Texas orders audits of all new data center projects

Data center developers have been scouring the U.S. for places to build, drawn to Texas by its loose regulations and seemingly abundant power supply — only Virginia hosts more data centers than Texas. But Governor Greg Abbott announced Monday that all new data center projects will need to be audited by both the Public Utility Commission of Texas (PUCT) and the state’s grid operator, the Electric Reliability Council of Texas (ERCOT).

ERCOT’s interconnection queue has grown dramatically this year. In January, the grid operator had 233 gigawatts of projects waiting to connect; in less than six months, that figure had more than doubled. Abbott’s office now says ERCOT is tracking 474 gigawatts of new connection requests, about 90% of which are data centers, according to the grid operator. Some of those projects are just paper proposals — developers often get in line first, and many fizzle out as they progress — but if even a fraction come to fruition, they could overwhelm the Texas grid: the queue today represents more than five times ERCOT’s total peak demand.

Google, Microsoft, and other data center operators have been drawn to Texas partly for its natural gas reserves, while wind and solar have helped ERCOT keep pace with rising electricity demand, according to the Energy Information Administration (EIA); utility-scale solar capacity grew fourfold between 2021 and 2025. Electricity prices declined over much of that period, according to a report from Amperon, and remain relatively affordable compared with other states — but they have been rising, pushed up by data centers and crypto-mining facilities, the EIA says.

Abbott has directed PUCT and ERCOT to collect a range of information about proposed data centers, including their on- and off-site demand for electricity and water, noise-mitigation efforts, light controls, use of tax incentives, and ownership details. Texas has historically favored lighter regulation than many other states — Houston famously lacks a zoning code — but data centers have become a flash point across the country, including in Texas. Abbott had previously tried to get the same information through a voluntary survey; most companies didn’t respond, so he’s now taking a heavier hand to compel compliance.

Why it matters

Depending on what the audits turn up, Texas’ days as a leading U.S. data-center hub may be coming to a close, as the state shifts from loose oversight to active scrutiny of the electricity and water demands straining its own grid.