Introduction

The Texas data center industry continues to see unprecedented growth, with operators in the state expected to more than double built-out capacity, bringing the total to 23 gigawatts by the end of 2030. However, operators face scarcity of land and power in key markets that once had an abundance of both, pushing them farther afield and drawing attention from local governments and residents, resulting in citywide moratoriums, local opposition in rural areas, and now more regulatory frameworks at the state level for operators planning to interconnect with the Electric Reliability Council of Texas.

In 2025, the state legislature passed Senate Bill 6, which laid the foundation for ERCOT’s subsequent large-load batch study framework. The law requires data center operators to provide greater transparency regarding projects, requires significant financial investment and mandates that large-load operators absorb the cost of power infrastructure upgrades necessary to support their projects.

As ERCOT’s large-load queue approaches 500 GW, data center announcements continue and more communities push back, Governor Greg Abbott has imposed additional requirements, including a full audit of all projects in the Batch Zero study (the first batch under the new interconnection study framework) to determine the overall impact on ERCOT’s transmission infrastructure.

This has led to further delays for data center operators hoping to connect to the grid and a statewide pause on all data center permits issued by the Texas Commission on Environmental Quality (TCEQ). The summer of 2026 also brought a special Senate Finance Committee hearing to evaluate the impact of data centers and their legislated tax breaks on the state, with multiple senators calling for repeal of the program, considering the rapid, unexpected growth.

About this Report

This report examines the rapid expansion of Texas’s data center industry and the implications of the growing pressure on land, electricity supply, grid interconnection, tax incentives and communities. It assesses recent legislative and regulatory developments, including Senate Bill 6, the Electric Reliability Council of Texas’s largeload batch-study process and the additional reviews requested by Governor Greg Abbott. It considers how these changes may affect the location, timing and power strategies of future projects. The analysis combines market and capacity data from 451 Research’s Data Center Market Monitor & Forecast with information from ERCOT, the Public Utility Commission (PUC) of Texas, the Texas Comptroller of Public Accounts, the Texas Legislature, the Texas Senate Finance Committee and the Office of the Governor of Texas. Queue figures, capacity estimates and forecasts are presented according to the definitions used by their respective sources and should not be treated as directly interchangeable. Additional details on sources, definitions and analytical methods appear in the methodology section at the end of this report.

The Take

Texas has long supported the data center industry, with state and local governments offering various incentives for operators, including sales and use tax exemptions and property tax exemptions based on location, size and employment qualifications. However, the state is reconsidering its position as ERCOT faces an interconnection request queue of nearly 500 GW. At the state level, S.B. 6 (R89, 2025) set the stage for the development of ERCOT’s large-load batch study mechanism, intending to reduce the queue to a realistic, manageable capacity. Still, it is delaying projects that were not previously approved for electrification.

Moreover, the “Abbott pause” for further audit will create additional delays to project timelines. While operators and developers have built familiarity with the ERCOT grid, the new framework and financial requirements may push some to the far reaches of the state, where they may seek interconnection with the Southwest Power Pool or the Midcontinent Independent System Operator, which are not under the jurisdiction of the state government.

In theory, those changes could also add momentum to fully islanded, on-site generation setups, as those bypass the grid and eliminate interconnection requests. However, Abbott’s pause on environmental permits for data centers applies to all unpermitted, planned data centers in Texas, including those outside ERCOT and those planning to build on-site power generation.

Texas’s recent data center developments are symptomatic of the growing pains of a rapidly expanding sector. Texas is a major hub in this historic infrastructure build-out, not only in the US but globally. As a result, Texas is well-positioned to set precedents for the industry. Although ultimate government authority over power matters differs elsewhere in the US — particularly in multistate Independent System Operator and Regional Transmission Organization markets, notably PJM, which covers all or parts of 13 states — a broader trend toward increased policymaker and regulator intervention in the data center and power sphere appears likely.

Figure 1: Texas data center legislation timeline

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