Texas Saddles Up For Data Center Clash

HOUSTON — The data center boom is hitting Texas. Data center politics haven't been far behind.

The tech companies and electricity giants gathered here in the second-biggest state have heaped praise on the boom in construction of new data centers they see as the cure to everything from soaring power prices to sluggish economic growth.

But the pushback in communities that began in states like Virginia, home to the nation’s densest fleet of data centers, has spread to states like Texas, where it’s been taken up by lawmakers responding to a chorus of complaints that the giant facilities will drive up energy costs once they come online, consume water supplies and blight the landscape.

“All data centers are kind of around Virginia right now,” Robert Gaudette, the incoming CEO of Houston-headquartered power provider NRG, told POLITICO in an interview. “Well, Texas is going to be the next Virginia.”

For the power producers and utilities at the CERAWeek by S&P Global conference here in the nation’s energy capital, the boom in AI data centers represents the first big jump in power demand in nearly two decades — and they are wary of the new political opposition. Those data center developers and the electricity companies and utilities they work with say they’re eager to set up shop in the Lone Star State, citing the state’s business-friendly mantra and independent electric grid.

The controversy has bubbled up from the community level in Texas, where some Democratic candidates in Texas are already making it a pillar of their platforms. That’s been echoed in Washington, where progressive Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez filed a bill on Wednesday to pause the buildout of new data centers, and Sen. Majority Leader Chuck Schumer included data center costs in Democrats’ broader affordability agenda.

The Texas Senate’s powerful Business and Commerce Committee is holding a hearing next week to grill the state’s power regulators and grid operators on how they’re managing data center power requests. The hearing could set the stage for how the issue will play out during Texas’ 2027 legislative session.

Already, some Texas lawmakers are calling for a temporary ban on building data centers.

“In my district, I am hearing increasing concern from constituents about the cumulative impact of large-scale data center development on local water resources and power availability,” Texas state Rep. Helen Kerwin, a Republican who represents a deep-red district near Fort Worth, wrote in a letter to Gov. Greg Abbott earlier this month seeking “an immediate pause” on data center development.

Bipartisan ambivalence

That’s not the message that Abbott, a Republican who is running for his fourth term, has welcomed. He’s courted data center developers and has been joined by some in the state party in lauding what they see as driving a wave of new jobs and tax revenues.

Texas is one of the hottest data center markets in the country, with the state’s grid operator receiving 225 requests from mega-power users to plug in last year. That has triggered state regulators to look for ways to incentivize new power plants to come online as the energy-friendly state tries to meet the soaring demand for electricity.

But as data centers have popped up across the state, so has local opposition.

Residents in reliably red districts have turned out in droves to protest tech projects in recent months. In Hood County, where Trump won more than 80 percent of the vote in 2024, people packed multiple county commission meetings to push a moratorium on data center construction.

The Hood County Commission voted data center moratorium measures down twice after Republican state lawmakers threatened legal action if they approved the measures.

That conservative pushback in Texas stands in contrast to claims by Republican Louisiana Gov. Jeff Landry, whose state is also heavily dependent on the energy industry.

“I think it is the same nefarious actors that are creating all the havoc, right?" Landry told reporters at the conference this week. "It's these NGOs that are ... funded by left-wing groups that just want to create chaos and don't want to sit at the table and actually work out a particular plan."

In fact, even other GOP governors have expressed doubts that the rise of AI data centers will deliver more benefits than costs.

Florida Republican Gov. Ron DeSantis is among the most vocal conservative critics of AI and data centers, urging Floridians to resist the sector’s growth “with every fiber of our being.”

At the same time, other Republican and Democratic governors have worked to lure tech projects to their states. Democratic Pennsylvania Gov. Josh Shapiro, who wooed a $20 billion investment from Amazon and other major investments from Microsoft and Google, has sought to temper his pro-tech messaging as he seeks reelection this fall, calling on data centers to pay for their power to protect everyday ratepayers.

Reckoning with bad PR

In conversations with tech executives who were granted anonymity to speak candidly, many acknowledged they had a public relations problem that has fueled community backlash. In recent months, many companies have pitched themselves as committed to preventing their power consumption from driving up residents’ utility bills. That effort also included the high-profile White House signing of a non-binding pledge to cover their electricity costs.

Caroline Golin, who previously served as Google’s global head of energy market development and innovation, acknowledged in an interview that the industry’s rush to secure power has created some “political pushback.” Recently, she said, data center companies have become more engaged with power markets and utilities to find strategies that work.

“We were slow, I think, in creating the localized strategies, because we were focused on a global conversation,” said Golin, who is now chief growth and policy officer at NRG. “But now, speed to power means you've got to figure this out.”

Harry Sideris, president and CEO of Duke Energy, said local opposition has grown so fierce that the industry has moved past calling project opponents NIMBYs.

“That’s not good enough anymore. Now we call them BANANAs — build absolutely nothing anywhere,” Sideris said at a CERAWeek panel. “But you have to get in and talk to them and build trust with them, listen to what their issues are.”

At CERAWeek, the tech and power industries promoted their new vision of data centers — framing them not as a problem but as a solution to the rising electricity costs that have outpaced inflation by providing financing for new power plants.

That’s a big change from last year’s conference, according to Joseph Dominguez, CEO of power generation-giant Constellation, which was dominated by concerns that data center demand would drive up costs for residents.

“Walking into CERA[Week] this year, the conversation is ‘Well, wait a second, we don’t want to kick these guys out. We want them in because data centers could actually save money for consumers,’” Dominguez said.

Dominguez and other energy executives said data centers can help foot the bill for repairing the country’s aging electricity infrastructure. They said that by soaking up excess power on the grid during times of low demand, and curbing their power usage during times of high demand, they could help stabilize electricity prices too.

Other companies are taking a different tack.

Toby Neugebauer, who founded the start-up Fermi Inc. with Rick Perry, the former Texas governor and energy secretary in the first Trump administration, is developing its own “behind-the-meter” private grid near Amarillo to power what would be one of the largest energy and data center campuses in the country.

Public perception is a threat to utilities and AI companies, he said, “especially on a technology that people are afraid of, and that they think might displace their jobs. It’s an incredibly sensitive time.”

Alphabet President and Chief Investment Officer Ruth Porat pointed to an Oct. 2025 study from the Lawrence Berkeley National Laboratory that showed — to date — electricity rates have risen more slowly in states with higher numbers of data centers. Other studies have also shown data centers largely are not to blame for higher power prices in most of the country, but they have driven up electricity costs in some parts of the mid-Atlantic where there’s larger concentrations of them.

“We’re helping amortize some of the costs, and as a result electricity prices have been growing at a slower rate,” Porat said. “We’re really pleased that we’re, as an industry, starting off on that foundation.”

Still, the Dallas Fed earlier this month released a study that found data center growth will lead to higher electricity prices under almost any future scenario.

“Even a modest data center boom could substantially raise retail electricity prices and hence annual inflation,” Dallas Fed officials wrote.

As the buildout continues, and as opposition mounts, companies, utilities and legislators will need to be better at putting out information about how their projects will affect local communities, said Ann Bluntzer Pullin, executive director of the Hamm Institute for American Energy at Oklahoma State University. Without that, Pullin told POLITICO at CERAWeek, “we’re going to keep seeing different parts of the country say, ‘no, thanks.’”