ERCOT pauses data center hookups as Texas grid queue hits 474 GW

Texas' grid operator ended 2024 with 63 GW of large new customers in its interconnection queue. By June, that figure had climbed to 474 GW — more than five times the state's record peak demand, with roughly 90% of it data centers, according to an analysis published by Andreessen Horowitz (a16z). In response, Texas has escalated from telling data centers to fund their own grid upgrades to a freeze on new permits.

A queue swollen with speculative bids

Part of the problem is how projects apply, not just what they are. Per the a16z piece, developers routinely file duplicate applications across several sites, and many are speculative builds with no customer signed. ERCOT, which operates most of the state's grid, cannot tell which submissions are real, and planners do not want ratepayers funding upgrades for projects that never show up. The review process was designed for 40 to 50 large loads at a time; 2025 brought 225 new requests by mid-November.

Community friction compounds this. As of June, only 28 of 377 companies had answered a state survey about their resource use, and officials in Hood County were asked to support a tax waiver for a code-named development, "Project Patriot," without knowing who was behind it.

Colocation pulled regulators in

The analysis traces how large-scale power buying changed. A decade ago, hyperscalers found a utility with spare network capacity, signed on as a large load, and used long-term contracts that were often purely financial. The grid is now stretched thin: almost any new large load or generator requires an upgrade, and buying from one plant does not reserve a physical route to your building.

Buyers responded by chasing firm power they could claim more directly — restarting retired plants or building beside existing ones. That "colocation" strategy, tapping a neighboring plant's output before it reaches the grid, produced some of the loudest fights. FERC rejected Talen's bid to send more power directly to an Amazon campus next to its Susquehanna nuclear plant after utilities argued it would let the campus avoid grid fees and shift fixed transmission costs onto others; the deal was later restructured. In Texas, the Public Utility Commission (PUCT) approved CyrusOne's 760 MW Freestone campus beside a Constellation gas plant in May, on the condition it can cut usage or switch to backup within 30 minutes of an ERCOT call. Two Crusoe data centers beside an Armstrong County wind farm face the same rule, and the second must be able to shed its entire load.

Batch Zero, and a full stop

In June, the PUCT approved a new batch approach. Under "Batch Zero," ERCOT studies large loads of 75 MW or more together and allocates grid capacity among them. But the batch is not moving: ERCOT has paused approvals for data centers of that size to switch on, including 17 projects that had completed every other ERCOT step, until a December audit report settles which are eligible.

Tighter reliability rules

Interconnection studies model what happens when equipment fails, following NERC's North America-wide baseline plus ERCOT's own requirements. A newer risk is load vanishing at once: many data centers flip to backup power at the first voltage dip, so a single fault can pull an enormous load off the grid within seconds, as an incident in Virginia showed earlier this year. Because ERCOT's grid is largely isolated, it can lose only about 3.2 GW of load at once under some conditions before problems start. A new voltage ride-through rule requires new data centers to stay connected through routine faults.

Who pays for the wires

Texas typically splits transmission costs by each large customer's demand during summer peaks, which lets a big load that ramps down on hot afternoons dodge much of its share. In July, regulators proposed counting all 12 monthly peaks and charging large loads as if they ran at full size — paying for the capacity of their connection, not the electricity flowing through it. New PUCT rules effective October 8 impose a $100,000 study fee plus a $50,000-per-MW deposit; a project that falls two years behind and loses its capacity forfeits 20% of that deposit, at least $10 million on a 1 GW campus. The deposit backs only the upgrades built for that project, not the costlier regional lines shared by everyone on the grid.

Why it matters

Fully connecting a large data center takes five to 10 years, and AI buildouts move faster than that. Texas is now the live experiment in who absorbs the cost and risk of that growth — developers, ratepayers, or grid reliability itself. The December audit and the fate of the 17 finished-but-paused projects will indicate whether the combination of batch studies, curtailment conditions and real financial commitments spreads to other grid operators. For anyone planning AI infrastructure, the message from the source is blunt: cheap, fast interconnection in Texas is over, and the state wants proof of seriousness before it builds.