Permit suspension and project risks
AI infrastructure expansion has been constrained in Texas, which has emerged as the largest data center market in the United States. Ahead of the midterm elections, the state government suspended new data center permits as residents' opposition over electricity and water consumption grew.
On October 29, local time, Bloomberg reported that developers were considering shifting investment to other states, including Utah, Georgia and Iowa, following Texas Governor Greg Abbott's suspension of data center permits.
On September 21, Abbott said that new data center permits would be suspended until investigations to protect the power grid and water resources were completed. The policy is to put new data center permits on hold while the Electric Reliability Council of Texas (ERCOT) and the Texas Water Development Board (TWDB) investigate electricity and water use.
The effects of the restrictions are spreading to individual projects. US data center developer Tract claimed that delays in grid connection approval for a 500-megawatt (MW) data center it is pursuing near San Antonio, Texas, could cause the construction project itself to fall through.
US developer Rowan Digital Infrastructure also said that additional financing could be disrupted for a $4.2 billion, approximately 6 trillion won, data center campus it is pursuing north of Austin, Texas.
The effects of the permitting restrictions are also spreading to major AI companies. Financial institutions postponed the sale of $15 billion, approximately 20 trillion won, in loans associated with a Texas data center that Anthropic plans to lease. In a filing submitted to the US Securities and Exchange Commission (SEC) on October 26, Anthropic said that Texas regulations were limiting the expansion of computing resources needed to operate AI models.
Residents' concerns and the election
The tighter restrictions come amid residents' concerns about data centers' electricity and water consumption. In an August poll of 1,200 registered Texas voters, 57% of respondents opposed data center construction in their communities. Concerns about higher electricity bills and water shortages are outweighing expectations of job creation and increased tax revenue from attracting data centers.
The article also cites analysis that the political situation ahead of the gubernatorial election, held alongside the November 3 midterm elections, played a role. Abbott, who is seeking a fourth term, previously emphasized turning Texas into an AI industry hub but has recently shifted toward tighter restrictions. Democratic gubernatorial candidate Gina Hinojosa criticized Abbott's suspension of data center permits as a political show for the election.
Market observers expect data center construction delays could continue after the election because of stricter grid reviews. In particular, financing for early-stage projects is expected to become more difficult as investors assess project feasibility more rigorously.
Original Korean article: theguru.co.kr
English brief by Korea Wind Intelligence, koreawindintel.com
