RESOLVING THE LEDGER
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Texas Governor Greg Abbott has paused new data center connections to the state’s grid pending audits on the requirements for new and proposed constructions. The audits will cover the revenue lost from data center tax exemptions, power usage and generation, infrastructure upgrades, water usage, and the impact on the local communities and environment.
Texans have seen their electricity and water bills increase significantly over the past five years. Data from Electric Choice shows the average residential electricity price has risen by over 25%, and data from the Texas Municipal League demonstrates the average residential water bill has risen by over 26%.
But the prices in Texas sit below the national average. So why then are they rising so fast, and what does it mean for other states in the US?
Prices rapidly rising
As new industries and houses are constructed, new connections need to be added. These connections are constructed by power grid operators, with the cost of upgrades generally passed on to consumers through utility transmission fees.
Infrastructural upgrades are also paid for by grid operators, with the costs of construction again passed back down to consumers through their bills.
The rapid increase in data center construction projects has been a particular issue in this regard. As data centers require enormous amounts of electricity, they require far more complex and expensive connections than are required of a typical residential connection.
But alongside the moratorium on new data center construction, Gov. Abbott has required data center projects that pass the states’ audit will be required to pay for their own connections and infrastructure. In a letter to the Public Utility Commission of Texas and the Electric Reliability Council of Texas, Abbot highlighted that 90% of new grid connections are data centers.
(Image credit: Electric Choice)
Electricity prices are also rising due to an increasingly unpredictable climate. Soaring temperatures place increased demand on electricity grids, especially as cooling systems for homes and businesses are switched on during peak times. The heat also causes electricity infrastructure to fail at a higher rate, causing additional costs as grids are repaired and replaced.
As for water prices, Texas has been subject to a four year drought. Per Washington Post reporting, Texas has been seeking alternative sources of water to extend supply. The downside is that in one such project, the state ended up paying the contractor responsible for a new groundwater collection project an extra 40% on top of the originally proposed $500 million.
The increasingly unpredictable weather is also wreaking havoc on existing infrastructure, especially when there are short periods of torrential rainfall. Sudden downpours can quickly overwhelm water infrastructure, damaging it or washing it away. Water treatment plants can also become overwhelmed and damaged. The cost of repairing and replacing infrastructure, as well as funding the much needed projects to create new water sources, once again gets passed down to consumers.
Couple this with the rapid increase in data center projects, which requires water usage during construction and for cooling, and prices will further increase. Texas currently sits in the number two spot for active data centers, slightly behind Virginia, but the number of planned and approved projects for Texas means the Lone Star state could soon become the number one state for active data centers.
Lessons for the rest of the US
As with all new technology, the pace of regulation falls a few thousand steps behind.
Numerous states have already begun issuing moratoriums on tax exemptions for data centers as the actual loss of revenue far exceeds earlier predictions. In Ohio, the loss of revenue has been $1.6 billion - far higher than the projected $136 million.
The new regulations introduced in Texas requiring data centers to pass the state audit before being hooked up to the grid have presented a second problem. Data centers providing their own on-site power are not subject to new grid connections, and can therefore bypass the audit.
One of the most cost effective means for producing on-site power are gas burning turbine generators. The downside for local residents in the vicinity of these sites is that noise levels have been compared to living near an international airport, and there are under-studied phenomena surrounding the infra-sound produced by these power projects.
There are also the climate implications of these sites. Despite the name, natural gas is a highly polluting fuel source that distributes pollutants both into the local area and the atmosphere, causing damage to local livestock, fauna, and the rest of the world.
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