In April 2025, ERCOT revised its outlook for future load growth to include 35 GW of peak demand from Data Centers by 2035 - a number that is nearly half the current system peak.
This shift is part of a wave hitting power systems nationwide. Technology giants are descending on Texas to build hyperscale Data Centers en masse, drawn by the state’s inexpensive power supply and abundance of land.
But the realities of connecting to the power system could prove to be the limiting factor.
How fast can growth actually go?
The analysis in this report is free to read and includes:
- Data Center growth projections for Texas
- An overview of Senate Bill 6 - Texas’s legislation on Large Load interconnection
- Analysis on why the global shortage of gas turbines could limit Data Center buildout
- And the opportunities this brings to energy developer
If you have any questions regarding the content of this article, reach out to ovais@modoenergy.com in the US Research team.
Key Takeaway: Data Center growth in Texas is expected to fall short of the ERCOT forecast
Data Center growth in Texas will be limited by the speed at which sites can access power.
All other factors - access to land, the availability of water for cooling, and a steady supply of semiconductors - have the potential to slow buildout, but will not be the primary constraint.
In Texas, the shortage of on-site generation is expected to limit Data Center buildout to 44 GW by 2035.
This means buildout may take longer than projected - and still fall short by the end of the decade.
There are three reasons to believe buildout will be lower than the forecast:
- Texas’ Senate Bill 6 enacts legislation that effectively requires projects to self-supply their power to ensure 24/7 uptime.
- There is a shortage of gas-powered turbines for meeting self-supply requirements, which will limit both how quickly and how many Data Centers come online
- Data Center press releases as of Q2 2025 do not show a firm pipeline in line with the first three years of ERCOT’s forecast.
1. Texas Senate Bill 6 pushes Data Centers to bring their own power
On June 20, 2025, Texas’s Senate Bill 6 (SB 6) established the first framework in the U.S. for managing the interconnection of very large electric loads (≥ 75 MW).
New Data Centers must come with a statutory “kill-switch”, compelling sites to reduce their power consumption in the event of another Winter Storm Uri.
But the larger AI sites are aiming for 99.999% of uptime - or as little 5 minutes of down-time a year - prompting them to bring backup generation to ride through load-shedding events.
Developers seeking to expedite the process will attempt to circumvent the uncertainty surrounding the interconnection process.
The quickest solution, and one that will meet their uptime requirements in the long run, is to go off-grid with gas turbines to support their hyperscaler loads.
This is leading Data Center developers to procure gas turbines to meet their uptime requirements and bridge the gap to a firm grid connection.
The bulk of ERCOT’s forecast comprises these mega-sites, and so access to turbines is likely to be the factor constraining their growth.
2. Gas turbine shortages will constrain Data Center deployment
Three manufacturers account for over 70% of the global gas turbine supply: GE Vernova, Siemens Energy, and Mitsubishi Power.
Turbine sales for all three had been declining over the past few years as gas plant deployment rates slowed worldwide, particularly during the COVID-19 pandemic.
But 2024 saw a resurgence in demand for turbines as new plants are being built in response to global electrification.
This, in turn, has led to a surge in turbine sales dedicated to power plants among major manufacturers.
Data Centers’ rush to secure turbines is late to this party.
And, while manufacturers are increasing production, they are cautious not to overcommit.
This has meant that the wait for new turbines is now at a minimum of three years. Projects attempting to secure turbines must wait until 2028.
In GE Vernova’s Q1 earnings call on April 23rd, CEO Scott Strazik confirmed that slots for delivery in “2026 and 2027 are largely sold out”, and that Data Centers make a “fairly negligible” portion of the purchases in their current backlog.
How could these global supply dynamics shape Data Center deployment in Texas?
The global supply of gas turbines is expected to increase from 27 GW in 2025 to just over 42 GW by 2027, assuming the industry expands similarly to GE Vernova.
60% of the gas turbine supply chain is dedicated to the US, of which Data Centers are expected to receive a third of the output beyond 2027.
Using these numbers to estimate supply provides an upper limit of 11.4 GW of gas turbines available to Data Centers in the US in 2028, after existing orders are delivered.
And, if developers in Texas manage to capture just over 50% of this figure, it would work out to roughly 6 GW of turbine capacity available for Data Centers in ERCOT annually.
3. Bottom-Up: Data Center announcements fall short of the forecast
Aggregating public announcements reveals that the new wave of hyperscalers and campuses are planning to bring 17 GW of capacity to the state.
Despite this growth, reported capacities only account for two-fifths of ERCOT’s projection out to 2029.
If the S-curve of growth is extrapolated based on this measure, 2035 may only see 25 GW of the 57 GW of nameplate capacity expected.
Why do announcements differ so much from ERCOT’s view?
One reason could be that projects are developing outside the public eye, and only system planners have been informed of their intention to connect to the grid. Recent projects have gone from public announcement to operational in as little as 18 months. Perhaps this shores up the difference between the two views.
Alternatively, it could be that developers are inflating ERCOT’s numbers. Developers submitting speculative and duplicative entries across the state may be hedging their bets to secure a connection somewhere. This is not uncommon for generation projects, particularly in the early stages of development, where costs for stating interconnection interest are minimal.
The future is uncertain, but signs point to Data Center buildout landing lower than expected
Should supply chain issues involving gas turbines continue to be the limiting factor for Data Center buildout, we can expect a projection that is both delayed and dampened relative to the system operator’s view.
The projects that have already secured a power source can be expected to come online within the next three years, but this capacity is unlikely to exceed 10 GW.
Once reservations for new turbines begin to materialize in 2028, developers could then add 6 GW of Data Center capacity every year until the early 2030s.
With some projects dropping from the queue, the total projected buildout is expected to reach 44 GW by 2035, 24% lower than the ERCOT outlook.
The opportunity for existing developers: Data Centers will pay a premium for co-located generation
SB 6 is driving Data Centers to co-locate with generation, but the shortage on gas turbines is limiting how quickly these projects can build it for themselves. This presents an opportunity for existing market participants.
Existing and soon-to-come online generators can strike up co-location agreements with Data Centers to deliver their power requirements and help bring them online faster
These co-location agreements would site new Data Centers alongside generation behind a common point-of-interconnection, allowing the generator to:
- Sell power directly to the Data Center, potentially as part of a PPA, providing a premium compared to the wholesale market.
- And help offset their grid power draw, enhancing the Data Center’s reliability.
For developers with projects in the queue, there is a strong case to consider co-location over a merchant strategy.
One of the more prolific announcements in this vein is the agreement between Google and Intersect Power announced in December 2024.
The top-performing developers in the next few years will be the ones who can provide these co-location solutions to support the AI boom.
Want to shape the future of Modo Energy’s Data Center research?
We’re writing research on how Data Centers are impacting US power markets - and we’d love your input.
If you liked this article and you want to steer the topics we cover in the future, drop us a line at ovais@modoenergy.com.
