Even AI Data Centers Now in the Power Queue... Rapid Investment Faces New Obstacles [Weekend Money]

Texas Steps Up Scrutiny of Data Center Power Grid Connections
20% of U.S. Development Pipeline Faces Delay Risks
Power, Water, and Permitting Emerge as New Variables for AI Infrastructure

The core of the artificial intelligence (AI) investment race has, for some time, centered on who could secure more graphics processing units (GPUs) and who could build larger data centers. However, a new variable has now emerged. Even if companies build new data centers, it has become uncertain whether they will be able to reliably access the electricity needed in a timely manner.

In a recent report, Hana Securities analyzed that more obstacles are cropping up in the way of data center investment in the United States. The issue has extended beyond who shoulders the cost of power infrastructure—there are growing concerns that, even with the willingness to pay, it may not be possible to secure the required electricity supply at all.

Tighter Scrutiny Means Data Centers Must Queue Up for Power

A prime example is Texas. Early this month, the state government of Texas temporarily halted the standard review process for new data centers waiting for power grid connection approval and decided to carry out additional reviews of those projects first. Whereas previously the main consideration was whether the grid could stably accommodate large-scale power demands, the authorities have now decided to examine the appropriateness of data center projects themselves.

The scope of the review has also broadened. Ownership and governance structure, public incentives, projected consumption of electricity and water, the ability to self-procure resources, and the impact on the local community will all be newly evaluated. However, this does not amount to a total ban on data center construction in Texas. Rather, the intention is to screen the surge of applications and select projects with a high likelihood of actual execution.

The main driver behind these changes is the explosive increase in demand for power grid hookups. The size of the queue for large-scale power connections filed with Texas grid operator ERCOT has reached about 474 gigawatts (GW). This figure exceeds five times the state’s maximum peak demand, which is about 91 GW. Roughly 90% of these applications are understood to be related to data centers. Of course, not all of this demand will be realized—some projects are still in the early stages or are speculative in nature.

Delays in Power Grid Access Now Pose Project Risks for Data Centers

The problem is that delays in power grid access could become a serious project risk. Data center construction and approval for grid connection are separate processes. Even if the land has been secured, customer contracts are in place, financing has been arranged, and construction is underway, actual operation will be delayed unless grid access is guaranteed. If electricity supply is postponed after investments have already been sunk into buildings, servers, and GPUs, companies face a scenario in which cash outflows have occurred but revenue and cash flow have been pushed back.

BloombergNEF estimates that the recent measures in Texas could expose around 20% of the entire U.S. data center development pipeline—totaling 49.8 GW—to delay risk. Further analysis found that, if the power supply to projects expected to go live by the first quarter of 2027 is delayed, up to 8 billion dollars (approximately 11.0592 trillion won) in revenue could be affected.

The regulatory environment is not limited to the power grid. Recently in the United States, issues such as environmental impact, water usage, community burdens, and permitting challenges have all emerged as potential obstacles for data center construction. The state of New York has introduced a one-year statewide moratorium on new hyperscale data centers, while Pennsylvania has excluded data centers from its expedited permitting program and strengthened environmental, transparency, and local government approval requirements. In the network managed by PJM (the grid operator covering 13 states in the eastern and central United States and Washington, D.C.), there has been a proposal for data centers to reduce grid usage and switch to backup power during emergencies.

A New Era of Project Differentiation Ahead

Project differentiation is expected to become highly significant. Data centers that have already secured grid connection approval and customer contracts will be at a relative advantage. In contrast, those still waiting for approval will need to explore alternatives, such as utilizing their own power generation or adopting phased grid connections. Youngju Lee, a researcher at Hana Securities, explained, "If uncertainty recurs, lenders and investors are likely to set more conservative conditions regarding electricity supply and the timing of operations," adding, "It is also possible that securing project financing itself could again become a constraining factor."

Lee concluded, "Although the recent regulatory and screening processes being implemented across the U.S. may seem aggressive, they can also be understood as a prudent adjustment phase aimed at filtering the rapidly increasing number of data center development plans down to those with actual demand and high feasibility."

This content was produced with the assistance of AI translation services.