Why Texas Is Making Data Centers Wait
a16z.com474 GW!!! Good God that's at LEAST the 5x our peak winter demand for the entire state.
And they want to mostly power it with on site GAS?!
What is even happening.
Everyone is using AI for everything now. Including people on here. It's "AI this" and "AI that". Why are people surprised this is what has happened? Has nobody on this forum ever lived in the contrast of a home with minimum appliance, then moved to a place with 4 gamers all over clocking their GPUs for 3 to 4 hours a day, and not observed the delta in utility bills? I'm honestly shocked everyone is surprised at what is happening.
Well, not everyone is using AI, and many of the people using it are using it becuase somebody else (a product vendor or employer) decided to put it in front of them as a tremendously less efficient and much less reliable but very flexible replacement for what they'd already been using.
They're mostly not opting into some change from no appliances to a houseful of hardcore gaming, they're being led from a houseful of servicable traditional appliances to a houseful of elaborate whizzbang futurist appliances that don't actuallg change much about what they get done in a day.
And all the absurdly more costly resource demands of these received whizzbang doohickies are off-site, so yes, people get pretty shocked and confused when confronted with those extreme hidden costs.
A good number of people doing their daily Google searches are now “using AI”.
> many of the people using it are using it becuase somebody else (a product vendor or employer) decided to put it in front of them
This doesn’t change the usage without a pendulum changing direction, and it doesn’t currently seem to be.
I’m still shocked at how nonsensical it all is every time I hear it because there’s people who claim it makes sense. There’s a chart in that article showing that 1/10th the proposed GW is online. And that’s just for Texas. What the hell do we need 10x the capacity we’ve got right now for? The best case is that makes tokens too cheap to meter which would be sweet for everyone but the investors. I don’t see how this ends any way other than a massive burst.
Anytime you hear someone claim that something would bring about the benefit of something being "too cheap to meter", stop believing them right there. These companies are not charities, they are not there to give you something so insignificant in value that they cannot be bothered to measure its worth. That's their entire reason for being: to find new ways to measure value that's otherwise unmeasured and charge for access to that value.
Right obviously. So then what happens with 10x the data centers? How do you saturate that in any reasonable way? The options are 10x usage, 1/10 cost.
Probably 10x usage.
Think about it this way: when OpenAI was founded, it was a public benefit corporation. It had to take into account the "public good" - which is nebulous, but whatever - and capped returns for shareholders at 100x initial investment. It has since been converted into a for-profit corporation and I recall reading that the earnings cap has been done away with, but that should give you at least some idea of the stakes.
According to these guys [0], there has been a total of $180 billion invested in OpenAI since its founding. Assuming there's not been a change in what the shares were sold for to each round - which is a fairly large assumption, I know - for them to reach the 100x threshold that was apparently too low to be followed, the company would have to reach a valuation of $18 trillion dollars.
For what it's worth, the year-on-year GDP of the world's largest economy, the United States, was $32.56 trillion in Q2 2026. [1]
You don't reach a little over half of the economic output of the US in valuation by cutting costs.
[0] https://tracxn.com/d/companies/openai/__kElhSG7uVGeFk1i71Co9...
> Everyone is using AI for everything now.
I don't think it's that big of a trend. There are a lot of people around forums like this who use it (I am one) and a lot of business leaders who want it so they can tell people like me that they need to find somewhere else to work. For the average person, it feels like living in Uncanny Valley and puts their livelihood at risk. They don't like it.
The resistance to AI is real. You don't see moratoriums and protests like this come out of nothing. People don't want to subsidize the infrastructure construction costs for an industry known for its insanely wealthy individuals, especially not if doing so could realistically put them out of a job within the next decade.
According to the article, a lot of those requests are a result of speculative spamming, not unique, set-in-stone commitments to build.
I thought that the gas was being flared off anyway, feeding it into a turbine at least makes some use of it.
I'd be surprised if flaring consumed more than a tiny percentage of NG produced in the state.
Most of the state's electricity comes from NG, so clearly there is a market for it. Not to mention heating, cooking, exports, ...
If this is a use for otherwise wasted flare gas that’d be a totally different story but I feel like that would be mentioned if that was the case.
https://www.chevron.com/newsroom/2026/q2/chevron-signs-20-ye...
In 2025, Texas vented or flared enough natural gas to generate roughly 2 gigawatts of useful electrical power continuously for the same period.
https://www.eia.gov/dnav/ng/NG_PROD_SUM_DC_STX_MMCF_A.htm
A lot of gas is burned off simply because it cannot be delivered. Pipelines have a maximum capacity and short term storage is limited.
Most flaring happens where there isn't gathering infrastructure, for example byproduct gas at an oil (only) well.
2GW, not 400.
What’s happening is that Texas, a state largely owned by the fossil fuel industry, is trying to create demand in their state for that product by trying to attract energy intensive industries but then incentivizing them to power everything with gas.
If those incentives come from that taxpayer then this is a roundabout transfer of tax money to gas companies.
This is a bubble. AI just got hot a few years ago and it takes years for the semiconductor industry to design and produce new kinds of chips at scale. I expect tons of new chips to hit the market in 27 and 28. These will run models much faster with less power because they are designed for this specific use case.
Meanwhile there’s constant ongoing research on more efficient models and ways of quantizing them without performance loss.
I don't think the model of highly concentrated data centers makes a lot of sense. From a security standpoint, you can target them easily. It's better for everyone (except perhaps a handful of elite power-mongers) if the hardware is distributed among the populace. I've pushed for something like this before, where each home has a 128GB+ powerful computing rig they can use to run LLMs, generate images and whathaveyou.
I get why the people in power want it, you can concentrate dependence on your asset, do surveillance and industrial espionage. But it's so obviously better to have the power distributed out among the people that it's a no brainer for the average joe/jane.
No doubt, there is still a need for large datacenters to generate models, but we should be looking to a more sustainable/distributed approach when it comes to inference, or running the models. That way people can keep their data, not have their ideas ripped off, not be subject to the whims of whatever policy some technocrat dreams up and not be shit out of luck if someone strikes us-east1 or some such place.
I've been thinking the same way. I bit the bullet and purchased two DGX sparks and am running GLM 5.3 Flash at a reasonable quant and it's quite amazing seeing this "brain" on my desk do real work and create code without anything leaving the building. But look what happened with hosting, it got more and more centralized over time. In the early 2000s there were more companies self hosting than now I'd bet.
FYI the Texas grid produces the most power of any state, twice as much in fact as either California or Florida.
It is also disconnected from the rest of the US power system. There was a Planet Money episode on it a few years back. https://www.npr.org/2022/09/21/1124365488/the-midnight-conne...
It is also poorly regulated and failed recently and killed several hundreds of people.
Oh, and the energy market that underpins the Texas grid was designed by Enron, literally.
https://www.npr.org/podcasts/1004840920/the-disconnect-power...
The power has been great since the freeze. Market forces fixed the problems. People were making $9,000/kwh at times. That's never going to happen again.
Do you live there? I do. Do you get the texts from ERCOT saying "if you don't turn off some shit the grid will fail due to the weather" several times a year. I do.
> "Great since the freeze"
I take it you know nothing about the back story and didn't listen to the podcast. Prior to this "great freeze" there was another "great freeze" and thing went well for a long time between them until they didn't. Virtually nothing structural that caused the conditions of the failure have changed.
I lived through it. I've listened to the podcast. 2026 is not 2021 or 2022. Since about 2022 or maybe 2023 I have never received a single ERCOT warning message text. Before then they were pretty common.
I'm saying it was a problem, it's been addressed. We had one of our hottest Augusts on record this year without a single issue.
If you think it's structurally broken there are energies futures markets you could use to make a lot of money on.
I was wrong. The bulk of my notifications are from Austin Energy. But ERCOT does still send them too. This is my last one:
> Austin Energy: ERCOT expects tight grid conditions, requests conservation Tue., Jan. 16, 6-9 am. Similar conditions expected Wed. morning. More info: ercot.com/txans . Conservation tips: austinenergy.com/alerts . > > ERCOT espera condiciones de red ajustadas, solicita conservación Martes, 16 de enero, 6-9 am. Se esperan condiciones similares el miércoles mañana. Más información: ercot.com/txans . Consejos de conservación: austinenergy.com/alerts . Responde STOP para cancelar. Reply STOP to cancel.
> it's been addressed. We had one of our hottest Augusts on record this year without a single issue.
No significant changes to weathercation regulation. No significant changes to the energy market. What exactly, from a systemic perspective, do you feel "has been addressed"? What little I see is too little.
> If you think it's structurally broken there are energies futures markets you could use to make a lot of money on.
What on earth? My problem is that the market is built to incentivize profit over preventing human pain and suffering. That's not a "make money here" opportunity.
Yeah man market forces man, don’t worry about it man the market fixed it, nah man massive federal subsidies didn’t do anything man don’t worry about it. The inflation reduction act? Never heard of it!
I also would not be so confident about it never happening again, handling the summer well does not indicate necessarily that the winter will go smoothly, they’re different loads.
> Market forces fixed the problems
1) That's assuming that they actually did fix the problems
2) The idea is to plan and regulate so you don't have market forces fixing problems when the problems are dozens of people freezing to death, massive structural damage to buildings, fires, and business stoppages.
> Market forces fixed the problems.
With zero threats from government?
From what I can tell a bunch of batteries, solar and wind came online since then not sure if the govt was involved or not.
We had PLENTY of capacity at the time of grid failure. The problem was that natural gas plants didn't pay for cold weather weatherization so the pipes literally froze.
The wind turbines were plentiful but lacked de-icing capabilities (another cost cutting measure).
Batteries are good, but my power was off for 72 hours. Some lost it for double that.
To your point "great since the freeze" why would a corporation take on significant costs for a thing that happens only once every decade or so. Much cheaper to let people freeze to death in their own homes.
Regulations don't take away the cost. But they level the playing field. Without them, the market will punish "excess" aka "redundancy". An operator who does the right thing will find themselves unable to compete. Not just decreased margins but possibly put out of business.
Which is why the real failure is the design of the market. And that fundamentally hasn't changed.
What regulations would you like to see?
I think data centers and power are the dark-fiber of this current "bubble".
Inference is 2/3rds of the power used in AI, and I expect the majority of inference to go local in the next 2-3 years, about the time these data centers will come online.
The other 3rd is training, and the major labs are training 6-7 times a year right now. But I suspect we will see a few things. 1) training iterations will slow as the improvements between training runs gets lower and lower. Is it worth spending an extra $500M(ish) for the small improvement in quality? Who is paying for that?
2) Training improvements and improvements in GPUs will require less power. Along with fewer training runs, as we add more and more tokens, the amount of power needed for a training run will likely asymptote at some point.
The dark fiber comparison is very close. I remember contracting bandwidth with Global Crossing in the late 90s/early 2000s when they were HOT and two years later they were bankrupt.
the TLDR is that the current historic peak supply of the texas grid is around 100gw. The queue of datacenter demand is 460gw.
If the new capacity uses gas to deliver the power it will consume more gas than the USA exported last year.
So basically it will drive up costs _globally_ to a comic scale, for limited return (its already expensive to train new models, this will make it ruinously expensive to both train _and_ run)
I am not climate change activist. But spending that much energy coming from fossil sources sound like something that we really should be very critical about... Is this really the best use for energy we have?
Gets just a little tricky on one aspect;
Lots of oil sites, oil refinery plants, (heck, even landfills) just 'flare' excess Natural gas today.
Biggest reason for that, is, they don't have the infrastructure to store that excess safely (at least around here, a lot of the landfill trucks are NG powered as a way to lower their fuel costs and lower flaring, but storing too much NG in one place makes for a fun terrorism target.) Natural gas is actually -way- worse for global warming than CO2, thus the flaring process.
Not saying that's a good thing. It would be better if companies saw the growing energy demand and figured out how to economically put power generation in place, back when such projects would have been cheaper to build. Alas the cost/benefit for that has usually been on the wrong side, to the detriment of us all.
Well, the climate is part of it, but I deliberately steered clear of that, because people get funny. I do agree it seems like a frivolous waste.
the thing that people _will_ notice is that they will not be able to afford LNG (ie heating), but that will also drive up peak energy price, so summer nights will be very hot because peak generation can't kick in because all the gas is contracted out.
Then if AI actually works, more than it does now, it'll put loads of people out of work. This means that money supply dries up. This pushes up the cost of debt. Meaning that infrastructure gets _more expensive_
that and mass unemployment.
It just seems that all these clever people live in thier own little worlds, without bothering to look at how people around them will be affected.
> It just seems that all these clever people live in thier own little worlds, without bothering to look at how people around them will be affected.
I'd like to add the possibility that all these clever people did look at how people around them will be affected, and they either consider the personal gain to be worth the pain, or they think "if I don't do it, the other guy will!"
Economically speaking, each of them is behaving rationally. And since economics also tells us that locations refusing them will be left behind, we can't say no, right? And let's not even think about how much money these people are pumping into politics... IMO the obvious conclusion is that our economic system is fundamentally broken, because it affords far too much power to individuals.
As a thought experiment, consider that comparable mountains of money would have been available to massively increase the housing supply while making positive RoI, but it didn't happen because these people wouldn't have made enough money.
I don’t want to be hyperbolic, but to me this technological revolution more than any other in history feels like Silicon Valley and its VC class going to war with rest of human society.
> AI is needed to reindustrialize America.
It seems like they have no idea or are willfully deceiving why Americans want to reindustrialize USA. It’s not because they feel bad that things aren’t made in USA anymore, it’s because they want those manufacturing jobs back. If you replace humans with robots, it’s almost like a monkey paw’s fulfillment of a wish. They want to build 2 Trillion of data centers to get rid of your white collar jobs and your blue collar job, and you’ll be happy for it cause GDP go up. SMH
They want slaves. Full stop. Does anyone think if somehow Altman or Dario or whomever creates AGI/ASI that they won’t hold it captive? That ASI would never be free it would be a slave to them.
The entire effort is dehumanizing. Because the goal is slavery.
I think a different issue is going to arise much sooner than any kind of conscious AGI: once their data centers can handle almost all digital labor (including research), how are all the workers going to earn money?
Sure, some new fields will open up. But there's a good chance that the majority of us will be competing for physical jobs that robots aren't yet able to do. What other choice will we have, especially if prices keep rising and inference hardware becomes too expensive for normal people?
Now consider the effect on a market if the supply suddenly grows a lot, while demand stays largely consistent.
This entire essay is so obviously Claude
Pangram says mostly human
easy to trick pangram.
any evidence for that? genuinely interested. all the evidence I've seen is that Pangram has a very low false negative rate.
Seems so. AI is unlikely to make A16Z cheaper, if anything, we might see the first 4-and-40 fund from them next year. As long as the Senate is controlled by Republicans and the Fed is led by Warsh.
I totally disagree? It seems quite human-written on the contrary; I don't see any strained metaphors, weird word usage or other AI hallmarks.
the graphs are pretty clearly made and labeled with AI
I don’t think that statement supports the original comment
> This entire essay is so obviously Claude
It might be worth reviewing the site guidelines around shallow comments of this nature. There are much more substantive elements to comment on.
A comment preventing fellow readers from wasting their time is not shallow.
Parent comment doesn’t say it’s a waste of time; nobody likes the “ai witch-hunt” comments and they add nothing to the discussion other than “maybe it is maybe it isn’t.”
Rhetoric meets reality.
Texas rolled out the red carpet to corporate interests --- and then discovered that their electrical grid operation is totally inadequate to deal with the impact.
This is just one isolated example of a much larger issue related to the "AI race".
AI is power intensive and the "winner" of the "AI race" is likely be whoever can produce lower cost power and lots of it.
>The upcoming election is part of it, but the underlying issues are worth digging into.
Well we will know for sure on Nov 4 :) But I expect 99.999% of the reason is Midterms, that way politicians can say "We are stopping Data Centers". I expect that will change once they have to account for their bribes, known as political contributions in the US.
There are a few dipshit NY pols playing this game right now. They have their signs and literature out touting their "votes to (temporarily) stop data centers".
Absolutely, as soon as the midterms are over these corrupt buttnuggets will roll right back over and let the data center construction resume unabated.
The tell is so obvious. All the GOP candidates distancing themselves from Trump and saying data centers are bad.
Normally that would earn you a 2AM all caps tweet labeling you a RINO or worse, and getting primaried. Instead, not a peep.
Which tells you its a ruse and he's in on it.
the biggest issue is the ever growing water shortage and not power
> a16z.com
Flagging as misinformation
Space-based compute is starting to look less crazy every day.
This is not just a wild-eyed thing invented by HN's favorite bad guy.
https://research.google/blog/exploring-a-space-based-scalabl...
Why would putting data center in space solve these problems? I feel like this is a total non sequitur. The solution is pay for more substations and power generation. This problem exists there regardless of space based compute and let me tell you the space based compute would 1000000x more expensive because you still need to build everything required in the current solution except in space! Its just not a real response to a lack of investment into infrastructure. And that means asking business to pay for the infrastrure they need as a collective industry.
I think they are thinking of something of a poorly designed Dyson Swarm, the plebs who came up with it think that with "cheap" launches, no permits really, and free* power, it might really come out in the wash and be easier to scale.
Is it a good idea? Most likely not, the amount of issues they are going to have is going to be amazing.
Ok, first solve cosmic rays, then solve space hardening silcon, then solve dumping megawatts of heat without convection.
oh and then solve data affinity whilst training.
oh and connectivity.
Oh and lossless RDMA over free space lasers.
Not that putting data centers in space is a good idea, but there are always problems to solve when doing anything novel or new right? Imagine the list when they were first discussing putting a guy on the moon and trying to get him back.
Yes, there are novel problems, and I love me a novel problem.
Much as I hate musk, I do love the engineers that managed to make practical high bandwidth inter satellite communications possible. the optics and sensing needed to do that is wonderful.
but data centres in space is just such a stupid fucking idea. Sure you need to solve those problems, but like add some fucking solar panels to datacentres on earth and solve the same problem locally. Its literally the same problem. but you have connection, cooling and less cosmic rays
Yeah but if you think about it from the perspective of a future AI, you'd want your data center in space so that meat plebs with drones on strings can't blow you up so easily.
The problem of waste heat alone is basically untenable by the laws of physics.
The ISS dissipates roughly 70kw of heat through 5000 square feet of radiator.
70kw is about 1-3 racks of ai compute.
Maybe if HN's favorite bad guy said the quiet part out loud about exploring space compute to avoid regulation...instead of making bombastic claims about possible technical efficacy. I'm not really interested in giving credit to leaders that lie about their motives. Note the blog you linked doesn't mention this either.
Not quite, because "the quiet part" is that space-based datacenters, space exploration, Mars colonization, asteroid mining, and all the rest are just a smokescreen for the rapid and thorough militarization of Earth's orbit. It's a play for global domination through the ultimate air superiority.
there's still so many things to invent before this moves out of fiction... radiation, cooling, communication, costs ...
Put them on container ships, and pretend you launched them into space. You'll come out ahead in every way.
Not really, no. It still look absurd and a way to lobby local governments. Nothing has changed. It’s really just a way to say „let us do whatever we want, how we want, or we go to space“.