Texas Faces 474GW of Uncertain Data Center Demand
Texas has 474 gigawatts (GW) of requests from data center developers seeking to connect to its power grid, significantly surpassing the state’s previous peak demand record by over five times. In contrast, in 2023, the figure was merely 48 GW. This substantial gap raises questions about the reality behind these requests.
The phenomenon is known as "ghost demand," where developers submit requests for potential sites at minimal cost, securing a place in the queue before deciding on actual construction. This practice creates uncertainty for grid operators who must plan infrastructure years in advance.
“When you don’t know what is real, you really don’t know how to build the infrastructure for it,” stated Thomas Gleeson, chairman of the Texas Public Utility Commission.
Grid operators are addressing this issue by implementing stricter measures, such as increasing collateral requirements and applying connection study fees, which have shown promising results in reducing speculative demand. For example, Exelon’s pipeline of high-probability data center demand decreased by 40% after introducing stricter conditions. Similarly, Ohio saw a significant drop in its pipeline after implementing grid connection study fees.
Pennsylvania provides a clear illustration of the gap between proposed and constructed data centers. Over 100 data centers have been proposed, but only 20 have applied for permits, while most others lack secured electricity or identified customers. In response, Governor Josh Shapiro signed an executive order requiring stricter permitting for large projects and more transparency regarding their users.
Texas has also initiated an audit to scrutinize data center development, focusing on ownership, tax incentives, water use, and power generation plans. While both Texas and Pennsylvania have refrained from prohibiting data center development, they are now demanding more evidence of project seriousness from developers.