From Bitcoin To AI: Tech Boom Tests Limits Of Texas Grid

The Texas power grid is entering a period of major transformation as an influx of energy-intensive data centers and industrial developments push electricity demand to new extremes. Operated by the Electric Reliability Council of Texas (ERCOT), the grid serves 90% of the state’s power needs and is now confronting a future that could nearly double its current capacity limits by the end of the decade.

Following the infamous 2021 winter storm that left millions without power, ERCOT implemented several safeguards, including mandatory winterization of power plants. Yet, that event remains the grid’s most severe test to date. Now, officials are shifting focus to a different kind of challenge: meeting the explosive demand growth driven by Texas’ rapid economic and technological expansion, as reported by the Houston Chronicle.

New projections released by ERCOT this week suggest peak electricity demand could hit 218 gigawatts by 2031—more than double the current record of 85.5 gigawatts set during the summer of 2023. However, ERCOT officials note that many of the requests for grid connections may never materialize, and their adjusted forecast puts likely peak demand closer to 145 gigawatts—still a staggering increase requiring massive infrastructure expansion.

A significant share of this demand surge stems from data centers—facilities packed with high-powered computers used for artificial intelligence, cloud computing, and cryptocurrency mining. Texas has become a magnet for these operations due to its low energy costs, lenient regulations, and abundant land. Industrial growth in sectors like hydrogen and oil-and-gas electrification are also contributing to the rising demand.

To meet this surge, ERCOT expects most new electricity supply will come from solar power and battery storage projects. Solar capacity could more than double in five years, while storage capacity may triple. Natural gas and wind generation are also projected to grow, but at a slower rate. Still, concerns persist about overreliance on solar, particularly during prolonged weather events that limit sun and wind availability.

The power lines delivering energy across the state are already at capacity, prompting calls for thousands of new transmission miles—an investment potentially exceeding $30 billion. In response, ERCOT and lawmakers are also exploring demand-side strategies, such as compensating residents who reduce energy usage during peak periods. As the grid braces for this transformation, the state faces critical decisions about how to balance economic growth, energy reliability, and infrastructure readiness.

In addition to solar and battery storage, nuclear energy is emerging as a potential solution to the growing demand. Last Energy, a U.S.-based nuclear startup, plans to build 30 modular microreactors in Haskell County, Texas. These reactors, which will generate around 600 megawatts of power, are expected to supply electricity to the state’s rapidly expanding data center sector. Governor Greg Abbott has expressed strong support for advanced nuclear energy, and Last Energy is working with Texas and Utah to challenge outdated licensing regulations that currently impede the development of microreactor technologies. This marks the startup’s first project in the U.S., with a grid connection already initiated with ERCOT, as reported by the Fast Company.

Meanwhile, the Dallas-Fort Worth area has become the second-largest data center hub in the U.S., after Virginia, according to Reuters. Over 150 data centers have been established by tech giants like Google, Meta (Facebook), and Verizon. These centers require continuous power for operations and cooling, prompting the integration of battery storage into solar projects to ensure a 24/7 power supply. By 2024, U.S. battery storage capacity is expected to double to 30 GW, with Texas and California leading the way in installations. For example, EDF is developing a 150 MW solar project with 300 MWh of battery storage in Doña Ana County, Texas.

As the demand for electricity from data centers continues to rise, they are projected to account for 11-12% of U.S. electricity consumption by 2030, up from 3-4% today, according to McKinsey. However, this growth faces several challenges. New projects are being delayed due to lengthy grid connection approval processes, and transmission congestion in West Texas is exacerbated by outdated infrastructure. While ERCOT’s voluntary curtailment programs help large energy users reduce consumption during peak demand times, these measures are insufficient to stabilize electricity prices in the long term.

As Texas navigates this period of transformation, the state faces critical decisions on how to balance economic growth, energy reliability, and infrastructure readiness to ensure that the grid can meet future demand without compromising stability.