Why Texas is slowing data center permits while power and water concerns keep growing

Texas halts data center permits

Governor Greg Abbott directed the Texas Commission on Environmental Quality to halt permits sought by data center projects while agencies examine their electricity demand, water use, and community effects.

The September 21 directive keeps affected permits paused until the Electric Reliability Council of Texas completes its audit and required information reaches agencies reviewing related proposals throughout the state.

Greg Abbott orders audit before grid approval

Governor Abbott had already directed the Public Utility Commission of Texas and ERCOT on August 3 to audit data centers advancing through ERCOT’s grid interconnection process within the state.

Projects that fail to complete the required review must be denied connection to the Texas grid, making compliance necessary before affected developments can advance further through interconnection approval.

Developers face broader information requests

ERCOT is collecting information from developers pursuing data center connections of 25 megawatts or more to evaluate state and community impacts, resource use, ownership, and local effects across Texas.

The request covers grid dependence, on-site generation, water sources, cooling methods, financial assistance, ownership, noise, light, traffic, and other conditions tied to proposed facilities and nearby communities across Texas.

Grid queue shows demand scale

When Governor Abbott ordered the August audit, ERCOT was considering more than 474 gigawatts of connection requests, exceeding five times the system’s record peak electricity demand in Texas.

Not all interconnection requests lead to construction. ERCOT’s verification process checks whether conditionally included large loads satisfy eligibility requirements before affected projects advance into Batch Zero study work.

Batch Zero changes large load reviews

The Public Utility Commission approved ERCOT’s Batch Zero framework in June for qualifying large loads of 75 megawatts or more seeking access to the Texas electric grid system.

Instead of reviewing each qualifying request separately, the process studies projects together to measure combined demand, available transmission capacity, reliability effects, and needed system upgrades through coordinated analysis.

New pathways change grid connections

Batch Zero gives qualifying customers different connection pathways, including options involving their own power generation or agreements that allow ERCOT to reduce usage during local transmission constraint events.

Facilities without a grid connection generally fall outside ERCOT’s interconnection process, though they may still face registration requirements with the Public Utility Commission under applicable Texas state rules.

Fun fact: Data centers rank among the most energy-intensive building types, using 10 to 50 times more energy per square foot than a typical office building.

Water reporting faces tighter enforcement

Governor Abbott directed the Texas Water Development Board on September 14 to enforce existing reporting requirements for major water users, including operators of data center facilities across the state.

The board must coordinate with ERCOT and the Public Utility Commission while gathering details about water consumption, supply sources, and water-efficient technologies used by proposed data center facilities.

Little-known fact: Cooling is a major power draw inside data centers, with HVAC systems consuming about 40% of the energy used by an average facility.

Water surveys support future planning

Texas law requires recipients of the Water Use Survey to complete and return it. The collected information supports long-term supply planning, modeling, and resource management across the state.

Governor Abbott directed the board to use existing enforcement authority when required reports are missing and to update his office on its enforcement activities by October 14, 2026.

Abbott seeks to limit electric bill impacts

Governor Abbott directed the Public Utility Commission to require data centers to fully fund electric infrastructure needed for their operations, preventing those costs from being passed to residential ratepayers.

His June instructions also required the commission and ERCOT to identify additional steps for shielding residential and small business ratepayers from data center-related grid expansion costs in Texas.

The directives extend beyond electricity

Governor Abbott’s September 21 permitting directive says data center projects must report electricity and water use, avoid drawing water needed by local communities and follow standards intended to limit impacts on nearby residents.

TCEQ was instructed to align its permitting decisions with the governor’s data center directives and use information produced by the ERCOT and Texas Water Development Board audits.

Some broader standards, including additional statutory reporting, water-efficiency and community-protection requirements, are also expected to be considered by the Legislature.

TCEQ faces an October deadline

TCEQ must align its permitting decisions with information produced through the ERCOT and Water Development Board reviews while Governor Abbott’s September directive remains in effect for affected projects.

Governor Abbott instructed TCEQ to provide his office with a compliance update by October 19, covering the agency’s adherence to the September permitting directive for affected data center projects.

Reporting deadlines remain pending

Certain newly substantiated medium-load data centers may enter ERCOT’s voluntary process by October 5, while previously identified qualifying projects remain subject to the October 12 response deadline in Texas.

Transmission or distribution service providers submit required responses through RIOO on developers’ behalf, including supporting documentation and a notarized attestation, before ERCOT and the Public Utility Commission analyze submissions.

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Financial incentives face legislative review

Governor Abbott plans to work with the Texas Legislature during its next session to eliminate financial incentives available to data center projects under applicable existing state incentive policies.

That proposal remains a future legislative step separate from the permit halt and agency reviews, meaning lawmakers would need to consider any resulting changes through the formal lawmaking process.

Want to read more about the latest developments? Check out how the Indiana Duke Energy case could affect solar groups and utility lawsuits.

Do you think Texas is right to slow data center permits over growing power and water concerns, or could tighter rules hold back development? Share your thoughts in the comments below!

This slideshow was made with AI assistance and human editing.

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