Texas Welcomes AI If Data Centers Build Their Own Power Plants

Texas Welcomes AI If Data Centers Build Their Own Power Plants | OilPrice.com

Texas has seen soaring electricity demand in recent years, driven by population growth, extreme weather, data centers and AI, and cryptocurrency mining.

The Electric Reliability Council of Texas (ERCOT), the operator of the electrical grid that represents 90 percent of the state's electric load, has issued reliability and conservation warnings at times of peak winter and summer demand as consumption soars to record-highs.

There have been issues with grid reliability even without the most recent boom in generative AI and data centers using up as much power as entire cities.

So, what happens when technology companies want to build more data centers in Texas? They may have to build the power plants to provide electricity to these, too, says the utilities regulator.

Texas's power grid is strained at peak demand periods as-is, and adding more demand load would further jeopardize the power system.
Companies willing to set up AI and data center operations in Texas want to have tech and data facilities built close to existing power plants to be able to use the electricity they provide.

"A new facility coming with its own new generation"

However, this approach would strain the already strained grid in Texas as it would threaten resource adequacy if data centers suck up all the electricity from a nearby power plant, Thomas Gleeson, chairman of the Public Utility Commission of Texas (PUCT), told Bloomberg in an interview.

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"We can't afford to lose any of our resources off the system at this point, especially given those load-growth projections," Gleeson told Bloomberg at a conference in Austin, referring to forecasts that peak power demand in Texas could double by the end of the decade.

"We have to look at really the co-location issue as being a new facility coming with its own new generation," according to Gleeson.

PUCT is telling tech firms that they will need to supply some of their own power if they want to connect to the Texas grid within a year or so, Gleeson told Bloomberg.

Texas regulators have been looking to boost power generation in the state to meet surging demand and balance increased solar and wind power generation.

PUCT is currently reviewing the extension of $5.38 billion worth of low-interest loans to companies planning nearly 10 GW of new natural gas-fired capacity in a bid to boost generation capacity for ERCOT.

Last month, the Commission also approved a reliability transmission plan to meet the future electricity needs of the Permian Basin Region. The plan outlines transmission infrastructure investments necessary to support the ongoing expansion and electrification of Texas' oil and gas industry in West Texas and the growing electricity needs of the region's local communities.

ERCOT forecasts electricity demand in the region will grow to about 26 gigawatts (GW) by 2038, which is equivalent to almost one third of the current summer demand of the entire ERCOT system, PUCT said.

Texas Power Demand Soaring

In the state of Texas, peak demand could nearly double to 150 GW by 2030, ERCOT CEO Pablo Vegas told the Senate Committee on Business and Commerce in June.

"It's a fairly significant step change from a demand perspective," said Vegas.

"All of that [demand] may not come, but even if a significant portion of it does, it's a really significant growth number."

Spikes in demand on the grid, especially since 2020, have been driven by population growth, extreme weather patterns, the proliferation of electric vehicles, and the expanding footprint of data centers, artificial intelligence, and cryptocurrency mining, says the office of the Texas Comptroller.

Large-scale computing facilities such as data centers and cryptocurrency mining operations are identified by ERCOT as large flexible load (LFL) customers, and power demand from these will total 54 billion kilowatt-hours (kWh) in 2025, up by almost 60% from expected demand in 2024. This expected demand from LFL customers would represent about 10% of total forecast electricity consumption on the ERCOT grid next year, the Energy Information Administration said last week.

Big Tech Looking for Power Deals

Meanwhile, technology giants are looking to seal deals with power plants to ensure electricity supply for their data centers, which consume large amounts of electricity, both to run their computing equipment and to keep them cool.

Amazon Web Services (AWS) signed in March an agreement with Talen Energy Corporation to buy its 960-megawatt Cumulus data center campus in northeast Pennsylvania for $650 million. The data center campus will be directly connected to the Susquehanna nuclear facility, the sixth largest U.S. nuclear facility with dual units and 2.5 GW gross capacity.

Microsoft has just signed a deal with the biggest owner of U.S. nuclear power plants, Constellation Energy, which paves the way for the restart of the Three Mile Island Unit 1 nuclear plant.

Microsoft and other major technology firms have been looking to purchase zero-carbon electricity to power up their data centers, which are consuming growing amounts of electricity.

For their part, power-generating companies and utilities are raising power supply and planning for a surge in U.S. electricity demand, driven by data centers, AI, and chip manufacturing.

As a result, U.S. power-generating companies are announcing plans for the highest volume of new natural gas-fired capacity in years as the AI boom is driving demand for electricity.

Natural gas-fired electricity generation in the United States has jumped year-to-date compared to the same period last year, as total power demand rose with warmer temperatures and demand from data centers.

By Tsvetana Paraskova for Oilprice.com

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