Texas is facing a rapidly evolving energy landscape, driven in part by the surging power demands of data centers and cryptocurrency mining operations. As the digital economy expands, the state’s existing power transmission infrastructure must adapt to ensure grid reliability, affordability and sustainability. However, the growing demand for electricity raises critical challenges, including the need for additional transmission capacity, grid resilience, and fair cost allocation for new infrastructure investments.

Rising Energy Demand from Data Centers and Crypto Mining

Texas has become a prime location for data centers and cryptocurrency mining operations due to its deregulated energy market, favorable business climate and relatively low electricity costs. Data centers, which support cloud computing, artificial intelligence (AI), and financial transactions, require vast amounts of power, often operating 24/7. Similarly, cryptocurrency mining facilities run continuously, consuming significant amounts of electricity to maintain blockchain networks.

The Electric Reliability Council of Texas (ERCOT) projects that power demand from these industries will grow substantially in the coming years. Consumption of electricity from large flexible loads such as data centers and crypto mining facilities is projected to account for 10% of ERCOT’s total forecasted electricity consumption in 2025.  ERCOT currently expects power demand to nearly double by 2030.  Without strategic infrastructure upgrades, this demand would likely strain the grid, increase congestion and lead to higher electricity prices for consumers.

Challenges with Existing Transmission Infrastructure

Texas operates its own independent power grid, which provides flexibility but also limits its ability to import electricity from neighboring states during periods of high demand. The state’s transmission infrastructure has already faced challenges in keeping up with rapid population growth and extreme weather events.  In 2021, Winter Storm Uri exposed vulnerabilities in the grid, leading to widespread outages and highlighting the need for greater investment in both generation and transmission capacity.

One major challenge is that much of Texas’ renewable energy generation—especially wind and solar—is located in rural areas, far from major load centers like Dallas, Houston and Austin. Without sufficient transmission capacity, this clean energy cannot be efficiently delivered to where it is needed. The addition of high-energy-consuming industries like data centers and crypto mining exacerbates this challenge by increasing congestion on existing transmission lines.

The Need for Additional Transmission Infrastructure

To accommodate the growing energy needs, Texas must significantly expand its high-voltage transmission network. New transmission lines are necessary to:

• Relieve Grid Congestion – increasing transmission capacity reduces bottlenecks that can drive up energy prices and cause reliability concerns.
• Enhance Grid Resilience – strengthening transmission infrastructure can help prevent widespread outages during extreme weather events.
• Support Renewable Integration – more transmission lines will allow Texas to take full advantage of its abundant wind and solar resources by connecting them to high-demand areas.
• Ensure Reliability for Data Centers and Crypto Mining – dedicated infrastructure planning can ensure that new energy-intensive operations do not disrupt service for residential and commercial consumers.

The Costs of Transmission Expansion

One of the biggest questions surrounding transmission expansion is funding. Historically, Texas has used a mix of ratepayer contributions, state incentives, and private investments to build and maintain its power infrastructure. There are several potential funding mechanisms for new transmission lines:

   •   Ratepayer Contributions – transmission costs are often passed on to consumers through electricity bills. However, increasing rates to fund expansion may face resistance, especially if residential and small-business customers bear a disproportionate burden of the cost.

   •   ERCOT Transmission Cost Recovery – ERCOT has a cost allocation model that spreads transmission investments across various market participants. This approach ensures that those benefiting from the upgrades contribute to the costs.

   •   Direct Charges on Large Energy Consumers – one potential policy solution is to require data centers and crypto mining companies to pay a larger share of transmission infrastructure costs. Special tariffs or direct infrastructure investment agreements could be established to ensure that these industries contribute fairly.

   •   Public-Private Partnerships – collaboration between the state government, utilities, and private investors could help finance large-scale transmission projects. In some cases, tax incentives or low-interest financing options could encourage private sector investment in critical infrastructure.

   •   Federal Funding and Grants – the federal government has recently made funding available for grid modernization projects through the Infrastructure Investment and Jobs Act. The new administration has called some of this into question. Texas could leverage these funds to supplement state and private investments.

Balancing Growth and Grid Reliability

Expanding transmission infrastructure is essential, but it must be done in a way that balances economic growth with grid reliability. Policymakers must ensure that the costs are distributed equitably and that the grid remains stable during periods of high demand. Additionally, investments in energy storage, smart grid technology, and demand response programs can complement transmission expansion by improving overall efficiency.

Texas has long been a leader in energy innovation, and addressing these transmission challenges will be critical to the state maintaining that position. By implementing forward-thinking policies and funding strategies, the state can support its growing digital economy while ensuring a reliable and affordable power supply for all consumers.