Texas’ surging artificial intelligence industry is fueling a boom in data center construction that could strain the state’s already questionable electric grid and push up power prices for homes and businesses, experts warn.
A University of Houston study projects the state could face an annual electricity shortfall of 27 to 40 gigawatts by 2035 as AI-driven data centers expand. The Electric Reliability Council of Texas, which operates the grid for most of the state, forecasts overall demand could nearly double by 2030, with data centers, cryptocurrency mining and industrial electrification driving much of the growth.
ERCOT’s 2025 Long-Term Load Forecast shows requests for grid connections from data centers projected for 2030 have jumped from about 29,600 megawatts to nearly 78,000 megawatts — a 160% increase. Peak demand, which currently tops out at about 85 gigawatts, could reach between 145 and 218 gigawatts by 2031, according to grid officials.
Meeting that demand may require more than $30 billion in new transmission infrastructure, along with expanded renewable energy generation and additional natural gas plants. Without those investments, analysts say the state could see higher electricity prices and more frequent grid stress events.
Lawmakers, mindful of the deadly 2021 winter blackout, have approved legislation giving ERCOT the authority to cut power to data centers during emergencies. The new rules require facilities to install shutdown switches and clarify who pays for infrastructure upgrades.
The growing demand has also raised concerns over water use. In drought-prone areas, AI data centers are projected to significantly increase freshwater consumption for cooling, which can account for up to 40% of a facility’s energy use. Researchers at the University of Texas at Arlington are developing hybrid cooling systems aimed at reducing that figure to less than 5%.
Private investors and energy companies are moving to meet the demand. Private equity firm Silver Lake has committed $400 million to acquire or develop up to 6 gigawatts of data center capacity across North America, with Texas as a primary focus. Dallas-based Vistra Corp. says the surge in demand will drive structural growth in the state’s power market and boost company revenues.
Without significant upgrades and innovations, experts say, the very technology powering Texas’ economic growth could also be one of its biggest threats to grid reliability.