Texas is home to the nation’s fastest-growing data center market, with a January report from Bloom Energy projecting that the state will see a 142% increase in its share of the data center industry by the end of 2028. Virginia currently has the nation’s largest concentration of data centers, although experts say that could change in the coming years.
“As it stands today, Texas is positioned to overtake Virginia as the world’s leading data center market by 2030,” Dan Diorio, vice president of state policy for the Data Center Coalition, said during an April 9 legislative hearing on data centers.
During the wide-ranging hearing, held by the Texas House State Affairs Committee, lawmakers questioned data center developers, energy companies and state grid officials about the amount of water the large facilities use; how they impact noise levels and air quality; and whether residents can expect higher costs when data centers come to their communities.
The committee did not hear from any local elected officials or take public testimony April 9. Committee Chair Rep. Ken King, R-Canadian, said he expects to hold another hearing on the topic in the coming weeks.
“We’re going to say ‘data center’ a lot through this interim. So if we don’t get to the subject you came here for, stay tuned,” King said.
Water use
State utility regulators are looking into how much water data centers use, said Thomas Gleeson, who chairs the Public Utility Commission of Texas.
“Water is a really scarce resource in this state, and so we have to have a clear picture of what these facilities use on the water side,” he told the committee April 9.
Data centers use water to cool their computer servers and prevent overheating. Data centers have historically used a process known as “evaporative cooling,” which experts said uses “a ton of water.” Several data center executives who spoke to the committee April 9 said their companies have transitioned to “closed-loop” systems where water is continuously reused.
“The water is recirculated in the system, and that’s what’s used to cool servers, to cool the equipment,” said Haynes Strader, chief development officer for Dallas-based Skybox Data Centers. “That’s recycled with often less than a 2% loss factor, so you’re talking hundreds of gallons [lost] per year.”
Due to closed-loop cooling, the average Skybox data center uses “less water than five households” each year, Strader said.
“I think we often get a bad rap for that,” Strader said. “There are examples of older data centers that you can find that were built 20 years ago—they use evaporative cooling and use a ton of water. I think sometimes we get thrown into that bucket.”
Rep. John Smithee, R-Amarillo, said he was concerned that local government officials are not effectively regulating data centers’ water usage.
“I’m not sure how good of a job the local officials are doing because some of these cities and counties are so hungry for economic development,” Smithee said. “I’m seeing this philosophy of, ‘Let’s get [this] built and then we’ll worry about the water later.’ I just don’t see anybody that is looking at the big picture for the state, or any region of the state, saying, ‘Wait a minute, where are we on water 30 years down the road or 50 years down the road?’”
Gleeson said the PUC is currently surveying Texas data center companies on their water use. The survey is voluntary, with responses due by May 28. Gleeson said he hopes to see “a really high response rate.”
Costs to residents
Rep. Senfronia Thompson, D-Houston, said her constituents have asked if electricity costs will rise as data centers are built in the area.
The Electric Reliability Council of Texas, which operates the state power grid, estimated in an April 15 report that Texas will see over 367,000 megawatts of electric demand by 2032. ERCOT’s current demand record sits at 85,508 megawatts, with much of that load growth expected to come from data centers and industrial projects.
To reduce the burden on Texas households and small businesses, the PUC is currently working on reallocating who pays for power transmission lines and incentivizing data center companies to provide their own power generation or pay for the cost of transmission upgrades, Glesson said.
“It’s not just, in my opinion, ensuring that rate payers are protected—it’s being able to show them that they’re being protected,” Gleeson said April 9. “The rules that we’re looking to promulgate are going to accomplish that.”
Data center executives echoed Gleeson’s remarks.
“We feel very strongly that the point of the grid is to serve load,” said Michael McNamara, the CEO of Lancium, which developed the Stargate data center facility in Abilene. “Data centers need the power, and they will pay. And so we feel strongly that we must build transmission to enable more load and more generation at the same time.”
Thompson said she was also concerned about how data centers would impact local property taxes and other bills for Houston-area residents.
“We’re really trying to be more cautious about data centers coming into the area,” she said. “Not that we don’t want them, but we are concerned … because we also have an influx of people who are coming to our great city, which means those [people are] going to need goods and services, electricity [and] water. I’m just trying to make sure that … as much as we need your facility, we’re not increasing the tax burden on people who are least able to incur those burdens.”
Local perspectives
Nearly 450 people submitted online public comments to the committee, with hundreds of mentions of data centers’ water usage and other environmental concerns.
“Parts of Texas already face issues with water availability,” wrote Rhea Thomas, who lives in the East Texas city of Gilmer. “Inviting in industries that will exacerbate the issues for citizens is a poor option.”
Shannon Hamilton, executive director of Central Texas Water Coalition, wrote that while Texas “is well-positioned to lead” in data center growth, officials have “one chance to get this right.” Hamilton asked legislators to work to ensure that data centers are being built in communities with the resources to sustain them, suggesting that the state require developers to disclose their expected water use when proposing new data center projects.
“Across Central Texas, we are already experiencing prolonged drought, declining inflows, and increasing strain on limited water supplies,” she wrote. “In many communities, the challenge is no longer just whether water exists, but whether it can be reliably accessed and delivered. … If these facilities are allowed to develop without clear standards for water efficiency and resource planning, our already stressed water supplies will be at risk.”
Texas’ existing water supplies are projected to decline by about 10%—from 15.5 million acre-feet to nearly 14 million acre-feet—from 2030-2080, according to a draft of Texas’ 2027 State Water Plan, which was released April 16. The Texas Water Development Board said the projected loss was “primarily due to depletion of aquifers.”
Texans who submitted public comments also expressed concerns about the changes data centers may bring to rural communities and a “lack of transparency” about planned and ongoing data center developments.
“Stand up to big business in support of your constituents,” Lago Vista resident Rebecca Bornhorst wrote. “We are paying attention.”
