Texas slows data centre approvals as grid audit raises financing risks

Traders Union
All News
Financial News
Texas data centre approvals slow

Highlights

Governor Greg Abbott halted new data centre approvals in Texas pending a power grid audit, creating uncertainty for projects expecting power allocations by April 2027.
Texas, with over $100 billion raised for data centres since 2024—including Oracle's 1GW Stargate and Meta's $12 billion El Paso project—now faces rising borrowing costs and investor caution.
Industry groups warn billions in investment and hundreds of thousands of jobs are at risk, with some developers shifting to off-grid or battery-backed systems to mitigate approval delays.

Grid review disrupts project pipeline

As reported by Financial Times, Governor Greg Abbott has halted new data centre approvals while the state completes an audit on whether projects are suitable for connection to the power grid as authorities review applications for large interconnections.

The move marks a sharp turn for a state that had become a preferred destination for developers because of cheap land and a business-friendly policy environment. Developers expecting projects of 75 megawatts or more to be assessed by the Electric Reliability Council of Texas in coming months, with power allocations by April 2027, now face uncertainty after the audit announced in August.

Texas authorities in July introduced Batch Zero, a verification regime intended to streamline approvals for power-intensive developments. Under that process, developers must make larger financial commitments, including a security deposit of $50,000 per megawatt at the application stage.

Lawyers, investors and developers say the policy change is complicating financing decisions. Juliana Sersen, a partner at Baker Botts, says the audit creates uncertainty over which projects are likely to secure approval and could become another filter for lenders and financing parties.

Backlash reshapes investment outlook

Texas still has more data centre capacity under construction than any other U.S. state, with more than $100 billion raised for new build-outs since 2024, according to Infralogic. Major projects include Oracle's more-than-1-gigawatt Stargate campus in Abilene linked to its $300 billion OpenAI contract, and Meta's $12 billion financing closed in July for a similar-sized facility in El Paso.

But public opposition in rural communities, combined with rising debt burdens and a less certain route to profitability, is pushing investors to pull back in recent months and raising borrowing costs for new developments. The political sensitivity is also growing ahead of the midterm elections, as Republican candidates seek distance from an industry that some voters say strains local resources and shifts costs to taxpayers.

Industry groups warn that the slowdown puts large sums of capital and jobs at risk. The Data Center Coalition says billions of dollars in investment and hundreds of thousands of jobs are on the line, while investors such as Generate Capital say developers are increasingly considering off-grid systems or more flexible grid connections backed by batteries to speed up access to power.

In our earlier article on Larry Ellison’s plan to sell up to 50 million Oracle shares, we looked at how the move landed alongside Oracle’s accelerating push to build AI data-centre capacity, including its large OpenAI-related commitments. We also noted investor concerns about rising debt, margin pressure, and how permitting and other approval hurdles could complicate the rollout of these large-scale infrastructure projects.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.