Executive Summary
Market Overview & Risk Profile
Texas is projected to overtake Virginia as the largest data center market in the United States within the next two years. The state currently has 387 operational data centers with another 70 under construction, concentrated in Dallas-Fort Worth, Austin, Houston, and San Antonio. The Stargate I campus in Abilene alone will draw 1.2 gigawatts at full capacity, enough to power over 1 million homes. Google announced $40 billion in new Texas data center investment in November 2025.
This growth is colliding with severe climate and infrastructure challenges. Texas is under a governor-declared drought disaster affecting over 100 counties. ERCOT has received over 220 gigawatts in large-load interconnection requests, more than double the state's record peak summer demand. The 2024 Smokehouse Creek Fire burned over 1 million acres, the largest wildfire in state history. And the Permian Basin is experiencing unprecedented induced seismicity from wastewater disposal linked to oil and gas operations.
Drought Coverage
73%
Of Texas under drought conditions, with an additional 24% abnormally dry (Feb 2026)
Grid Demand Requests
220+ GW
Large-load interconnection requests to ERCOT, over 70% from data centers
Data Centers
387
Operational facilities with 70+ under construction across 4 metro areas
Wildfire Response
+136%
Above normal for Oct 2025 - Jan 2026 period (434 fires, 11,425 acres)
💧 Drought & Water Availability
Source: U.S. Drought Monitor (NOAA) • Texas Water Development Board • Updated weekly
HIGH RISK
Texas is under a governor-declared drought disaster proclamation, most recently renewed on February 16, 2026, covering over 100 counties. Approximately 73% of the state is under drought conditions with an additional 24% classified as abnormally dry, meaning 97% of Texas is experiencing some degree of water stress. Winter 2025-26 has been exceptionally warm and dry: Texas recorded its 3rd driest and 3rd warmest December on record since 1895.
Drought Disaster
100+
Counties under governor's drought disaster proclamation, continuously renewed since July 2022
Soil Moisture
<10th
Percentile across much of Texas, indicating extreme subsurface dryness
Precipitation Outlook
40-50%
Chance of below-normal precipitation through spring 2026 for western and south Texas
Water-Energy Nexus
Data centers require massive water volumes for cooling. In a deregulated market like ERCOT where the grid itself is strained, power plant cooling also competes for water resources. The combination of drought, rising energy demand, and data center cooling needs creates a three-way resource competition that does not exist at this scale in any other U.S. market. West Texas sites (Abilene, Midland-Odessa corridor) face the most acute water stress.
The drought outlook for February through April 2026 favors persistence along the Rio Grande and expansion in far western Texas. La Nina conditions, which historically increase dry weather in the Southern Plains, are expected to transition to ENSO-neutral by spring 2026 with a potential El Nino pattern possible by late summer or early fall, which could eventually bring relief.
🔥 Wildfire Exposure
Source: NIFC • Texas A&M Forest Service • NASA FIRMS • Updated daily
HIGH RISK
Texas wildfire risk is at critical levels heading into spring 2026. The National Interagency Fire Center projects above-normal wildfire risk for Texas through at least May 2026. Wildfire response from October 2025 through January 2026 is running 136% above normal, with 434 wildfires burning 11,425 acres before the traditional spring fire season even begins.
Texas Wildfire Scale: Recent Events
Acres burned. Smokehouse Creek was the largest wildfire in Texas history and one of the largest in U.S. history.
Conditions Repeating
The conditions that produced the 2024 Smokehouse Creek Fire (drought, heavy grass loads from the prior year's growth, and extreme wind) are present again in 2026. Above-normal grass growth from 2025 combined with current drought has created increased fuel loads, particularly in the Panhandle and east Texas. The NIFC 2026 seasonal outlook calls this an above-normal risk environment through spring. Power lines caused 60% of Panhandle wildfires since 2006, a direct concern for data center power infrastructure.
As of 2024, approximately 244,617 Texas homes are at risk of damage or destruction from wildfires, ranking the state third behind California and Colorado. The 2025 Texas Legislature passed a package of wildfire bills including statewide fuel load studies, wildfire risk zone mapping (due December 2026), and expanded authority for power line inspections at oil and gas facilities.
⚡ Energy Grid & ERCOT
Source: EIA • ERCOT • Texas PUC • Bloom Energy
HIGH RISK
The Texas energy landscape is being fundamentally reshaped by data center demand. ERCOT has received requests for over 220 gigawatts of large-load connections by 2030, more than double the state's record peak summer demand of 85 gigawatts. Over 70% of those requests are from data centers. Only about 7.5 gigawatts have actually connected or been approved, highlighting an enormous gap between demand projections and physical infrastructure reality.
Interconnection Requests
220+ GW
Large-load requests to ERCOT by 2030. Peak summer demand is ~85 GW. "There's just no way we can physically put this much steel in the ground."
Price Forecast
+45%
Wholesale price surge forecast for ERCOT-North hub in 2026 due to high demand vs. limited supply
Approved Capacity
7.5 GW
Actually connected or approved out of 220+ GW requested. A 3.4% approval rate so far.
DC Demand (2030)
78 GW
ERCOT's projected total data center demand by 2030, up from 29.6 GW projected in 2024
ERCOT Interconnection Queue Breakdown (Aug 2025)
New generation interconnection requests by source type
Grid Reliability: The ERCOT Question
Texas operates an isolated grid (ERCOT) that is not interconnected with the rest of the U.S., meaning it cannot import power during shortfalls. Winter Storm Uri (February 2021) demonstrated the consequences: widespread grid failure, 246 deaths, and an estimated $195 billion in damages. Senate Bill 6, enacted in 2025, introduces new rules allowing ERCOT to order emergency load reductions on large customers including data centers. Developers expecting power availability on data center timelines are consistently ahead of actual utility delivery dates.
Key Regulatory Timeline
2025
Senate Bill 6 enacted. New interconnection standards, emergency curtailment authority for ERCOT over large loads, and transmission cost allocation study for data centers. Implementation rules being finalized throughout 2026.
December 2025
ERCOT announced new Interconnection and Grid Analysis organization and partnered with McKinsey to develop streamlined large-load interconnection framework, expected early-to-mid 2026.
January 2026
PUCT rulemaking on net-metering for large loads (75+ MW), large-load forecasting criteria, and voluntary demand reduction programs all in active development.
Late 2026
Transmission cost allocation study expected to determine whether current cost-sharing methods should change given the influx of large-load customers.
Renewable Advantage
Texas has a significant renewable energy advantage. ERCOT's solar capacity increased over 200% in the last four years, with 877 solar projects under development as of November 2025. Wind and solar combined can now supply up to nearly half of ERCOT's total electricity demand. Texas electricity prices for residential customers and businesses remain 24% below the national average (as of mid-2025), though this advantage is under pressure from the data center surge.
🌊 Seismic Activity
Source: USGS • TexNet (Texas Seismological Network) • UT Austin Center for Injection and Seismicity Research
ELEVATED RISK
Texas was historically considered seismically quiet, but induced seismicity from oil and gas wastewater disposal has transformed the risk profile, particularly in West Texas. The Permian Basin, which produces over 40% of the nation's oil and manages roughly 15 million barrels of produced wastewater per day, has experienced a dramatic increase in earthquake activity over the past two decades.
Strongest Recent Event
M5.3
Martin County, near Midland. One of the strongest earthquakes in Texas history, linked to wastewater disposal.
Permian Basin Quakes
45,000+
Earthquakes identified in the Permian Basin region from 2000-2017, the vast majority linked to wastewater injection
Active Monitoring Zones
3 SRAs
Seismic Response Areas designated by the Railroad Commission of Texas in the Permian Basin
Location-Dependent Risk
Seismic risk in Texas varies dramatically by location. The Dallas-Fort Worth metro, Austin, and San Antonio (where most existing data centers are concentrated) have low natural seismicity. West Texas sites (Abilene, Midland-Odessa) carry significantly higher risk due to induced seismicity from oil and gas operations. UT Austin researchers have identified seven separate induced seismicity systems in the Permian Basin, each with unique geological characteristics. Data center operators siting in West Texas should factor this evolving hazard into structural design and insurance assessments.
⚠️ Severe Weather & Extreme Heat
Source: National Weather Service (NOAA/NWS) • ERCOT • Real-time alerts
HIGH RISK
Texas faces the full spectrum of severe weather: hurricanes and tropical storms along the Gulf Coast, tornado activity across North Texas and the Panhandle, extreme heat events that stress both grid capacity and cooling systems, and winter storms that have historically caused catastrophic grid failure. The state's geographic size means that facilities in different regions face fundamentally different weather risk profiles.
Winter Storm Uri Impact
$195B
Estimated total damages from February 2021 grid failure. 246 deaths. Grid was down for days across the state.
Peak Summer Demand
85 GW
Record peak summer demand on ERCOT (2025). Extreme heat drives both grid stress and cooling costs.
Hurricane Exposure
Gulf Coast
Houston and coastal facilities face direct hurricane risk. Inland metros face remnant flooding.
The Isolated Grid
Unlike every other state except Hawaii, Texas operates its own power grid (ERCOT) that is not interconnected with the Eastern or Western Interconnections. During extreme weather events, whether summer heat waves or winter storms, the state cannot import emergency power from neighboring grids. Data center operators must account for this structural vulnerability in redundancy planning, backup generation requirements, and SLA commitments. SB 6 now gives ERCOT authority to curtail large loads including data centers during grid emergencies.
🌡️ Climate Trajectory & Long-Term Outlook
Source: NASA GISS • NOAA • EPA • ERCOT Long-Term Forecasts
LONG-TERM ELEVATED
Rising global temperatures increase both cooling energy demand and peak grid stress in Texas. Each degree of warming compounds the challenge for a state already operating near grid capacity during summer months. The relationship between climate trajectory and operational costs is direct: hotter summers mean more cooling, more cooling means more electricity consumption, and more consumption in a supply-constrained market means higher prices and lower reliability margins.
Global Temp Anomaly
+1.3°C
Above pre-industrial baseline. Texas summer temperatures already driving record grid demand.
Atmospheric CO2
427 ppm
Highest in 800,000 years. Leading indicator for regulatory and reporting requirements.
Solar Growth
200%+
ERCOT solar capacity increase over last 4 years. 877 projects in development.
ERCOT's long-term projections show data center demand potentially reaching 78 gigawatts by 2030, up from 8 gigawatts in 2025. If even a fraction of this materializes, it will fundamentally alter the economics of electricity in Texas. The state's competitive advantage on energy pricing (24% below national average) could erode as demand outpaces supply, making long-term energy cost modeling essential for any data center investment decision.
Risk Summary Matrix
Compiled from all data sources • February 2026
| Risk Category |
Current Level |
Data Source |
Key Factor |
| Drought / Water |
HIGH |
NOAA Drought Monitor |
73% in drought, governor disaster proclamation active since 2022, 3rd driest Dec on record |
| Wildfire |
HIGH |
NIFC / TX A&M Forest Service |
136% above normal fire activity, conditions matching 2024 Smokehouse Creek (1M+ acres) |
| Energy / Grid |
HIGH |
ERCOT / EIA |
220+ GW requested vs. 85 GW peak capacity. Isolated grid. SB 6 curtailment authority. |
| Severe Weather |
HIGH |
NWS |
Winter Storm Uri precedent ($195B), hurricane exposure, extreme heat driving record demand |
| Seismic |
ELEVATED |
USGS / TexNet |
45,000+ induced quakes in Permian Basin, M5.3 near Midland. Location-dependent risk. |
| Climate Trajectory |
ELEVATED |
NASA GISS / NOAA |
Rising temps compound cooling costs and grid stress in already supply-constrained market |
| Regulatory |
ELEVATED |
TX PUC / Legislature |
SB 6 implementation active, curtailment authority, transmission cost allocation under review |
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Data Sources & Methodology: All data in this report is sourced from authoritative government agencies and official filings including NOAA (U.S. Drought Monitor, NWS), USGS (Earthquake Hazards Program, TexNet), EIA (energy generation and consumption data), ERCOT (grid interconnection and capacity data), NIFC (wildfire statistics and seasonal outlook), Texas A&M Forest Service (state wildfire data), NASA GISS (global temperature), NASA FIRMS (active fire detection), and the Texas Governor's Office (disaster proclamations). Market data sourced from Bloom Energy, CNBC, Texas Tribune, and industry analysis. Regulatory information sourced from Texas PUC proceedings and legislative records. This report is provided for informational purposes and does not constitute investment, legal, or engineering advice. Climate and grid conditions change rapidly and should be verified against current sources before making operational decisions. This is a sample report demonstrating the type of analysis available through TWOCLICKS Custom Portals.