Texas Grid Chief Says Big Tech Must Pay More for Power Upgrades

Technology giants developing big artificial intelligence data centers in Texas will need to pay more for electricity infrastructure upgrades to prevent those costs from burdening households and other businesses, according to the state grid operator’s chief.

Affordable power is “at the core” of the conversation that the Electric Reliability Council of Texas, the grid operator, is having with firms vying to build artificial intelligence facilities that would consume as much electricity as some cities, Chief Executive Officer Pablo Vegas said.

The state needs to figure out how to allocate the cost of building high-voltage transmission lines because the new big users, like data centers, are primarily driving the need for that infrastructure, he said. Rules for co-locating data centers with power plants also need to be reviewed, he said.

The tech companies “do have to, I think, carry a disproportionately larger burden on ensuring that the infrastructure cost gets covered,” Vegas said in an interview on the sidelines of the Aurora Energy Transition Forum in New York Thursday. “We don’t yet have clear policies that are shifting or changing that, but that is going to be part of the conversation going forward as to what’s the right way to allocate cost fairly.”

Vegas sees the record demand growth that’s possible this decade as an opportunity to upgrade and expand the state grid, which proved fragile during the February 2021 winter storm. After the storm knocked out the grid — keeping millions of people in the dark for days and leaving more than 200 people dead — Texas approved reforms to prevent a repeat of the catastrophe. Tech companies’ deep pockets can help speed up investments and make the grid more dynamic, according to Vegas and other grid experts.

“We need to take advantage of that investment and grow responsibly with those customers, make them part of the solution so that they’re helping to pay the way to allow this infrastructure that’s needed to come online,” Vegas said.

Read More: Texas Regulator Wants Data Centers to Build Power Plants

Ercot is trying to estimate how much demand from data centers and other major users — including from manufacturers or hydrogen producers — will increase and over what time frame.

One key question is whether data centers, which typically use electricity steadily around the clock, can tap on-site back up generation during times of grid stress, Vegas said. Data centers usually have enough back-up power to cover 100% or 125% of their needs, meaning permitting rules could be adjusted to turn them into tools to help the grid, he said on a panel earlier.