Texas Needs 'All-of-the-Above’ to Meet Future Power Requirements

KEY POINTS

• Last Energy plans to build 30 Small Modular Reactors near Dallas to supply reliable, 24/7 power to data centers, addressing surging demand and grid stress in Texas.

• Texas power demand is skyrocketing, driven by new housing, climate change, and especially data centers, which now account for 9% of usage. Grid connection requests have more than doubled since March 2024.

• Texas is expanding power capacity using renewables, gas, and nuclear, but delays, high costs, and policy shifts—especially around renewables—complicate efforts to meet 2030’s 75% higher demand forecast.

Last Energy has applied to connect 30 Small Modular Reactors near Dallas to meet the increased power demands associated with proposed new data centers.

Texas faces a surge in power demand over the next five years. New and existing data centers are often singled out as the newest and biggest power customers. Texas is already home to over 340 facilities, and many more are planned.

Surging Power Demand Driven by Data Centers and Growth

According to NucNett, data centers already represent about nine per cent of all of Texas’s electricity demand.

ERCOT, the non-profit organization that manages about 90 percent of the state’s electrical load, says requests for new grid connections have more than doubled since March 2024. This includes big power users such as data centers, bitcoin miners, and hydrogen producers.

Last Energy has applied to connect 30 Small Modular Reactors near Dallas to meet the increased power demands associated with proposed new data centers. Image: Last Energy

Overall economic expansion and the rapid growth of new housing developments stand alongside as demand factors, as does a continually warming climate. In his 2025 Preliminary Summer Weather Outlook issued in April, ERCOT supervisor of operational forecasting Chris Coleman predicted 2025 to rank among the 10 hottest summers in state history. That means an increased use of mechanical cooling.

Demand projections for 2030 have been revised upwards by 75 per cent from the current record levels.

This will require all forms of power generation to meet the state’s needs, a likely combination of natural gas, renewables, and nuclear.

Natural Gas and Renewable Energy Face Growth and Headwinds

Natural gas power generation continues to grow in Texas, thanks partly to the State’s low-interest loan program.

Natural gas power generation continues to grow in Texas, thanks partly to the State’s low-interest loan program. Image: Montgomery Power
 
The future supply of power generation in Texas will be interesting. Each potential source has cost and timeline implications.

Texas has already responded with a significant growth in power generation, particularly from renewables. According to ERCOT, more than 9600 MW of capacity has been added to the state’s grid since last summer. Nearly 5400 MW came from solar, 3821 MW from energy storage, and 253 MW from wind power. Texas led the country in newly installed wind and solar capacity in 2023 and 2024. Today, 30 per cent of the state’s power comes from these two sources alone, up from 18 per cent in 2019.

However, President Donald Trump’s “One Big Beautiful Bill” Act cut the heart of federal tax incentives for new wind and solar generation for large projects and individual homeowners. As a result, although Kristi Hobbs, ERCOT’s vice-president of system planning and weatherization, reported in June 2024 that over 85 per cent of generation seeking interconnection was solar, this was before recent tariff uncertainty and tax cancellations.

Downward revisions are probably now necessary. Approximately 5,300 MW of renewable energy projects pulled their connectivity requests in May and June of this year alone.

The high cost of solar generation in the United States is also hard to ignore. In an interview with Inside Energy, Chris Seiple, Wood Mackenzie’s vice-chairman for power and renewables, estimated it costs 50 per cent more to develop solar power in the U.S. than in Europe. Yet there may be little choice but to pay the price, since solar power can come online faster than other generation methods.

 

Texas led the U.S. in new installed solar and wind power generation in 2023 and 2024. Image: OCI Solar Power

Small Modular Reactors: A Nuclear Option for Data Center Power

In the meantime, at the state level, Texas continues to show its long-standing bias towards fossil-fueled power generation, despite a 366 MW decline in natural gas power generation capacity since last summer due to facility retirements, deactivations, and losses of available generating capacity. A $5 billion addition to its Texas Energy Fund, a low-interest loan program to incentivize the development of gas-fueled power plants, was recently passed into law.

However, new natural gas generation isn’t cheap. Ed Hirs of the University of Houston told local media that the cost to build a new natural gas power plant has doubled over the last four years, outstripping cost increases for large-scale solar farms. These plants also take years to build and require steel pipelines to carry fuel to the facility site.

However, this isn’t slowing down interest in natural gas power generation in Texas.

As reported in local media, the builders of Stargate in Abilene, Texas, one of the world’s most significant data center projects, applied for permits in January to build 360 MW of gas power generation. Elsewhere, more than 130 new gas-fired power plants are reportedly being planned.

ERCOT estimates that Texas’s near-term power demand will expand to a level equivalent to 30 new nuclear plants. This raises the question of whether Small Modular Reactors (SMRs) are the answer.

SMRs make sense for large users like data centers, given their need for reliable 24/7 power, despite their high capital cost relative to natural gas and renewables. Gordon Dolven, director of data center research at CBRE, says this connection should continue to strengthen. In fact, Amazon and Google have each announced plans to use SMRs to generate electricity for their future data center projects in various parts of the country.

SMRs are coming to Texas, too. Last Energy, a U.S.-based micro-nuclear technology developer, announced plans in February to build 30 microreactors on a 200-acre site in Haskell County, west of Dallas, to serve data center customers across the state via a grid connection with ERCOT.

Texas Power Future Requires All Generation Methods

Ultimately, there will be no single solution for power generation in Texas. Every available method will be explored and utilized based on the timelines surrounding customer demand.

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