Earlier this year, OpenAI, Oracle and SoftBank announced the development of Stargate, a network of data center campuses across the United States. The companies are pouring hundreds of billions of dollars into this project with the hopes of building out an AI infrastructure – and the epicenter of this project is in Abilene.
The economic benefits are expected to be massive, and this is not the only project of its kind in the Lone Star State.
One of the big challenges in bringing these campuses to life is access to energy. It’s expected that Texas is going to see its peak electricity demand to increase by more than 60% in the next five years.
Because of this, many of these companies are investing in their own energy infrastructure.
Jennifer Hiller, a reporter who covers renewable energy, has been following the so-called “bring your own power” boom for The Wall Street Journal. She joined the Standard to discuss her reporting.
This transcript has been lightly edited for clarity:
Texas Standard: Why has expanding grid infrastructure been so difficult? I mean, it’s not like we haven’t seen the demand coming here, and of course Texas is big on trying to attract big investments.
Jennifer Hiller: Right. It is definitely a challenge. And I think it’s always kind of hard to build big infrastructure projects. But in this industry, you kind of have supply chain challenges just every which way you look.
And it’s really hard for companies to not only sometimes get permits and things like that lined up – those can take a while, just for permissions and that sort of thing. But just equipment – just the wires equipment, the substations, the transformers, you know, building the actual power infrastructure … large gas turbines have a years-long wait at this point.
And so it’s just really hard to physically find the equipment. And there’s also things like labor shortages, you know, engineering services are in high demand. There’s only so many people who can do this kind of work.
Well, of course I mentioned that the demand part of the equation, that’s not gonna wait around. When it comes to these data centers and the AI boom, this too is exploding. We already have a big role in the data center and AI explosion. In fact, how do we compare to other states in that regard?
I think Texas is definitely one of the busiest states and will remain so. We always hear about Northern Virginia as being kind of the epicenter of the data center world. That’s where like a huge chunk of the world’s internet traffic goes through, Northern Virginia.
But I think after Northern Virginia and Texas are getting the lion’s share of new development, there’s already a very large data center market around the Dallas-Fort Worth area. But we’re seeing a lot of development in Central Texas. Also, you know, a huge amount of large projects are now going out to West Texas, like the Stargate project.
And it’s just easier and faster to build in Texas, as we know, than a lot of other states. So it’s a good place to do business, and it attracts a lot of development. It’s just that those companies kind of run into the same supply chain problems that everybody else has, you know, not only here in the U.S., but a lot of people around the world are building this kind of infrastructure. And so this is sort of a universal problem.
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But these companies, come you know, in these projects like Stargate, they can’t really afford to wait around for the infrastructure, the electricity infrastructure, to be built out to the scale that you know they’re gonna need this energy.
And in your story, you note that a lot of companies are using their own power sources as a sort of stopgap until the electric grid can get built out. What are we talking about?
Yeah, they are essentially in quite long lines to connect to the grid and receive electric service. And so what you’re seeing in a lot of cases is that they are just bringing their own power with them.
And a lot of times these are maybe smaller turbines and smaller reciprocating engines and they will just stack up a lot of them on site and plan to produce their own power for maybe a period of months or years until they can connect to the grid. And then beyond that, they may be using a mix of on-site power and grid power.
There’s a handful of projects around the country where we’re seeing people saying we’re just gonna go it alone forever and be an island and not connect to the transmission system at all. Yeah, so there’s Williams, the pipeline company is working on a project with Meta in Ohio where they’re not planning to connect to the grid. That’s called being behind the meter. But for the most part, people are looking at this as kind of a bridge solution.
Well, I know a lot of these planned power plants are looking to natural gas, at least for the stopgap. What does all this mean for the long-term push for more renewable energy sources?
Well, I still think you’re gonna see a big push towards renewables. There’s a big, especially solar and battery, build-out that’s going on and continuing across the country. And solar is especially competitive on price. And so developers are continuing to pursue those projects.
But in particular for the AI boom, and definitely if you want to be doing on-site power, you have to have natural gas. There is just nothing else that’s gonna get you round-the-clock energy the way that natural gas will do in short order. And so that is just sort of the realistic solution that’s close at hand for people who want to produce power on site.
You also note in your story that in spite of all this activity and demand for more energy, something like more than $20 billion worth of new electricity projects have been canceled or scaled back this year. Those seem to be going the wrong direction.
Yeah, there’s definitely been a lot of tax changes on the federal side with the “Big Beautiful Bill” and a lot of just policy confusion. There’s been, you know, tariffs that have come in and made maybe projects more expensive in some ways. And so developers are kind of scaling back their future plans.
We still see quite a lot in the works right now because companies are gonna be racing to try to lock in their tax credits. If you can get a project started quickly and finished quickly, you will still be able to get the rich tax credits that were available under Biden-era administration laws.
But just sort of for future planning, there are definitely projects that are falling kind of out of the money. So it’s, you know, gonna be a confusing picture, I think, for the next few years. Like we will just sort of see what people have in their development pipeline and what sort of falls out of it and what continues forward.
