global competitiveness and national security. Evaluate the direct and indirect economic growth potential fostered by in-state data center development, including growth multiplier effects and economic diversification. Identify existing secondary and post-secondary education and training opportunities and recommend pathways to satisfy increasing labor demands. Review the existing regulatory framework governing data center development and recommend proposals to streamline regulations while enabling communities to plan and manage growth responsibly. Study the implementation of SB 6 and the Large Load Batch Study Process proposed by the Electric Reliability Council of Texas, as it relates to datacenters, and identify how grid-connected data center facilities and co-located resources can support grid resilience and reliability
Senate Business and Commerce was charged with:
Data centers: Managing Data Center Growth: Study the adequacy of current statutory, regulatory, and infrastructure frameworks to meet the rapidly increasing demand from large electric loads, such as data centers. Recommend ways to balance economic development benefits of this growth against the impacts on landowners, private property rights, water infrastructure, and community integrity.
According to Inside Climate News:
“Compared to September 2024, ERCOT is now tracking more than three times as many large load interconnections, with nearly 69% of 189 GW of large load requests coming from data centers. By contrast, in May 2024, non-cryptocurrency data centers made up less than half of the large power demand requests. The large load requests in the ERCOT queue - 189 GW - equal about 40% of the nation’s estimated electricity consumption for 2025, according to the US Energy Information Administration.”
The Legislature passed SB 6 during the 89th Session to help manage the influx of large-load interconnection requests on the ERCOT grid. SB 6 directs the Public Utility Commission to create new rules about on-site power generation, policies around cost-sharing for transmission and infrastructure needs for large load interconnection requests, and requires financial commitment earlier in the interconnection request process, to limit speculative projects taking up too much of the interconnection queue. PUC will also determine whether to require data centers with on-site generation, also called “behind the meter” generation, to supply power back to the grid during grid emergencies, so that residential customers are not affected.
Environmental Impacts
Data center development comes with environmental concerns which must be taken into account by local leadership. One of the biggest concerns is water. Water is used to cool the computing equipment within data centers. Some data centers advocates point out that cooling systems can be configured in a closed loop, which means cooling water is recycled, minimizing their water use. However, facilities that rely on on-site natural gas electrical generation must use water as part of that process. Water used for electrical generation is not closed loop, and can affect the local or regional water supply.
Air quality is another concern. Data centers that rely on on-site natural gas power generation come with all the same air quality concerns as traditional utility-scale natural gas generators. Burning natural gas to generate electricity releases oxides of nitrogen, volatile organic compounds, and particulate matter, all of which contribute to poor air quality that is hazardous to human health, especially those with pre-existing respiratory conditions. Transporting and processing natural gas is subject to leakage, meaning those living in the area around the generator are exposed to ambient natural gas.
Generating electricity using natural gas is also highly climate-intensive. Carbon dioxide emissions from combusted gas and leaks of uncombusted gas from pipelines and other equipment are both greenhouse gases that contribute to climate change. The growing demand for electricity driven by data center expansion threatens to roll back progress made in decreasing our dependence on fossil fuels.
Finally, many residents living in the vicinity of data centers complain about noise pollution. Cooling fans, power plants, diesel backup generators, and other equipment all make noise. Some describe it as a constant low-frequency “hum” that never turns off. Local leaders should remember that data centers are industrial facilities that are not appropriate for residential neighborhoods.
Are Data Centers Good or Bad?
Much of the pushback we have seen in the media about data centers comes when a data center company wants to build a new facility in a community. At a dedicated City Council meeting early this year, residents of Round Rock advocated against siting of a new data center in a densely populated part of town. That effort was unsuccessful, but a similar fight in San Marcos was successful in getting the project canceled.
Data centers have been around for some time without drawing the kind of negative attention we have seen recently in Texas. What is driving people’s concern now is the rapid increase in size and number of data centers, concerns about water and power availability, and siting of data centers too close to residential areas.
Texas continues efforts to track data center construction, citing economic development. But concerns about the water supply and the grid must be addressed if the industry is going to continue its expansion. Stories like the water shortage in Corpus Christi and experiences like the grid failure during Winter Storm Uri have not been satisfactorily addressed and residents have noticed that its not the industrial facilities who must do without water and electricity when there is a shortage, it has historically been residential customers who must make sacrifices.
Taken together, the environmental concerns, the climate concerns, the electricity concerns, and water concerns reflect a need for thoughtfulness and balance on the part of the Legislature and data center developers. The state must look beyond economic development as they develop a policy approach to continued data center development in Texas.
Further Reading
Inside Climate News Article about SB 6
The Future of the Electric Grid in Texas: Opportunities and Challenges in the Next Decade (University of Houston)
Houston Advanced Research Center Report