A tidal wave of data centers turning Texas into a digital stronghold, but the surge in power demand is putting pressure on a fragile grid already pushed to its edge
HOUSTON — Texas is quickly turning into a “data center destination“. Giant tech hubs are popping up everywhere and that’s fueling a historic demand for electricity especially in Houston.
“It’s the foundation for all this technology we as humans consume,” said Raul Martynek, CEO of DataBank, one of the largest data center operators in the country.
Data centers are living fortresses of fiber and fans, rarely seen on the inside, and buzzing with a constant hum of connectivity. They’re critical to nearly everything we do in the modern world.
“When people are scrolling through their TikTok feed, or Instagram feed or going on Facebook or using remote work and using a Zoom call, all of that activity is ultimately supported by a data center,” said Martynek.
The data center industry so popular in Texas, it’s already boosted the state with more then 363,000 jobs and $52.6 billion in GDP.
So why is Texas so appealing?
Martynek says there are several reasons including the state’s location, available land, little regulation, and the power grid.
“Texas has its own grid, the ERCOT system,” said Martynek. “It’s a very flexible power system. It’s also very business friendly.”
But it’s also a grid that’s faced challenges like during the 2021 winter storm when more than 4 million homes and businesses lost power. A surge in 24-7 data centers that consume enough electricity to power hundreds of thousands of homes, will test the grid, like never before.
“We’re committed to the safety and security of all Texans and we want to be that responsible partner on the grid,” said Dan Diorio, Senior Director of State Policy with the Data Center Coalition.
Diorio says companies work closely with utility providers. Here in Houston, CenterPoint will be key to making it all work.
“It’s presenting a new set of challenges for us,” said Darin Carroll, Senior VP of Electric Business at Centerpoint. “We have not ever seen this type of demand.”
Carroll says CenterPoint has seen a 700% increase in data center developers’ requests to connect the utility in less than a year. Peak demand in Houston could jump another 30% by 2030.
“We see it as an opportunity for growth for the city of Houston and Texas and we want to enable that,” said Carroll.
That means billions of dollars more in investment for new transmission lines and substations.
“You can’t just generate new power overnight,” said Martynek.
DataBank sees it as a multi-year strategy and stresses facilities like theirs- equipped with an army of back up power generators can help relieve, not strain the grid.
“Data centers can be a part of the solution to this power shortage and this demand,” said Martynek. “Because we can take load off the system at those peak points.”
What’s clear in this high voltage tug of war – data centers aren’t going anywhere, fueled by AI and the digital demand of the consumer at home. It’s the same consumer who’s also worried if their lights will stay on.
“It’s really their consumption and demand that’s creating the demand for data centers, but that ultimately there’s enough here through a rational process to come to a way its a win win for everyone,” said Martynek.
Governor Greg Abbott signed SB 6 into law earlier this summer. It tackles this very problem. SB 6 requires companies to pay upfront for grid upgrades, prove they have backup power and gives ERCOT more authority to limit data centers power use during emergencies. The goal is to keep the lights on and protect Texans from rising energy costs.
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