6 February 20–26, 2025 dallasobserver.com DALLAS OBSERVER Classified | MusiC | dish | Culture | unfair Park | Contents Patrick has since told the Texas Tribune he supports the Stargate initiative and be- lieves Texas should be the “world leader in AI, data center and crypto. The key is to en- sure they have the power they need without a major impact to our electrical grid. “The industries understand that and they are working on solutions,” he said. Paying the Price ven as Dallas stands as a hub for data center development, Sen. Johnson says it’s a topic he rarely hears about from his constituents. “I don’t think a lot of people are wonder- ing if a data center is going to be built in their town or the next town over, but it will affect everybody,” Johnson said. “It’s not on every- one’s mind, like transgender sports and de- mocracy and January 6th. It’s just nowhere near as sexy as the kind of stuff that stirs our passions.” North Texans might start paying more at- tention to the data center boom once they see the price tag it’s expected to bring. A new report from ERCOT predicts that more than 3,000 miles of power lines will need to be built to accommodate the in- creasing energy demand. That infrastruc- ture alone is expected to cost around $30 billion, the Houston Chronicle reports, and those costs will likely be levied at consumers and small businesses. Because transmission lines are a public good, Texas residents can expect to see that $30 billion project reflected in their own en- ergy bills over the coming decade. Already, data centers benefit — and in some cases profit — from inexpensive energy costs and incentive programs. According to Department of Energy data, Texas residents paid, on average, 15 cents per kilowatt-hour in 2024. Industrial con- sumers, the category data centers fall under, paid only 6 cents per kilowatt-hour, despite creating the lion’s share of the demand growth over the last decade. Some data centers do have the ability to shut down during times the grid is strained; ERCOT has partnered with industrial con- sumers through the Responsive Reserve Service, which pays data centers to cease operations during high-use times to prevent blackouts. According to The New York Times, this program has resulted in ERCOT paying five industrial energy consumers at least $60 million since 2020. In most cases, the facilities ceased operations for only a few hours. ERCOT has indicated some interest in expanding the program to residential con- sumers. Thomas Gleeson, chairman of the Public Utility Commission of Texas, told Bloom- berg last year that the energy demand fix could be simple: Rather than having every data center ask to plug into Texas’ already wobbly grid, the centers need to begin sup- plying their own energy or find alternative sources, he said. This could be a major win for natural gas plants, especially in Texas where construc- tion projects in the Dallas area have access to Permian Basin gas. According to a study by S&P Global Ratings, data center develop- ment is expected to help bump the natural gas industry’s share of Texas energy produc- tion from 30.3% in 2025 to 34.3% 2035. In response to last summer’s grid projec- tions, Abbott and Patrick pledged to double the state’s $5 billion energy fund, which of- fers low-interest loans as an incentive for gas- fueled power plant developers. The fund also offers cash bonuses to existing plants that opt into connecting to the state grid. Gas power plants are better for the envi- ronment than coal or crude oil but more harmful than solar or wind energy, and Metzger is concerned what effect a natural gas renaissance could have on Texas’ carbon footprint. While large-scale data center drivers such as Amazon, Google, Meta and Microsoft have made pledges to reduce car- bon emissions by 2030, the S&P study pre- dicts most companies will be willing to quietly accept gas plants as a backup energy source. Also worrying for state leaders is the ef- fect data centers could have on Texas’ water supply, especially during drought periods. In a conversation hosted by the Dallas Citizens Council last December, Texas Gov. Greg Abbott said the current legislative ses- sion may be the “most successful session we’ve ever had” on water issues. Shoring up the state’s water supply would be a critical endeavor, Abbott said, to ensure Texas a smooth path forward with the artificial in- telligence data center industry. “[Data centers] require cooling and the cooling typically is not air cooling, it’s water cooling that is needed to get these things to function and to function effectively,” Cor- pora.ai’s Morris said. “And there are issues.” In 2023, protests broke out across Uru- guay as leaders welcomed a 72-acre Google data center that required two million gallons of water daily to cool its servers, amid a crip- pling nationwide drought so severe public water authorities began adding brackish es- tuary water to the public drinking supply, giving it a salty taste. That’s equivalent to the water demand of 55,000 people, local ex- perts estimate. By 2027, the global water demand from AI data centers is estimated to hit 4.2 – 6.6 billion cubic meters; that’s half the annual freshwater usage of the entire United King- dom, equivalent to 2.4-million Olympic sized pools. “We’re not against data centers or against AI, there’s a lot of uses that are ben- eficial to society. They’re using AI to de- velop or identify new drugs to treat diseases and things. So there’s definitely a lot of benefits,” Metzger said. “But given the enormous strain that they have on our electric grid, our water supplies, our envi- ronment, I do think it’s worth asking the questions, do we need all of these?” Swings at Regulation lthough the data center regulation talk hasn’t overwhelmed the legisla- tive session as Metzger had hoped, it will likely become a more prominent talking point in the coming months. (Our lawmakers first have to work through the critical things, like education vouchers and ending the sale of THC products.) The Texas Senate Business and Com- merce Committee, which Johnson sits on, has focused on several of the key complaints levied against data center and crypto mining facilities. In a recommendation report sub- mitted to the lieutenant governor in Decem- ber, the committee suggested industrial energy consumers be required to “offset their impact on the grid by adding on-site power systems or participating in programs to curtail electricity usage during peak de- mand periods.” The same recommendation report keyed in on ERCOT’s Responsive Reserve Service program, and urged the state to “consider closing loopholes that allow these companies to leverage financial perks for private benefit.” The committee also encouraged the Legislature to consider measures that would protect small con- sumers from paying an unfair portion of energy costs by introducing a cap on trans- mission costs. They’re small steps, and it’s unclear what impact they would have on an initiative like Stargate, where details have been few and far between. Then there’s ERCOT, whose forecasts are just that; the energy supplier could be overstating the problem, and the strain on the grid may not be as drastic as has been predicted. But it could be. Johnson feels optimistic about what the Stargate endeavor could mean for North Texas, if handled correctly, although he’s also fairly skeptical of the “arrogance and ig- norance of people who rush in.” “Just because a bunch of wealthy tech people say they’re going to drop $100 bil- lion in Texas doesn’t mean it’s going to happen. And it doesn’t mean it will hap- pen at the pace they want it to or in the manner that they envision. Industry hasn’t always been the best at forecasting the consequences of their actions to everyone and everything around them,” Johnson said. “I think there’s great promise here, but there’s also a lot of bluster and bullshit.” ▼ HOUSING HOMELESS HOUSING OR JUST HOUSING? DALLAS MAY SELL HOSPITAL PURCHASED FOR HOMELESS HOUSING. BY EMMA RUBY I t has been three years since the city spent $6.5 million on the former University General Hospital with plans to build a housing and services facility for the home- less — a purchase that inspired community vitriol so rabid that the entire project has sat listless for years. Now, the city may finally be throwing in the towel. Council member Zarin Gracey submitted a memo recently asking for the Economic Development Committee to discuss selling the property at an upcoming meeting. The memo lists a mixed-use development balanc- ing housing and retail as the preferred use for the site. The full City Council would have to approve the sale of the property following a recommendation from the Economic Devel- opment Committee. Gracey, who was elected to the District 3 seat in a 2023 runoff election, inherited the controversial 2929 S. Hampton Road project and has pushed for the facility to be sold throughout his tenure. The city is ex- pected to lose money on the sale — al- though financial matters are generally discussed in executive session so it’s un- clear just how much value the property has lost while in Dallas’ care. Already, $35,000 a year has been spent on keeping the empty facility secure, city staff told the Housing and Homelessness Solutions Committee in January. It was that meeting — where nearly ev- ery question asked about the Hampton Road hospital was answered with a “don’t know” or a “we’re waiting” — that motivated Gracey to formally ask the council to assess developer interest in the 12-acre property. “It’s continued to get pushed and pushed and pushed further and further back, and there’s no movement there,” Gracey told the Observer He added that he knows of at least two parties interested in taking the property off the city’s hands. “This is a case where we’re trying to come up with a solution for the entire city in a place where that solution doesn’t make sense,” Gracey said. “I’m just trying to get some practicality to all of these things Brandon Bell/Getty Images A new report from ERCOT predicts more than 3,000 miles of power lines are needed. Unfair Park from p4 >> p8
