AI Data Centers in Texas

The basics

A data center is a large building full of computer servers that store data and run software, including artificial intelligence. Nationally, data centers used about 4.4% of U.S. electricity in 2023, and a federal lab projected 6.7% to 12% by 2028¹.

Texas is one of the busiest markets. As of March 2026, ERCOT was tracking about 410 gigawatts of large loads seeking to connect, about 87% of them data centers³. By August 2026 the state put the figure at about 474 gigawatts, more than five times ERCOT's record peak demand⁵. ERCOT's record peak is about 91,089 megawatts, set July 22, 2026 (unofficial until final settlement), topping the 2023 record of 85,508 megawatts¹⁴.

Many requests may never be built. ERCOT has said its own forecast likely overstates future growth⁴. Still, lawmakers acted. Senate Bill 6 (2025) set rules for new large customers, 75 megawatts or more unless regulators set a lower threshold. It requires a screening study fee of at least $100,000 and disclosure of on-site backup generators and of similar requests elsewhere in Texas. In grid emergencies, ERCOT can direct large customers that have backup generators to switch to them or cut power use, and large loads connected after 2025 must be able to be curtailed during rotating outages².

On August 3, 2026, the Governor directed the PUC and ERCOT to audit data center projects in the interconnection process before any more advance, covering tax incentives, power use, on-site generation, water use and ownership⁵. On September 21, 2026, the Governor ordered the state environmental agency, TCEQ, to pause all permits for data center projects until the audit is done⁶. ERCOT expects to finish the audit in December 2026⁷.

Water use is another issue. The state water board's 2025 annual water use survey went to 341 data centers, and only 17% responded, even though not responding can be a Class C misdemeanor⁸. On September 24, 2026, the Texas Attorney General opened an investigation into data center developments that had not responded to the survey, starting with projects in 18 counties including Tarrant and Dallas⁹.

Key terms

Large load

Under SB 6, a single electricity customer using 75 megawatts or more at one site, such as a big data center, unless regulators set a lower threshold².

Interconnection queue

The waiting list of projects asking to connect to the grid. ERCOT is moving to study large loads in batches³.

Curtailment

Ordering a customer to cut power use. SB 6 lets ERCOT direct large loads with backup generators to curtail or switch to those generators in an emergency, and requires new large loads to be able to be curtailed during rotating outages².

Tax abatement

A local agreement in which a city, county or special district exempts some of the increase in a property's value from taxes for up to 10 years, usually in exchange for investment or jobs¹⁶.

Qualifying data center exemption

A state sales tax break for data centers of at least 100,000 square feet that create 20 qualifying jobs and invest at least $200 million over five years¹⁰.

In Texas

The Texas Economic Development Corporation, a nonprofit that recruits businesses to Texas, reports that data centers directly employed about 47,856 people in Texas as of mid-2024, about 10% of the U.S. data center workforce¹⁷. Texas offers a state sales tax exemption to qualifying data centers, lasting 10 or 15 years depending on investment size¹⁰. The state forecast in 2025 that it would forgo $3.2 billion in sales tax over two years¹¹, and the Comptroller's office said that is likely an underestimate. Of 138 certified data centers, only 20 had been audited as of July 2026, and 6 of those were found out of compliance¹¹.

Local decisions matter too. In North Texas, the Fort Worth City Council in March 2026 unanimously tabled a vote on a proposed 50% property tax abatement over 10 years for a $1 billion data center, after hundreds of residents turned out to a public meeting with concerns¹². The developer, Edged, withdrew its application on April 30, 2026, before the rescheduled May 12 vote¹⁵. Texas counties generally lack the zoning power that cities have, and nearly half of the more than 248 planned Texas data centers are slated for unincorporated areas outside city limits¹³. In Hood County, southwest of Fort Worth, eight data centers have been proposed across more than 7,600 acres¹³.

The August pause applied only to projects of 75 megawatts or more inside ERCOT, so smaller data centers, projects with their own power, and areas outside ERCOT were not covered⁷. The September permit pause reached more projects⁷. Some critics have urged a special legislative session before the regular session begins in January 2027⁷.

How people see it

The strongest case for each view, in terms its supporters would recognize. We don't pick a side.

Questions to ask a candidate

• Should Texas keep, limit or end the sales tax exemption for data centers?
• Who should pay for new power lines and plants built to serve data centers?
• Should counties get zoning power to decide where data centers go?
• Should the state require data centers to report their water and power use publicly?