AI Data Centers Are Losing the Fight: Even Texas "Pauses" Approvals Until Audited

Data centers have unwittingly encapsulated all that is wrong with American society and politics: wealth concentration, the decline of affordability, energy costs, inability to buy homes, inflation, obnoxious billionaires, environmental degradation - and will no doubt eventually be blamed for whoever doesn't win the World Series... 

The serious problem for big tech and investors is that AI valuations and growth projections were premised on a set of already questionable assumptions which had, at their core, the necessity of data and compute scale being available to support AI's growth. Not only is that increasingly less likely, but every politician in America - including the governor of Texas - is now running against, not for data centers. If you're a big money industry and you've lost Texas, well, you'd better lawyer up. JL

Aaron Mak and Jessie report in Politico, Paul Cobler reports in the Texas Tribune:

Data centers are on the losing end of a populist backlash. Fears the server-packed data hubs will drive up electricity prices, deplete water supplies and gobble farmland have prompted people across the country to pack meetings of zoning boards and county commissions to oppose the projects, while leaders in both parties are calling for moratoriums. Amid growing public backlash to the rapid buildout of data centers across Texas, Gov. Greg Abbott announced a moratorium on the approval of data centers until regulators can audit proposed data centers seeking connection to the state’s electric grid. Messaging about the benefits of the facilities is failing to resonate with the public. A recent poll found just 16% of people agreed data centers “benefit the area they are built in and the country as a whole,” while 60% said they come at the expense of the local area and country or provide no benefits at all.

Amid growing public backlash to the rapid buildout of data centers across Texas, Gov. Greg Abbott on Monday announced a moratorium on the approval of data centers until regulatory agencies can audit proposed data centers seeking connection to the state’s electric grid.

It is unclear how long the audit will take, but the effort is Abbott’s strongest effort yet to slow the development of these data centers statewide and underscores how little information members of the public, including state leaders, know about the facilities.  

The companies that build and run data centers are on the losing end of a populist backlash — and they’re struggling to respond.

Fears that the server-packed data hubs will drive up electricity prices, deplete water supplies and gobble farmland have prompted people across the country to pack meetings of zoning boards and county commissions to oppose the projects, while leaders in both parties are calling for state or national moratoriums.

In response, the data center companies have tried to sell their projects as a boon to tax revenues and employment — though too often, they fail to actively communicate with the public, tech industry policy advocates and executives told POLITICO. That messaging void has let their critics gain the upper hand.

Results this month from The POLITICO Poll reveal the scope of the industry’s predicament, showing that majorities of Americans now believe key arguments from the industry’s opponents, like the idea that the projects will make electricity more expensive. That’s a departure from just six months ago, when most Americans were either undecided or disagreed with key statements of the opposition. 

Messaging around the benefits of the facilities is failing to resonate with the public. The POLITICO Poll — which surveyed 2,061 U.S. adults online from July 12 to 15 — found that just 16 percent of people agreed that data centers “benefit the area they are built in and the country as a whole,” while roughly 60 percent said they either come at the expense of the local area or the country or provide no benefits at all.

Instead, negative messaging seems to be taking hold. Higher electricity costs, for example, are Americans’ top concern when it comes to building data centers, the results show. In January, 43 percent of Americans said they believe that “data centers raise people’s electricity bills.” This month, that share jumped 16 points to nearly 60 percent of Americans who said the same. The share of Americans who said data centers deplete the water supply grew from 34 to 55 percent during the same period.

Abbott is asking the Public Utility Commission of Texas and the Electric Reliability Council of Texas to ensure data center developers provide information on tax breaks they will receive; power use and generation; water use and cooling operations; efforts to reduce impacts on local communities; and ownership of the facility. Any projects that fail Abbott’s ordered “comprehensive verification and audit” should be denied connection to the grid, the governor said. 

Abbott’s letter to the PUCT and ERCOT directs them to conduct the audit on all data centers advancing through ERCOT’s interconnection queue, or the line for energy intensive projects seeking connection to the electric grid. ERCOT is currently tracking more than 1,800 projects in the queue, representing over 474 gigawatts of electricity, or more than five times the grid’s record for peak demand, according to ERCOT. Approximately 90% of the new power requests are data centers, Abbott said.  

There is no state or federal government database of the facilities, but the Texas Tribune has identified at least 335 data centers operating in Texas. The state is currently the second largest market for the facilities in the country, behind Virginia, and is poised to take the top spot. The Tribune has identified at least 248 planned data centers coming to the state, although hundreds more in lesser development phases have lined up in the power queue.  

City and county governments in the state have tried to slow data center development amid grassroots resistance to the facilities’ construction. Hood County rejected two attempts to pass a countywide moratorium in February after state Sen. Paul Bettencourt, R-Houston, warned the commissioners court it lacked the legal authority to do so. In May, Hill County approved the state’s first moratorium on the development of data centers but rescinded the measure a month later after a developer sued for $100 million in damages. And in June, San Marcos became the first Texas city to issue such a moratorium.  

Democratic New York Gov. Kathy Hochul signed an executive order in July establishing the United States’ first statewide pause on large data center construction, and progressives in Congress have proposed such a moratorium for the nation. Some Republicans, notably Rep. Nancy Mace of South Carolina, have jumped on the moratorium bandwagon as well.

The push for pauses has thrown a wrench into plans for new data centers. That includes a project in Monroeville, Ohio, that Decimal Digital had to put on hold after the village council imposed a one-year ban on data center construction in February. A 49 percent plurality of Americans said they would support a local candidate who proposes a statewide data center moratorium “to ensure that there is no impact on energy and water costs in the area.” Just 28 percent said they would vote for the candidate who proposed tax breaks for data centers to ensure economic growth in the state.