Data Center Boom Sparks Debate Over Energy and Infrastructure Demands

Data centers are rapidly expanding across the country, prompting concerns from local leaders like Texas Governor Greg Abbott (R-TX) over its impact on energy grids and local resources. However, some industry experts argue those concerns do not tell the full story.

Gov. Abbott announced last week that he would pause approvals for new data center projects until an audit of all existing and proposed facilities was completed. This is not just a Texas issue; several other states have issued similar orders over concerns that these centers would strain local power grids, increase energy costs and place additional pressure on water resources.

But Khara Boender, the director of government affairs for the western region for the Data Center Coalition (DCC), said the narrative the public is seeing is not entirely accurate. She said data centers are not putting such a big energy strain as some, like Gov. Abbott, claim, but actually decrease utility rates in some circumstances.

“Since they're able to spread those fixed costs, they're generating the electricity,” Boender told Texas Politics on how data centers can offset electricity costs by creating additional demand for power. “Then they need to have customers to serve if they have that electricity being generated.”

The DCC serves as a “voice” for the data center industry as a whole. With members ranging from data center owner-operator companies to broader ecosystem partners and an advisory council, Boender said the DCC represents nearly every aspect of a data center.

Boender said this broad representation gives the organization insight into the many components required to develop and operate data centers, which she said are often misunderstood in public discussions. Contrary to what many believe, she said data centers are not the sole cause for these rising energy and utilities costs.

“There have been supply chain shocks across the world in terms of how that impacts utility pricing; fuel and energy costs are generally increasing,” Boender said. “There's really, I think, a more robust picture of what is driving those increased utility rates.”

The debate on whether data centers will pay for the added costs of its projects remains a crucial question at the top of lawmakers’ minds. Earlier this month, President Donald Trump announced the expansion of his Ratepayer Protection Pledge to ensure ratepayers aren’t footing the bill.

“The data center industry is committed to paying for their full cost of service for electricity and the underground, underlying infrastructure that supports that,” she said.

Boender previously worked on the state policy team, where she learned that, although states have the right to weigh the costs and benefits of pausing data center expansion, they must also consider the economic and technological opportunities these facilities can bring.

“It just creates a lot of uncertainty in a space for an industry that really is looking toward having certainty and being able to deploy these massive amounts of capital investment, and again, put steel on the ground,” she said.