Texas data centers face grid freeze over ghost demand risks

Texas froze new grid connections for data centers as large-user requests topped 474 gigawatts, testing which AI power plans are real.

Texas tests 474 gigawatts

The pause makes Texas the first major US data center hub to stop new hookups while it audits whether proposed facilities can be financed, powered and built. "When you don't know what is real, you really don't know how to build the infrastructure for it," Texas Public Utility Commission Chairman Thomas Gleeson said at an industry conference in March.

Requests from data centers and other large users seeking service on the Texas grid rose from about 48 gigawatts in 2023 to more than 474 gigawatts, according to documents from ERCOT and Governor Greg Abbott. Across selected utilities in the Midwest, Mid-Atlantic and South, large-user requests reached about 270 gigawatts, bringing reviewed queues above 700 gigawatts.

That total is more than 10 times industry estimates of current US data center power use, according to a review of utility and grid data. The comparison is a warning about measurement, not proof that 700 gigawatts of new demand will be built.

Deposits cut project queues

Utilities do not use a single standard for reporting data center demand. Some count signed contracts, while others include earlier-stage inquiries from developers that may not have customers, financing or equipment lined up.

When companies imposed upfront money and tighter collateral, weaker proposals dropped away. Exelon reduced its high-probability data center demand tally by about 40% to 11 gigawatts in a July 30 investor presentation after adopting stricter collateral standards.

In Ohio, AEP Ohio's data center power pipeline fell by more than half after state rules added grid connection study fees of up to $100,000. The drop gives regulators a concrete example of ghost demand: projects that can reserve planning attention without proving construction capacity.

Daniel Farris, an attorney at Foley & Lardner who advises data center developers and hyperscalers, said some entrants are discovering the difficulty of turning grid access into operating facilities. "The entities that rushed into the space, because there was a sort of pot of gold, are maybe now learning the hard way just how difficult some of this is to actually construct and bring online," Farris said.

PJM bills test patience

Consumer advocates say speculative queues can still affect household costs if utilities build for projects that do not arrive. Public Citizen Energy Program Director Tyson Slocum said Texas appears to be trying to impose transparency on an industry that remains "like the Wild West" in much of the country.

In PJM Interconnection, the grid operator covering 13 states including Virginia's Data Center Alley, Monitoring Analytics attributed a $29.4 billion increase in capacity costs over roughly the past four auctions to existing and forecast data center demand growth. Capacity charges are paid by homes and businesses to ensure enough power supply is available.

PJM spokesman Jeff Shields said substantiated demand remains large even after utilities reduce inflated forecasts. "The reality is that the load is showing up, and generation is not at the pace we need it to," Shields said.

Audits reach Pennsylvania

Abbott's order requires data center power proposals to disclose ultimate ownership, replacing earlier rules that allowed an affiliate company to be listed. The Texas audit also seeks details on taxpayer-backed incentives, water use and plans for on-site power generation.

Pennsylvania Governor Josh Shapiro signed a data center executive order on August 18 that applies stricter permitting requirements to projects of 25 megawatts or more. The state has more than 100 proposed data centers, but only 20 have applied for permits, according to a governor's office official who discussed the permitting data.

Three paths for power queues

If deposits and ownership audits keep filtering requests, the macro effect would be less pressure for near-term power infrastructure spending tied to speculative AI projects. For Exelon, AEP Ohio and other utilities, the mechanism is clearer capital planning; for the industry, it favors developers with customers and balance sheets.

If a large share of the more than 700 gigawatts proves real, the channel runs through tighter regional power markets, more demand for generation and higher scrutiny of who pays for grid upgrades. Utilities would face larger investment programs, while data center operators would compete harder for firm power, water access and permits.

If states overcorrect, viable projects may wait longer for service, shifting some AI infrastructure investment to regions with faster approvals or on-site power options. The open question is whether audits can separate duplicate and underfunded requests from real demand before utilities either underbuild for load that arrives or overbuild for projects that never do.