Texas data center developers are forging ahead with construction plans despite warnings from grid operators that no additional power will be available until 2032 in some regions, according to energy market intelligence firm IIR Energy. The state’s aging power grid, which experienced approximately 263 outages between 2019 and 2023, is being stretched beyond capacity by rapid renewable integration, slow transmission upgrades, and surging demand from artificial intelligence and data processing facilities.
San Antonio grid operators have informed data center operators they cannot allocate another megawatt of power until 2032, yet developers continue construction using behind-the-meter power sources including natural gas turbines and fuel cells. Shane Mullins, IIR Energy’s Director of Global Power, explained that developers are not being deterred by grid constraints. ‘It’s not holding up developers,’ Mullins stated. ‘They’re just finding a way to do it another way.’
Texas has emerged as one of the nation’s hottest data center markets, attracting developers with its renewable energy resources, business-friendly tax incentives, and affordable real estate. IIR Energy estimates approximately $2.7 trillion in data center projects underway globally, with roughly $1 trillion in new capital spending invested in the United States during the past nine months. Much of this investment is concentrated in Texas, where the digital economy is expanding faster than the infrastructure supporting it.
The behind-the-meter strategy represents a fundamental shift in how industry approaches power generation. ‘Every data center is now a power project,’ Mullins emphasized. ‘And every data center that’s not a power project is influencing the power industry.’ This approach allows facilities to generate power independently, creating resilience while bringing technology and energy production into closer alignment.
Despite these innovations, experts warn that Texas’s energy infrastructure continues to lag behind demand. Britt Burt, Vice President of Power Industry Research at IIR Energy, highlighted the growing imbalance between renewable generation and baseload power requirements. ‘We’ve added a lot of wind, solar, and battery storage, but not much baseload generation—and that’s what we depend on every day to meet demand,’ Burt explained. ‘The system hasn’t caught up.’
As electricity demand rises by up to two percent annually nationwide, reliability concerns are mounting. Texas, once celebrated for energy independence, now exemplifies the consequences of digitalization outpacing infrastructure development. Coal-fired plants have delayed retirement to meet increasing load requirements, while wholesale prices have surged up to 800 percent in regional capacity auctions.
In this rapidly evolving market, accurate project tracking becomes essential. Mike Bergen, Executive Vice President of Marketing and Analytics at IIR Energy, emphasized the importance of verified data. ‘We track projects through to completion,’ Bergen noted. ‘So, at any given point in time, we can actually say how much of this $2 trillion market is actually approved and moving forward.’ This transparency provides confidence to energy traders, utilities, financial institutions, and investors navigating the complex landscape of increasing power demand.
The grid challenges facing Texas reflect broader national concerns about reconciling AI-driven innovation with sustainable, scalable energy supply. As the industry continues to monitor data center development and its implications for energy infrastructure, the strategies emerging in Texas may inform how other regions approach similar challenges in the coming AI decade.
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