State, local lawmakers weigh data center growth as energy demand surges

Texas has positioned itself as a hotbed for the digital frontier, propping up abundant land, low taxes and a business-friendly environment to attract private investment. The rise of AI has further spurred demand, spreading data center infrastructure to scale with increased integration and development. Although Texas is projected to become the largest home for data centers, lawmakers and residents alike are pushing back. 

As concerns over data centers grow, the Texas Legislature is expected to take action by establishing a joint select committee composed of Texas House and Senate lawmakers as early as April. The committee will hear from stakeholders as their assert their positions over the future of data centers across the state. 

The explosive growth of data centers has raised flags in both conservative and liberal circles. Developers frequently keep rural communities in the dark on these projects, raising little awareness or notice before building out these massive, energy-intensive facilities. 

However, as these projects become more prominent, communities are beginning to resist. Coalitions of county residents are banding together to create as much friction as possible in the data center permitting and development process. While they lack the political capital or legal authority to prevent groundbreaking, their efforts to disincentivize construction has proven effective in restricting tax incentives, water permits and grid priority. 

Data centers are notorious for being large-load facilities, taking a disproportionate number of resources including electricity and water to remain functional. There are 6.5 gigawatts (GW) of data center capacity currently under construction, tapping the state as the world’s top data center market by 2030. A fifth of these centers are projected to have a maximum demand of 1 GW over the next five years, with that number expected to rise to one in three by 2035. 

As it stands, critics of rapid data center expansion have taken notice that demand will outpace supply. Currently, Texas doesn’t have the interconnectivity or energy generation needed to sustain these facilities. While measures are in place to counteract the shortage – including building power plants alongside the data centers – the Electric Reliability Council of Texas (ERCOT) has forecasted that demand will nearly double the peak demand seen in 2023 by the end of the decade. 

Texas legislators have already moved to implement regulatory changes to manage the sharp increase in large-load developments. Senate Bill 6 was signed into law in 2025, marking the creation of a statutory framework to guide regulatory oversight for these projects. The Public Utility Council of Texas (PUCT) will carry out the law’s actions to manage interconnection standards, net-metering, forecasting criteria, transmission cost-allocation review and more. 

The PUCT will execute five cornerstone projects establishing a framework for approvals, forecasting and allocation. Full execution of these initiatives will harden and strengthen the ERCOT grid in preparation for skyrocketing energy usage. These include: 

• Establishing the interconnection procedures and cost obligations for large loads. Creating large-load interconnection standards will include reinforcing the cutoff of 75 megawatts (MW) and requires the large-load customer to handle required study fees, site control proof, disclosure requirements and backup generation mandate. 
• A rule requiring PUCT approval of net-metering arrangements for co-location. These will apply to large-load customers needing more than 75 MW and stand-alone generators. The commission will be empowered to condition approvals and hold proceedings that remove stranded-asset costs from rates. 
• ERCOT will define large-load customers as any that require more than 10 MW at a single site. As part of its efforts to sustain large-load forecasting, the project specifies components needed for inclusion and outlines how submitted information impacts ERCOT’s transmission planning and resource-adequacy forecasts. 
• The creation of a voluntary demand reduction program for large loads. 
• Advancing a transmission cost allocation study on if the current method of sharing transmission costs should be changed due to the sudden explosion of large loads. 

With SB 6 in place and projected issues with rapid data center development escalating, the select joint committee will be pivotal in steering the future of Texas’ role on the digital frontier. 

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