Texas Data Centers Under Threat
Why Texas should choose energy abundance over political panic.
Hello friends,
A fresh round of anxiety over Texas data centers is building in Austin, and lawmakers need to get this right. The noise is familiar: grid strain, water use, local disruption, and rising demand from AI. The temptation is also familiar: form a committee, write a mandate, and pretend government can centrally plan the next phase of the digital economy better than markets can.
That instinct would be a costly mistake.
The better approach is to understand what data centers actually are, why they matter to economic growth, national security, and daily life, and how Texas can meet the challenge with more supply, more transparency, and more competition instead of more bureaucracy.
The goal should not be to block growth. It should be to build abundance.
A recent Texas Policy Research explainer captures the tension well. Texas is attracting major data-center investment because it has long offered low taxes, abundant land, and a relatively competitive electricity market. But those same projects are exposing weaknesses in the state’s energy and water systems, especially when policy gets in the way of price signals and private adaptation.
Start with the basics.
A data center is not just a warehouse with computers. It is physical infrastructure that stores, processes, and transmits information for the modern economy. Every search query, cloud backup, digital payment, video stream, logistics update, telehealth session, and AI-generated response relies on this backbone.
The Goldwater Institute is right to call data centers the “industrial backbone of the modern economy.” As of March 2025, the United States had 5,426 data centers, and global investment in data-center infrastructure could approach $7 trillion by 2030, with more than 40 percent expected in the United States.
Texas is central to that future. CBS Texas reports that the state already has more than 400 data centers and could become the largest data-center market in the world. It highlights major projects from firms like Digital Realty and says Texas data-center load could more than double, accounting for roughly 30 percent of total U.S. demand by 2028.
That is not a niche trend. That is Texas sitting at the center of America’s technology race. This is why the issue is bigger than convenience. Data centers matter for national security, too.
The same infrastructure that supports commercial AI and cloud services also supports cybersecurity, defense, communications resilience, and America’s broader technological lead. If the United States wants to compete with China, secure sensitive systems, and lead in AI, then it needs the physical infrastructure to do it.
A country cannot talk tough about technological leadership while acting squeamish about building server capacity, fiber connections, and reliable power.
Lawmakers also need a clearer picture of how these facilities are built.
According to GBC Engineers, data centers must handle massive structural loads from server racks, backup generation, batteries, cable trays, transformers, and cooling equipment. They require large open spans, flexible layouts, and rapid construction to keep pace with changing technology.
That is why developers often use prefabricated systems and precast concrete. These are specialized industrial assets, not vanity projects for big tech.
Now to the hardest concern: electricity.
Yes, data centers use a lot of power. Of course they do.
They process huge amounts of information nonstop, and computing creates heat that has to be removed.
The problem is not that demand rises. The problem is when policymakers respond as if demand itself is suspicious.
Rising electricity demand is what you should expect in a growing economy with more AI, more digital commerce, more advanced manufacturing, and more connectivity.
The Cato Institute notes that U.S. electricity demand, after staying mostly flat for years, is now climbing because of data centers, AI, manufacturing, and electrification. Cato says U.S. data centers consumed about 183 terawatt-hours of electricity in 2024, roughly 4 percent of total consumption, and projects from the International Energy Agency suggest that could rise to 426 terawatt-hours by 2030.
The answer to that is not to crush data centers. The answer is to expand supply and let large users bear their own costs.
That is where a lot of current policy thinking breaks down.
The Texas Policy Research piece notes that ERCOT has documented one of the sharpest increases in projected load growth in its history, with large-load projects entering the queue faster than generation and transmission can be built. It also flags Senate Bill 6 as an example of lawmakers leaning toward more regulatory control over large-load customers rather than relying on stronger market incentives.
That is exactly the kind of drift Texas should resist.
Here is the key point policymakers need to understand: grid strain is not proof that data centers are bad. It is often proof that policy has constrained supply, delayed investment, or socialized costs through monopoly utility structures.
The Goldwater report argues that high electricity prices are largely driven by policy choices such as mandates, fuel restrictions, and barriers to reliable generation, not by the mere existence of data centers. It even notes that Virginia maintains below-average electricity rates despite hosting one of the largest data-center concentrations in the world.
If data centers automatically wrecked affordability, Virginia would be a mess. It is not.
That should sound familiar. In my earlier writing, I made the same basic argument: the deeper problem is not private innovation but government distortion through monopoly utility structures, mispriced risk, and political meddling.
Data centers are exposing weaknesses in the system. They did not create those weaknesses out of thin air.
Connection costs are a legitimate concern, but they still do not justify panic. A large new facility can require substation work, transmission upgrades, and interconnection investments. If those costs are dumped onto ordinary customers, that is a problem. But the fix is not to let government decide which projects deserve power. That means better pricing, faster approvals, more direct contracting, more private generation, and more room for microgrids or other parallel systems.
This is where the Cato paper is especially useful. It argues for private electricity grids and consumer-regulated arrangements that allow electricity-intensive users to secure power without forcing everyone else to subsidize them. That is a much better path than trying to ration demand from the Capitol.
Responsibility should follow decisions. If a company wants to build a power-hungry facility, then it should have strong incentives to contract, generate, conserve, and invest accordingly. Markets can handle that better than hearings can.
Water is the other major concern, and again, lawmakers need more light and less heat.
The Texas Policy Research explainer is fair to note that Texas still lacks complete statewide reporting and that both direct cooling use and indirect water use through power generation matter. That uncertainty is real. But uncertainty is not the same thing as a case for blanket restrictions.
The Goldwater Institute adds important context: firms are already reducing or eliminating potable-water use in many cases through closed-loop cooling, air-cooled systems, and reclaimed-water designs.
Many modern data centers do not need pristine municipal drinking water just to cool equipment, and they have strong incentives to conserve because water costs money. That is how profit and loss work. Waste is expensive. Efficiency pays.
This is the bigger lesson policymakers need to absorb.
The public conversation too often treats data centers as though they are imposed on passive communities by giant corporations. But Texas has always been strongest when it trusted property rights, voluntary exchange, and personal responsibility more than political control.
If a developer wants to buy land, risk private capital, line up power, manage cooling, and meet clear rules, who exactly should decide that project is not worth building?
In a free state, that answer should not be “a handful of politicians who are nervous about headlines.”
That does not mean no rules. It means the conditional rules.
Texas should insist on transparency and clear property-rights protections. It should avoid subsidies that pick winners and losers. It should let prices reflect scarcity. It should allow more generation, faster infrastructure expansion, and more innovation in private power arrangements.
That is what abundance looks like.
The alternative is the politics of scarcity: bottling up supply, forcing new demand through fragile systems, then blaming growth for revealing the weakness. That is not stewardship. That is surrender dressed up as caution.
Texas should be the state that shows the country how to handle this well. Not by pretending the digital economy can run without physical infrastructure. Not by demonizing electricity demand as though growth itself were irresponsible. And not by letting government decide which parts of the future are allowed to exist.
Data centers are not the enemy. They are part of the foundation of prosperity, security, and modern life. The right question is not how to stop them. It is how to make Texas abundant enough to support them.
Legislative Snapshot
Data centers are core Texas infrastructure for AI, payments, communications, logistics, and national security, not optional tech toys.
Electricity and water concerns are real, but they are mostly challenges of supply, pricing, and transparency, not reasons to regulate growth away.
The best path is abundance: protect property rights, avoid subsidies and mandates, let large users pay their utility bills, and expand energy and infrastructure through market competition.
Subscribe and share this with policymakers, staff, or media who need a clearer framework than the usual panic. The state that leads on abundance will lead on technology, too.
Let people prosper,
Vance Ginn, Ph.D.