Texas, which accounts for around a quarter of planned data centre capacity in the US, has elected Gina Hinojosa as its new governor, who pledged a moratorium on new data centres during her campaign. The ballot did not revolve around the general demand for computing capacity, but around the question of who will secure access to electricity, water, and building land in the future.
The market is by no means suffering from a lack of demand. Investment capital is available, and developers are searching nationwide for suitable sites. The central hurdle lies in scarce resources: utility providers can barely construct transmission networks and substations at the required pace. Furthermore, transformers face substantial delivery lead times, and qualified specialists are scarce. Large-scale campus projects are increasingly competing with industry, housing, and agriculture for the same water and electricity capacities.
Political restrictions intensify the battle for resources
With the ballots on 3 November, this distribution battle noticeably shifted to the political arena. In addition to the outcome in Texas, Amy Acton prevailed in Ohio, also advocating a moratorium. In Georgia, Keisha Lance Bottoms won after calling for developers to take greater responsibility. Nationwide, voters in at least ten states backed restrictions or rejected specific data centre schemes. This stance cuts across both political camps: prior to the election, outgoing governor Greg Abbott had already suspended grid connections for data centres pending a review and halted environmental permits.
Allocation decisions therefore no longer lie solely with utilities. Governors, lawmakers, regulatory commissions, and municipal bodies set the local framework. As long as resources are constrained, market advantage shifts to players who can secure scarce allocations and obtain regulatory approvals. Former industrial locations, such as those around the Great Lakes, still possess transmission grids and substations from earlier decades in some areas. Conversely, regions with cheap development land are often unable to deliver the requisite infrastructure on time.
New criteria for due diligence
Suhail Tayyeb, Assistant Professor at the Schack Institute of Real Estate at New York University, highlights that a strict distinction must be made between theoretical and genuinely allocatable capacity. Power quotas that can only be supplied years after the planned start of operations hold little commercial value for operators. For investors, six specific questions are therefore moving to the fore during due diligence:
- —Viability of cost structures and acceptance among local communities
- —Control over power feed-in as well as contractual priority in the grid connection procedure
- —Financing and binding completion dates for required grid upgrades
- —Legal securing of water rights and timely procurement of critical components such as transformers
While the sector primarily analysed demand potential from artificial intelligence in recent years, project success in the next phase will be decided above all by physical and regulatory feasibility.
