Articles
South Texas manufacturers navigate a data center bubble
By Bart Taylor, GHMA
Houston manufacturers are wise to cyclical markets, to boom and bust. They know a bubble when they see it.
It’s why those participating in the data center buildout in South Texas are ramping up operations to meet demand, with eyes wide open. As one fabricator told me, “I’m treating my next (data center) order like it’s my last.”
Wise counsel.
Our goal is to assess the scope and duration of the buildout. We’re efforting to shed light on data center supply-chain details and present more information at GHMA’s Mid-Year Manufacturing & Economic Forecast June 17. You’re invited. Along the way, it’s also important to make sense of fast-moving details.
Texans are getting mixed messages relating to moratoriums on data center development. There’s certainly grass-roots support building to slow down the data center boom – and the orders that come with it. For example, “Hill County became the first in Texas to approve a one-year moratorium on new data center and power plant construction in unincorporated areas,” and others like Hood and Hayes counties “are petitioning” for similar pauses.
More, Texas Department of Agriculture Commissioner Sid Miller used his office last week to call for a “temporary moratorium on new hyperscale data center development in Texas until we fully assess the long-term impacts on our infrastructure, agricultural economy, and communities.” Hill’s concerns are understandable. As AG Commissioner, he’s charged with protecting those assets that weigh on the success of Texas agriculture, namely water and land. Hill cited a Georgia example where outrage followed a report that “a data center reportedly used nearly 30 million gallons of water during drought.”
In South Texas, water is already a massive issue and in some cases a barrier to responsible development. Ask the folks in Conroe, or Corpus Christi.
Yet no formal response has yet been forthcoming from Governor Greg Abbott, Hill’s elected counterpart, nor is it clear that Texas’ US congressional delegation favors intervention. More the opposite, based on past pronouncements. We asked; no word yet.
If water is one potential show-stopper, energy is another, and rising demands on the grid may in the end be the challenge to development that even pro-growth advocates can’t abide.
Use AI to do your own research (ironic, isn’t it?), but know that Texas is a key national hub. In Greater San Antonio alone, over 70 operational facilities dot the landscape in addition to a “new wave of underway and planned developments vastly larger in scale.”
In Houston, AI tells me there are upwards of 35 “operational” data center powering “specialized high-performance computing (HPC) needs of the oil, gas, and healthcare sectors” and many more planned to undergird the “broader enterprise, cloud, and AI infrastructure” that will soon power my search for information on data center development.
The sticky wicket is of course energy, the exponential increase in power that data center processing requires, on a grid already prone to volatility. The optimistic view is that CenterPoint Energy and the ERCOT grid can successfully scale transmission infrastructure to meet demand for gigawatts of new power, as Retail Electric Providers like GHMA member-companies TXU and Chariot Energy keep rates at reasonable levels for consumers and businesses.
The glass-half-full narrative also includes new, alternative power sources coming online to augment both regional and national grids – including renewed enthusiasm for nuclear power. One of my national counterparts, Stephen Gold, president of the Manufacturing Alliance, sees nukes as a panacea in Making the Case for Data Centers, asserting that “small modular reactors (SMRs) are easier and faster to build, are independent of the power grid and can be installed directly on-site at data center campuses.”
I asked a real person about Gold’s optimism – ARC Specialities’ Dan Allford, himself a nuclear advocate and one of Houston’s top manufacturers. Allford was succinct. “SMRs making useful power are eight years out,” he replied to me. “The only SMR under construction will simply heat water, not generate power. And there are no traditional light water nuclear reactors under construction now.”
It’s clear we’ll reach an inflection point much sooner. That’s not to say that nukes aren’t part of a long-term solution. Of course they are. “I expect that permits will be granted for several traditional large nuclear reactors in the next few years. Add four years of construction time to this, and we're at least six years out for traditional nuclear power as well,” he forecasts, and that “only a couple of mothballed nuke plants have any realistic hope of restarting.”
Allford adds that “solar and wind are quick to deploy and will be the largest addition to our grid capacity.” They will, when Texas fully commits.
We’ll leave policy matters to entities like the Texas Association of Manufacturers, though it would seem a full-throttle, pro-growth position on data center development might be yesterday’s endorsement.
Just ask a Houston manufacturer.
Bart Taylor is president of the Greater Houston Manufacturers Association. Reach him at [email protected].
REGISTER for the GHMA Mid-Year Manufacturing & Economic Forecast and join us for an informative discussion over lunch.
