Photo credit: Midland Mayor Lori Blong

What happened: At a panel during the Texas Public Policy Foundation’s (TPPF) Texas Policy Summit, state leaders and industry experts discussed a surge in proposed data center development across West Texas.

State Sen. Kevin Sparks, whose district covers Midland and much of the Permian Basin, described the potential as both an opportunity and a concern. He noted that about 22 projects are proposed, but not all are likely to materialize. “This feels very much like a gold rush to me,” Sparks said.

The big picture: The scale of the proposed projects is already forcing a broader conversation about the limits of the electric grid and water availability.

“Our grid right now is not set up to handle a lot of new load,” Sparks said. “I know they’re saying they’re bringing their own power, but there’s something that they’re not telling us.”

Brandon Seale, Senior Advisor to VoltaGrid, said many data centers are choosing to build their own power generation, often using natural gas, rather than relying on the grid, largely due to timing.

“You can get a pipeline to almost anywhere in the state in about 12 months,” Seale said, “The ERCOT interconnection queue may be 36 months.”

Seale said that the scale of demand for the proposed centers is unlike anything the grid has seen before. Because of that, he argued the best outcome for the grid is for data centers to generate power close to where they operate.

“As citizens of Texas, as retail consumers of electricity, we want these guys to be building their generation as close to their load as possible,” Seale said. “That’s the best possible thing for the grid.”

Go deeper: Sparks pointed to residents’ concerns about the data centers raising residential electricity rates. He noted that TPPF informed him that Texas’ residential electric rates are the 27th-highest in the country. The U.S. Energy Information Administration shows that Texas’ residential electric rates have risen about 37% since December 2020.

“The Permian Basin is the most energy-rich region in the lower 48, but as far as our electric rates for our residential customers, we’re right in the middle,” he said. “Why shouldn’t we be number one or at least in the top five?”

Sparks said water is an additional central concern among residents. He said local communities will need to negotiate development contracts carefully, but added the capital these projects bring could create opportunities to improve local water sources.

“If our communities do a good job of the deals that they construct and who they allow when to come into their area, we’ll make sure that these data centers don’t pull all of our water,” Sparks said. “There’s a lot of different technology on how you cool these things, and not all of them require vast amounts of water.”

The bottom line: Data center projects are coming. The question is how they will integrate into a system that was not built for this level of demand, and whether local communities can capture the benefits without absorbing the costs.