Data center industry leaders are divided on the wisdom of Texas Gov. Greg Abbott's pause on data center grid connections in the Lone Star State.

Texas is the nation's fastest-growing data center hotbed, on track to surpass Virginia as the industry’s largest market by 2030. This growth surge has been driven by the state’s reputation for easier pathways to power and a business-friendly political environment.

But earlier this month, Abbott, a Republican who had previously been supportive of data center expansion in the state, issued a directive to halt all data center connections to the Texas grid until state agencies conduct a comprehensive audit of each project to determine their planned power and water consumption, ownership and other information.

The data center freeze comes ahead of midterm elections in which opposition to data centers has emerged as a central campaign issue championed by candidates from both parties.

For developers with projects awaiting power in Texas, Abbott’s pause has put timelines in limbo, creating significant uncertainty as to when — or if — they will secure the grid connections needed to move forward.

This has generated rancor within the data center industry. Speaking at Bisnow’s DICE: South event in Arlington this month, some Texas data center developers called Abbott’s edict a mistake, arguing it is a politically motivated measure that threatens to slam the brakes on the state's digital infrastructure boom.

But other prominent industry voices have expressed support for the data center pause.

Leaders of large data center firms said at DICE: South that while Abbott’s decision will create pain in the short term, it is a necessary step if the state is going to make informed decisions about which projects receive power first. They said the audits will help separate the wheat from the chaff when it comes to projects waiting for power and will ultimately be a boon to legitimate developers.

Among those applauding the pause is Skybox Datacenters Chief Development Officer Haynes Strader, who said he “could not agree more strongly” with the Abbott administration’s actions.

“The reality is we need a much firmer grasp on who's about to get interconnected to make sure it's the responsible players in this industry and to make sure that it supports the right narrative in Texas,” Strader said at the event, held at the Live by Loews Hotel Arlington.

The power grid operated by the Electric Reliability Council of Texas is considering more than 474 gigawatts of power capacity requested by large projects, according to the Abbott administration — more than five times the record demand on the state grid and the equivalent of connecting more than 415 million new homes. It said 90% of those power requests come from data centers.

That load growth could jeopardize the stability and reliability of the state's grid, the governor’s office warns.

Frustratingly for data center developers, the ordered pause came just days before what was expected to be a moment of clarity for many projects awaiting grid connections.

With so many data centers looking for power, ERCOT’s interconnection process had become overwhelmed. In response, earlier this year, ERCOT and the Texas Public Utility Commission developed a new “batch” system, in which dozens of projects would be studied together in a single planning cycle instead of evaluating each data center project individually.

ERCOT was in the process of determining which projects would be included in the first of these planning cycles, known as “Batch Zero.” The decision would carry enormous consequences for developers, effectively deciding which projects receive priority for grid connections. Projects not included in Batch Zero would likely face far longer wait times for power.

Developers had been expecting a decision on Aug. 7, a critical milestone that could clarify which projects move forward and on what timeline. Instead, Abbott’s order, announced just days earlier, has delayed these decisions.

Even developers supportive of an interconnection pause, like Strader, said they were frustrated that a deadline that promised long-awaited certainty is now being prolonged indefinitely.

“We were all, for those of us in that process, very much looking forward to [Aug. 7] and getting a notification of where you stood in what's been an arduous 18-month process to get to interconnection,” Strader said. “That is causing a lot of consternation.”

Among the firms directly impacted by this delay is Gigabit Fiber. It requested power from utility Encore three years ago and still doesn’t know when that power will be delivered or have a clear understanding of its place in the queue, CEO Tom Spackman said at DICE: South. He said he had hoped this month would bring greater clarity, but instead it has only prolonged the uncertainty.

Spackman said Abbott’s interconnection freeze is a “horrible decision,” one that undermines the free-market economic ecosystem that drew data center developers to Texas in the first place.

Instead of being evaluated through the objective measures in the ERCOT study process, the upcoming audits mean politics and public relations will have a role in who gets power first, he said.

“He essentially is going to set up a system where we're going to have a beauty contest, not one driven by economics,” Spackman said. “I think the free market has to decide this.”

Multiple DICE: South panelists argued that the planned audits will weed out speculative projects and developments proposed by firms that are likely unable to bring them to fruition.

Even with the new batch evaluation process, ERCOT is still overwhelmed by the sheer number of projects that have to be evaluated, and Abbott’s mandate will help unclog the queue. According to Skybox’s Strader, this will benefit established firms with track records and strong reputations, who will likely jump to the front of the line for power. And while it will derail certain projects, Abbott was left with little choice but to create a system to pick winners and losers, he said.

“It's going to cost a lot of projects their opportunity to succeed, which is going to stink for lots of people,” Strader said. “But the reality is something has to be done to process four times the actual grid worth of requests down to a bite-sized number.”

CleanArc Data Centers Chief Operating Officer Lindsey Bruner argued that the planned audit process might look like a burden now, but it may be beneficial over the long term by bringing transparency to a development process she said has sparked community opposition and damaged the industry’s reputation.

In Texas, projects proposed outside city limits often face little oversight or scrutiny prior to approval. Although developers have traditionally viewed this as a competitive advantage and one of the draws of the state, Bruner said this has left many communities feeling blindsided when massive projects are snuck in “under the radar.”

Requiring developers to publicly disclose information about projected power and water consumption and who is actually building the data center — and allowing communities to subject projects to a public approval process — could ultimately improve public trust in a sector that has increasingly become a political punching bag for Democrats and Republicans.

“Obviously, there will be impacts to some projects, but overall, it will be a good thing to help move the industry forward in a more positive light,” Bruner said.