In June, Texas Governor Greg Abbott signed a law allowing the state’s grid operator to remotely disconnect data centers and other large energy consumers during times of extreme grid stress. This “kill switch” is part of comprehensive state legislation targeting the growing number of energy-intensive supercomputer warehouses in Texas.
This legislation seeks to balance Texas’s appeal to the booming data center industry with the challenges posed by these facilities’ high electricity demands, especially when grid capacity is strained by extreme weather. Recent energy legislation in Texas aims to prevent a repeat of 2021’s Winter Storm Uri, which left millions without power and resulted in at least 246 deaths.
Senate Bill 6, applying to electricity customers using at least 75 megawatts, aims to transfer transmission costs to large power users, preventing residential and small business customers from bearing these expenses. It also establishes grid reliability measures and enhances electricity demand forecasting.
The Public Utility Commission of Texas (PUC), the Electric Reliability Council of Texas (ERCOT), and other stakeholders are determining how to implement new data center regulations. Public comments on S.B. 6 rulemaking close this month.
The energy and data center sectors are monitoring the rulemaking closely, as they are used to minimal state-imposed restrictions. Industry representatives have warned that new oversight requirements could deter business in Texas.
Crusoe Energy Systems, involved in the Stargate Project in Abilene, expressed in a state filing that new approval requirements for private power agreements could cause significant project delays. The Stargate project, featuring partnerships with OpenAI, Softbank, and Oracle, aims to become the world’s largest data center.
ERCOT’s large load interconnection queue is currently dominated by data centers. According to ERCOT’s update, 69 percent of the 189 gigawatts of large load requests come from data centers.
Grid operators and utilities have noted that some developers are submitting multiple interconnection requests, complicating load forecasting and infrastructure planning. A 2023 law change required ERCOT to include all potential large-scale power users in demand projections, even without full project vetting.
S.B. 6 aims to address speculative projects by requiring financial commitments, including an interconnection study fee of at least $100,000 and site control proof. Determining the necessary investment for grid planning will be challenging, according to Doug Lewin, a Texas energy consultant.
Woody Rickerson of ERCOT highlighted the state’s adaptability at a recent data center conference, noting Texas’s success in integrating renewable energy. The PUC aims to complete rulemaking on law implementation by 2026, addressing how power cuts to data centers would occur and managing grid upgrade costs.
S.B. 6 requires the PUC to reassess whether existing ratemaking practices appropriately distribute transmission costs among customers. Currently, large customers benefit by reducing energy use during peak times, potentially raising costs for residential users, as noted by San Antonio’s CPS Energy.
The Texas Advanced Energy Business Alliance has advised against shifting transmission costs onto power generators, arguing that it could hinder power plant investments in Texas.
The rulemaking process for S.B. 6 will continue until December 2026, with discussions on whether to lower the 75-megawatt threshold for customer obligations. Analysts suggest the threshold might inadvertently encourage projects to remain just below it.
ERCOT can instruct large load customers to reduce operations during energy emergencies. S.B. 6 allows ERCOT to equip facilities to curtail demand before integration into the grid. Data centers lobbied for a 24-hour notice before potential disconnections.
The law also addresses private agreements between data centers and power plants, requiring ERCOT notification, studies, and PUC approval. These conditions ensure grid reliability and force data centers to share power during grid stress events.
Maria Faconti from K&L Gates emphasized the importance of participating in rulemaking to ensure S.B. 6’s proper implementation. Brock Petersen of Satoshi Energy expressed concerns about unclear definitions affecting project timelines and investment assumptions.
Faconti noted that despite regulatory changes, S.B. 6 has not hindered development in Texas. It has provided parameters for the energy sector, offering some clarity for investors and developers.
Original Story at insideclimatenews.org