Utilities Tighten Screens on Data Centers, Texas Pauses New Grid Hookups
US utilities are tightening interconnection rules and large-load tariffs to filter out speculative data center projects, and Texas has paused new connections while ERCOT audits a queue of roughly 474 gigawatts, according to a ZeroHedge report published via OilPrice.com.
Market Impact
That 474-GW queue is more than five times Texas’s all-time peak demand record of just over 90 GW set this summer, and grid officials doubt most of it will ever get built. ERCOT CEO Pablo Vegas said in an April statement that the forecast is “higher than expected future load growth,” and PUCT chairman Thomas Gleeson was more direct on the Energy Capital podcast in June, saying “the projections are extremely high, and what we know is that a lot of that load will not actually come here. A lot of it is speculative.”
Despite the friction, Goldman Sachs still expects US data center power demand to more than double from 2025 levels to 66 GW by 2027, though it estimates only about half of capacity scheduled for the next one to two years will come online on time. The Electric Power Research Institute projects data centers will account for 9% to 17% of US electricity demand by 2030, rising to as much as 20% by 2035. Meanwhile, energy advisory firm Relae (formerly Carbon Direct) said in June that more than $170 billion in AI data center capacity has been blocked, withdrawn, or stalled by community opposition since January 2024, a meaningful slice of the roughly $581 billion Goldman Sachs expects hyperscalers to spend on US AI infrastructure this year.
Texas has responded with Senate Bill 6, signed last summer by Gov. Greg Abbott, which requires large-load customers to prove site control, cover most grid upgrade costs, disclose duplicate interconnection requests elsewhere in the state, and accept curtailment during firm load shed events. On June 18, the PUCT adopted a cluster study framework for loads over 75 MW meant to replace a slower, repetitive sequential review process.
What It Means for Subcontractors
- Before committing electrical, mechanical, or E&I crews to a Texas data center campus, confirm the project has cleared ERCOT’s interconnection queue audit and holds a signed interconnection agreement, not just a permit filing or announced groundbreaking.
- Ask developers whether they’ve satisfied SB6 requirements, including proof of site control and upfront payment toward grid upgrade costs, since these are now gating conditions for ERCOT to treat a load request as real.
- For projects over 75 MW, verify where the load sits in the PUCT’s new cluster study process adopted June 18, since that timeline now determines when power, and therefore construction schedules, actually firm up.
- Price contracts with contingency language tied to interconnection milestones given that Goldman Sachs expects only about half of near-term scheduled data center capacity to come online on time.
- Track local opposition and moratorium activity in target markets, since Relae’s tally of over $170 billion in stalled or withdrawn projects since January 2024 shows community pushback can kill a job after design work has already started.
