Texas has temporarily frozen new grid connections for large data centres while officials investigate whether an extraordinary pipeline of electricity requests represents real construction—or projects that may never exist.
Requests from data centres and other major users seeking access to the Texas grid have risen from approximately 48 gigawatts in 2023 to more than 474 gigawatts, according to documents reviewed by Reuters from grid operator ERCOT and Governor Greg Abbott.
That number is far larger than the power system could quickly supply. It is also unlikely that every request is genuine. Developers can submit overlapping applications, reserve capacity in several locations or approach a utility before securing land, financing or a customer.
This uncertain portion of the queue has become known as “ghost demand.”
Texas data centre freeze: key facts
- Texas large-load requests: More than 474 gigawatts
- Comparable Texas figure in 2023: About 48 gigawatts
- Main sources of growth: AI and cloud data centres
- Current action: Freeze and audit of new grid connections
- Agencies responsible: Public Utility Commission of Texas and ERCOT
- Information being requested: Ultimate owner, financing, incentives, water use and on-site generation
- Wider US large-load requests reviewed by Reuters: More than 700 gigawatts
The freeze does not mean Texas has banned data centres or disconnected operating facilities. It is intended to identify credible projects before the grid commits expensive infrastructure.
What is ghost electricity demand?
Ghost demand is electricity capacity requested for projects that are duplicated, speculative, underfunded or unlikely to be built.
Imagine a developer considering three possible sites for one data centre. It may ask three utilities whether each location can provide 500 megawatts. Grid planners can see 1.5 gigawatts of requested demand even though the company intends to build only one 500-megawatt facility.
Another applicant may control land near a transmission line but have no firm customer, chip order or construction financing. Reserving grid capacity can make the site more valuable, even if the developer cannot complete the project.
Not every early inquiry is dishonest. Companies need information about power availability before making a final investment. The problem arises when utilities combine preliminary inquiries with signed, financeable projects and treat the total as a likely forecast.
Why the number matters
Power grids must plan years ahead.
If officials believe all 474 gigawatts will arrive, they could approve new power plants, transmission lines and substations costing billions of dollars. If most projects disappear, households and existing businesses may be left paying for infrastructure that is not needed.
If planners assume the requests are exaggerated and build too little, genuine data centres may connect faster than new generation becomes available. That can threaten reliability and increase prices during periods of high demand.
Texas Public Utility Commission Chairman Thomas Gleeson summarised the challenge: planners cannot build the correct infrastructure when they do not know which requests are real.
How large is 474 gigawatts?
A gigawatt equals 1,000 megawatts. Electricity demand changes constantly, so the number should not be confused with annual energy consumption.
Still, 474 gigawatts of simultaneous demand would be several times larger than the existing peak load of the Texas grid. It is a project-request total, not a forecast that all facilities will switch on together.
Reuters found that very large users have requested more than 700 gigawatts across portions of Texas, the Midwest, Mid-Atlantic and South. That is more than ten times estimates of current US data-centre power use.
The gap between requests and existing consumption is one reason regulators suspect significant duplication and speculation.
Why AI data centres use so much power
Artificial-intelligence systems require specialised chips arranged in large clusters.
Training a frontier model can keep thousands of accelerators working for weeks or months. After launch, serving user requests—known as inference—also consumes substantial power, particularly for coding agents, video generation and long reasoning tasks.
The servers are only part of the electrical load. A facility also needs:
- Cooling systems
- High-speed networking
- Data storage
- Power conversion equipment
- Security and monitoring
- Backup power
- Lighting and other building services
Newer chips may perform more calculations per unit of electricity, but total demand can still rise when companies install more chips and offer more intensive products.
Why Texas became a data-centre hotspot
Texas offers available land, an expanding energy industry, business-friendly policies and several large metropolitan markets.
It also has its own major electricity system, ERCOT, which covers most of the state. Developers have targeted locations with access to transmission, natural-gas generation, renewable power and fibre networks.
The AI boom accelerated those plans. Big technology companies, cloud providers, property developers and investors began competing for sites capable of supporting hundreds of megawatts.
But grid access is not the same as a completed data centre. A credible project still needs billions of dollars, suitable equipment, permits, construction contractors and an end customer willing to pay.
How Texas plans to identify real projects
Governor Abbott's order calls for a comprehensive audit.
Projects will have to disclose the ultimate owner rather than listing only an affiliate created for a particular site. Regulators also want information about:
- Taxpayer-funded incentives
- Water requirements
- On-site power generation
- Development schedule
- Customer and financing status
- The party responsible for grid-upgrade costs
Better disclosure helps ERCOT compare applications and identify several requests linked to one underlying project.
Financial requirements can also filter the queue. Deposits, study fees or collateral make it expensive to reserve capacity casually.
Evidence that stricter rules work
Several utilities have seen their demand pipelines shrink after introducing financial guardrails.
Exelon reduced its estimate of high-probability data-centre demand by approximately 40% to 11 gigawatts after applying stricter collateral requirements.
In Ohio, AEP Ohio's pipeline fell by more than half after state rules introduced connection-study fees of up to $100,000 for data centres.
The projects removed from those lists were not necessarily fraudulent. Some may have been early-stage ideas that could not meet a higher proof standard. For grid planning, the important result is a more realistic queue.
Pennsylvania's approach
Pennsylvania has introduced similar oversight as developers pursue the state's natural-gas and electricity resources.
Governor Josh Shapiro signed an executive order on August 18 requiring stricter permitting for data-centre projects of 25 megawatts or more and additional disclosure about end users and development plans.
More than 100 data centres had reportedly been proposed in the state, but only 20 had applied for permits needed to advance.
Many proposals had not secured a power source or customer, according to an official cited by Reuters. That difference between public announcements and permit activity is a practical sign of ghost demand.
Could data centres raise household electricity bills?
Yes, if regulators allocate infrastructure costs poorly.
Utilities may need new transmission lines, substations or power plants to serve large customers. If a data-centre project cancels after construction begins, other ratepayers could inherit those costs.
Even completed projects can affect prices by increasing competition for limited electricity capacity.
Reuters reported that existing and forecast data-centre growth contributed to a $29.4 billion increase in capacity costs across roughly four auctions in PJM Interconnection, the grid serving 13 states.
That does not mean a single company received a $29.4 billion bill. Capacity auctions pay resources to remain available in the future, and their costs are ultimately recovered from customers across the region.
Why utilities cannot simply reject every early request
Data centres can bring investment, construction work, tax revenue and demand for new power generation.
Overly strict rules could push credible projects into another state or country. Utilities also need early information because large substations and transmission connections take years to build.
The policy challenge is to require enough evidence without demanding that developers finish every commercial decision before beginning the grid process.
A staged system can help: preliminary inquiry, paid engineering study, refundable or non-refundable deposit, signed connection agreement and escalating financial commitments as the project advances.
What happens to projects already under construction?
The Texas action focuses on new connections and the audit process. It does not automatically stop every project already being built.
Individual developments may be treated differently based on their stage, signed agreements and grid requirements. Companies with demonstrated financing and firm customers are more likely to remain in the credible queue.
The final rules from the Public Utility Commission and ERCOT will determine which evidence is required and how quickly reviews occur.
Is AI power demand itself fake?
No.
The existence of ghost applications does not mean the underlying growth is imaginary. Data-centre electricity use is rising, and utilities still report credible projects large enough to strain generation and transmission.
PJM said actual load is appearing faster than new generation. Texas is also home to real facilities already operating or under construction.
The distinction is between genuine demand and an inflated application queue. Removing duplicates improves planning; it does not eliminate the need for new power infrastructure.
What investors should watch
For data-centre developers:
- Upfront deposits and collateral
- Grid-study timelines
- Responsibility for transmission upgrades
- Required ownership disclosure
- Water and environmental permits
For utilities:
- Confirmed contracts rather than inquiries
- New generation schedules
- Rate protections for existing customers
- Exposure to cancelled projects
For technology companies:
- Whether promised computing capacity arrives on time
- Regional power prices
- Availability of alternative sites
- Ability to provide on-site generation or flexible demand
Large contract announcements should be compared with permits, grid agreements and construction progress.
The bottom line
Texas paused new data-centre grid connections because a 474-gigawatt request pipeline cannot be treated as a reliable construction forecast.
Ghost demand comes from duplicate, speculative or underfunded applications that make future electricity use appear larger than it may be. An audit, ownership disclosure and financial deposits can separate serious projects from placeholders.
The policy is not an end to the AI infrastructure boom. It is an attempt to ensure that households and businesses do not pay for grid expansion built around data centres that never arrive.
Sources
- Reuters: Texas' halt on powering data centers reflects US reckoning over ghost demand, September 1, 2026
- ERCOT and Texas government documents reviewed by Reuters
- Public Utility Commission of Texas statements
- Pennsylvania executive order on large data-centre projects
