The swift growth of data centers in Texas is escalating electricity demand in winter, heightening the risk of supply shortages that may lead to blackouts amid frigid temperatures.
The Lone Star state is drawing a significant number of data center inquiries, fueled by its plentiful renewable energy and natural gas resources along with its favorable business climate. OpenAI, for instance, is constructing its primary Stargate campus in Abilene, situated roughly 150 miles west of Dallas-Forth Worth. This campus could demand up to 1.2 gigawatts of energy, similar to the output of a large nuclear facility.
The North American Electric Reliability Corporation cautioned this week that the continuous energy use of data centers will complicate efforts to maintain an adequate electricity supply during extreme demand situations in freezing conditions, akin to the devastating Winter Storm Uri of 2021.
“The substantial load growth from new data centers and other significant industrial consumers is elevating winter electricity demand forecasts and contributing to ongoing risks of supply deficiencies,” NERC reported regarding Texas in an analysis released Tuesday. Texas is at increased risk during severe winter weather, although the state’s grid is dependable under typical peak demand, NERC stated.
During Uri, demand surged for residential heating due to the cold temperatures, simultaneously while numerous power plants failed because of the same weather conditions. Texas grid operator ERCOT initiated 20 gigawatts of rolling blackouts to avert system collapse, as per a Federal Energy Regulatory Commission report. Most of the offline power plants operated on natural gas.
This incident marked the “largest manually controlled load shedding event in U.S. history,” resulting in 4.5 million individuals losing power for several days. At least 210 fatalities occurred during the storm. Many of the deaths were linked to power outages and included hypothermia, carbon monoxide poisoning, and health issues aggravated by icy temperatures, according to FERC.
Surge in data center requests
Since Uri, Texas has experienced an overwhelming influx of requests from data centers, cryptocurrency mining operations, and industrial customers seeking grid connections. More than 220 gigawatts of projects have sought connections this month, a 170% rise compared to the 83 gigawatts of project requests in January, based on data released Wednesday by ERCOT.
Approximately 73% of the projects requesting connections are data centers, according to ERCOT.
If all proposed projects were realized, they would match the average yearly energy consumption of nearly 154 million Texas homes, as per a CNBC analysis utilizing 2024 residential electricity data. However, the Lone Star state has a population of only about 30 million.
Beth Garza, a former leader of ERCOT’s oversight board, expressed doubt that these projects will all materialize, characterizing the scale as “extraordinarily large.” More than half of the projects have not submitted planning studies, ERCOT noted.
“There isn’t enough infrastructure to handle such a substantial load on either the equipment or consumption side,” remarked Garza, who served as director of ERCOT’s Independent Market Monitor from 2014 to 2019. “There are simply too many factors in the world for those numbers to be feasible.”
Phantom data centers are appearing in grid connection requests nationwide as developers pitch the same projects to multiple jurisdictions, according to John Moura, the director of NERC’s reliability evaluations. This complicates utilities’ prospects for predicting future demand conditions.
Threats to reliability
The projects ERCOT has sanctioned to connect to the grid total a mere 7.5 gigawatts, yet this still signifies a considerable increase in demand. For comparison, the six-county area in southeastern Pennsylvania that encompasses Philadelphia, with a population of 1.7 million, faced a peak demand of approximately 8.6 gigawatts in 2024, according to the state utility board.
Texas’ supply and demand equilibrium can become strained in winter and may lead to deficits. The state has 92.6 gigawatts of available resources and peak demand in a severe Uri-like scenario could reach around 85.3 gigawatts, as noted by NERC.
However, available power may drop to about 69.7 gigawatts during severe cold weather, creating a supply shortage of over 15 gigawatts. This is attributable to routine power plant maintenance, unexpected outages, and decreased capacity due to winter weather conditions.
“It’s crucial to grasp the tightness we’re encountering,” Moura said. NERC’s winter evaluations included only data center facilities that have reached specific milestones to eliminate speculative projects from consideration, he noted.
“I cannot emphasize enough how monumental this shift is for the electric industry,” Moura commented regarding data center requests. One potential solution is for data centers to demonstrate flexibility in their electricity usage to assist in balancing demand and supply during extreme winter periods, he added.
In Uri’s case, natural gas facilities constituted 58% of all unplanned outages in Texas, as per FERC. Freezing temperatures hindered gas production, created difficulties in fuel delivery, and caused issues in transmitting electricity as power lines collapsed.
Following the storm, Texas has implemented regulations to strengthen natural gas infrastructure for extreme winter conditions.
When gas plants experience widespread outages, solar and battery storage also encounter obstacles, according to NERC. Peak winter demand typically occurs in the early morning when sunlight is minimal, and batteries may not have sufficient time to charge, Moura explained.
With data centers operating around the clock, “ensuring sufficient battery state of charge will become increasingly difficult during prolonged periods of high loads, such as a severe multi-day storm like Winter Storm Uri,” NERC stated in its assessment.
“Power shortages and rolling blackouts could indeed take place in the next few years in certain regions” of the U.S. as demand from data centers surpasses supply, cautioned Rob Gramlich, president of the power consulting firm Grid Strategies. “Those scenarios are unacceptable to everyone across the United States.”
Garza expressed confidence that the sustained demand from data centers will generate new supply. “Generators are attracted to such opportunities,” she said. “I believe this will then draw additional private investment to fulfill those supply demands.”
