Memories of deadly winter blackouts haunt the Texas data center boom

The American electrical grid is creaking under growing demand from data centers that power websites, streaming platforms and Silicon Valley’s artificial intelligence boom. A new law in Texas introduced an unprecedented remedy: cut power to the energy-guzzling facilities in times of emergency.

Lawmakers who championed the law say giving the Texas grid operator that option will help avoid deadly blackouts like those that followed a 2021 winter storm in which more than 200 people died. State regulators are now hashing out how to implement data center shutoffs with industry leaders.

The willingness of Republicans in a red state that is a major hub for data centers to impose new regulations on the facilities underscores how even those enthusiastic about participating in the AI revolution can be hampered by the limits of the country’s aging infrastructure.

The narrow prospects for adding new energy sources to the grid may be cut further by President Donald Trump’s recently passed tax law, even as data centers contribute to rising electricity rates.

Texas, with its wide open spaces, cheap energy and pro-business policies, is a natural home for data centers, warehouse-like buildings stocked with powerful computers that can consume comparable power to a small city.

The Lone Star State hosts data centers built by Meta, Alphabet, and Microsoft. Abilene, in western Texas, is home to the first site of the Stargate AI data center project that, according to a January announcement hosted by Trump, aimed to “immediately” spend $100 billion.

Trump has made more data centers a national priority, recently seeking to accelerate their construction with a new national AI plan and an executive order that eases federal permitting.

But the fatal 2021 storm that left millions of Texas residents in the dark without heat while industrial operations stayed online provides a stark reminder of the dangers of overstretched energy infrastructure.

Last year, Texas power officials informed lawmakers that energy demand on the state’s grid could double in six years, threatening its reliability. The forecast set off a panic that led to the drafting of the law allowing data centers to be cut off in emergencies.

“We never want to risk another (Storm) Uri, where over 200 Texans died because they lost their electricity,” said Texas state Sen. Phil King, who co-wrote the bill, in a Feb. 27 hearing about the legislation, using an unofficial name for the storm. “That can never, ever happen again.”

An implementation process that began with a public meeting before the Texas Public Utility Commission late last month will determine when and how power can be cut to data centers under the new law, which was signed by Gov. Greg Abbott in June. The process will also specify new requirements for how the facilities pay for power and grid infrastructure upgrades.

Tyler Norris, a fellow at Duke University, said the process will be closely watched by lawmakers and energy leaders around the country as they grapple with electricity demand forecasts that are “physically impossible to meet.”

“It’s hard to overstate the significance in terms of the direction this is likely to push the data center industry,” Norris said. “When you have periods of system stress – demand exceeding supply – you get into load shedding … Unless a data center is providing a critical national security function, there’s going to be a push to curtail the data center first.”

‘The Wild West of data centers’

Days after Trump announced Stargate in an Oval Office live stream in January, OpenAI executives flew to Austin to discuss the project with state officials including Gov. Abbott. Stargate is a joint venture between the ChatGPT maker, business software giant Oracle and Japanese investor SoftBank. (The Washington Post has a content partnership with OpenAI.)

Texas leaders – like their counterparts in states including Ohio, Virginia and Arizona – have welcomed data center projects and the tax revenue they promise.

Two of the lobbyists OpenAI brought along to the Austin meeting, Daniel Hodge and Luis Saenz, had previously served as Abbott’s chief of staff. After the meeting, OpenAI’s global policy director Chris Lehane wrote a LinkedIn post thanking the governor for a “big Texas welcome.”

Behind the scenes, Republican state senators King and Charles Schwertner were preparing State Bill 6. It introduced measures aimed at ensuring tech companies pay their fair share for power transmission costs, and required any data center seeking a grid connection after Dec. 31 to build a switch that can be used to cut supply in an emergency.

The legislation was spurred by an ominous forecast in June 2024 testimony from the chief executive of the Electric Reliability Council of Texas, the nonprofit that manages the Texas electric grid. It predicted that, largely thanks to data centers, energy demand in the state would nearly double by 2030.

Lt. Gov. Dan Patrick called the forecast “shocking” in a social media post that month. “We want data centers,” he wrote, “but it can’t be the Wild Wild West of data centers.”

As the bill made its way through the Texas legislature, tech companies voiced concerns, including Crusoe and Lancium, partners of OpenAI and Oracle on the Stargate project in Abilene.

At a February hearing, Dan Diorio, vice president of state policy at the Data Center Coalition, an industry group, warned of the “significant consequences” of even a “momentary interruption” to data center customers, which he said include governments, law enforcement, hospitals and banks.

Microsoft, Amazon, Oracle, and Google are members of the Data Center Coalition.

The most strenuous opposition to the Texas data center bill came from other Republicans. In interviews and editorials this spring, Vance Ginn, a conservative and former Texas lobbyist who briefly worked for the White House Office of Management and Budget during Trump’s first term, argued that the regulation could make his state less attractive to tech industry dollars.

Ginn’s comments were followed by criticism from right-wing pundits and influencers who saw a potential threat to the Trump administration’s plans to see America dominate AI. At the time, Lt. Gov. Patrick’s office told Fox News he was aligned with Trump’s vision for AI in Texas.

“We have made clear we are in lockstep with President Trump on his goal to make America the premier destination for AI, data centers and cryptocurrency,” Patrick’s communications director Steven Aranyi told the Post.

Abbott signed the bill on June 20. His press secretary, Andrew Mahaleris, said the governor acted “to ensure that, as Texas grows, ERCOT can effectively manage energy to meet rising demand.”

“Thanks to this law and increased investments in energy infrastructure, innovators know Texas has the tools needed to lead,” he said in an emailed statement.

White House spokesperson Harrison Fields said in a statement that Trump’s goal is to create “a golden age for American technological dominance” and that “state legislators and utility regulators need to be more open to facilitating data center development in a manner that ensures a productive and symbiotic relationship between grid operators, developers, and hyperscalers that does not impose unreasonable and onerous restrictions on the American tech companies on the frontier of AI development.”

New data centers are still incubating in Texas, where former Gov. Rick Perry announced plans for a nuclear-powered facility near Amarillo to be called the Donald J. Trump Advanced Energy and Intelligence Campus. OpenAI has said it’s expanding Stargate in Abilene with a deal to add facilities that consume another 4.5 gigawatts of power.

Ginn, the former Trump staffer, said he remains concerned the new law creates “structural barriers to growth, innovation, and voluntary grid support at times we need it most.”

More flexible AI

The new regime for data centers in Texas could push tech companies to rethink how they operate the facilities.

In an extreme weather event, Texas must be able to “load shed as quickly as possible,” said Clif Lange of the South Texas Electric Cooperative. At the public meeting last month, he acknowledged that “bad things can potentially happen” when power to industrial customers is cut, but said some must find a way to be flexible.

While online services depend on data centers to keep operating, major tech companies can switch some workloads between locations. The facilities are also used for less time-sensitive work that can be paused or postponed.

The tech industry is exploring ways to reduce the burden that data centers place on electric grids.

Google on Monday announced deals with two utilities, the Tennessee Valley Authority and Indiana Michigan Power, that will see the internet company reduce its energy demand during periods of peak use by adjusting AI workloads running in its data centers. Chipmaker Nvidia has backed startup Emerald AI, which is developing software to help other data centers do the same thing.

Robin Hytowitz, a researcher with the nonprofit Electric Power Research Institute, which is studying how data center flexibility could help electrical infrastructure, said the new Texas law is “the first state bill that really gave clarity around some of that emergency use.” It probably won’t be the last.

New Jersey is considering a law that would offer financial incentives to data centers to be more adaptable.

California state Sen. Steve Padilla has proposed legislation aimed at insulating residential grid customers from rate hikes due to data center demand. “We’ve got to try to figure out what happens when one of these things plugs in and starts drawing off the grid, and suddenly we have scarcities created that drive up cost on a scale that we haven’t seen before,” he said.