ERCOT Is Experiencing A Surge In Power Demand For New Data Centers

Natural gas to nuclear is the path forward for Texas.

Grok art depicting “AI and data centers in Texas”

Not long ago, tech companies like Apple, Microsoft, and Google were all in for the “Green Revolution” and Net Zero 2050. Apple announced in 2020 that it had been powering all its data centers with 100% renewable energy since 2014. Google claimed in 2017 that it matched 100% of its global annual electricity consumption, including data centers, with renewable energy purchases. Microsoft stated it has been 100% renewable energy-powered since 2014, including renewable energy credits. They all claimed or implied that their data centers used 100% carbon-free renewable energy, when, in reality, they had just purchased carbon offsets.

Those lofty carbon-free energy goals were quietly moved to the background starting in 2022-2023 when the Magnificent Seven and others began developing AI projects that require large data centers. Now, they are mostly silent about their carbon footprints while moving full steam ahead to build new data centers that require enormous amounts of 24-hour-per-day electricity. Wind and solar power cannot power their data centers, and they know it, so most of them are looking at Texas, the largest natural gas-producing State in the US, as the best location for their new data centers.

The big names like Apple, Google, Microsoft, and many other tech companies have all identified Texas as a top choice to locate their data centers. Apple plans a 250,000-square-foot AI server farm in Houston; Google already has data centers in Midlothian and Red Oak; and Microsoft is building its Stargate venture in Abilene. Meta is building an $800 million facility in Temple, and Oracle has leased space in Abilene for Stargate. Dozens of similar projects are under consideration all around the Lone Star State.

Why is Big Tech moving to Texas? Texas already has the second-most data centers behind Virginia due to its abundant natural gas resources, pipeline infrastructure, and business-friendly atmosphere. Texas is the nation’s largest natural gas producer and has an extensive network of natural gas pipelines, which reduces transportation costs. Texas also has a deregulated power grid, which allows companies to strike direct power deals, such as those done for Bitcoin miners.

So many data centers have expressed interest in building new facilities in Texas that ERCOT has struggled to estimate how much new power demand they face. In their latest forecast, released on April 7, 2025, ERCOT used three projections of their peak load demand: (1) the pre-2024 load forecast, which is the low projection using their traditional forecast method (2) the ERCOT-adjusted load forecast, which is the mid-level forecast, and (3) the high forecast provided by ERCOT’s transmission service providers or TSPs, such as Oncor and CenterPoint, which own and operate the high-voltage lines that move electricity across the ERCOT grid. ERCOT’s three recent projections are below:

ERCOT emphasizes the middle case, the “ERCOT Adjusted Load Forecast,” meaning it expects a growth rate of 8.6% per year over 6 years or 9.42 GW annually for a total increase in total generation of 56.5 GW by 2031.

This growth rate is much higher than the average 2 percent annual growth rate ERCOT has experienced for the last 20 years. However, ERCOT considers the high growth rate achievable, as emphasized in their presentation on April 7-8, 2025, entitled “Long-Term Load Forecast Update (2025-2031) and Methodology Changes”:

ERCOT will begin incorporating an ERCOT Adjusted Load Forecast, based on historic trends, in transmission planning, resource adequacy, and outage coordination analyses.

My Take

It will be challenging for ERCOT to bring on enough new power generation to meet the surging power demand in Texas. One way Texas can encourage new natural gas power generation is to increase the Texas Energy Fund, which subsidizes new natural gas generation with guaranteed low-interest rate loans. Texas is the leading US natural gas producer with an extensive intrastate gas pipeline network, so it has a better chance of meeting this challenge than most other states.

While natural gas generation can ramp up quickly, the long-term solution is nuclear power. The two nuclear plants in Texas, Comanche Peak Nuclear Plant and South Texas Project Electric Generating Station, have at least 25 years of useful life but are already running at near full capacity. New nuclear plants and/or many small modular reactors will be needed to handle the enormous demands of new AI data centers. With lead times measured in decades, it is time for ERCOT to focus on nuclear power for Texas's long-term power needs.

As Robert Bryce said in his 2010 book, “Power Hungry,” the path forward in power generation is N2N—natural gas to nuclear: “Natural gas and nuclear power are the fuels of the future because they have high power density, are relatively low cost, and can provide the enormous quantities of energy we need” (page 7).

Texas needs enormous quantities of new power generation, and it needs them soon. Texas must move quickly and decisively to remain the most attractive location in the US for power-hungry AI data centers.

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