Texas Governor Greg Abbott has directed the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) to audit data centers seeking to connect to the state's power grid. As part of this directive, Governor Abbott has set a moratorium on the approval of data center projects connected to the ERCOT-linked grid pending the results of the audit.
The audit is intended to ensure grid stability and reliability. Governor Abbott stated, “Our top priority is to protect Texans’ safety and quality of life.”
Data center applicants are required to provide information regarding state and local incentives, grid reliance, expected water consumption and sources, and community impact tracking, such as noise.
Grid demand and compliance
ERCOT is currently considering over 474 gigawatts of requests to connect to the Texas grid, a figure that exceeds the record peak electricity demand by more than five times. Data centers account for approximately 90 percent of these new power requests in Texas.
Number of data center operators that complied with PUCT requests for water and power usage information out of 377 asked.
There are at least 335 data centers operating in Texas and at least 248 more currently planned. Texas stands as the second-largest data center market in the United States, following Virginia.
Market implications and political response
Bernstein analysts stated that the moratorium is unlikely to impact Bitcoin miners in Texas who are already under contract for approved electric capacity. Analysts believe the audit will throttle the speculative data center pipeline and increase the value of genuine sites with development history.
Bernstein analysts identified Cipher Digital (CIFR), Core Scientific (CORZ), and CleanSpark (CLSK) as miners potentially most exposed to future public opposition to data center expansion. CIFR reported a second-quarter loss of $0.65 per diluted share, compared to a loss of $0.12 per diluted share last year. CIFR shares fell by more than 7% in Tuesday's premarket trading.
IREN and Riot Platforms (RIOT) maintain Texas mining operations that are fully ERCOT grid approved. Data center developments in El Paso, Texas, remain unaffected by the ERCOT moratorium because the city falls outside of ERCOT's jurisdiction. Additionally, projects that generate their own power on-site are unaffected as they do not connect to the ERCOT grid.
The directive has faced criticism from political figures. Texas Commissioner Sid Miller described the move as “all hat and no cattle — empty political rhetoric wrapped in meaningless fluff.” An opponent of State Representative Gina Hinojosa claimed Governor Abbott has taken millions from data center CEOs while giving Texans lip service to non-existent restrictions.
