Remember when the biggest headache for a data center developer was finding a spot close to internet backbone and a fat power line? Those days feel almost nostalgic now.
I was digging through the latest numbers the other day and nearly dropped my coffee. The United States alone has roughly 245 gigawatts of data center capacity in the planning pipeline. To put that in perspective, that’s more than the entire installed power generation fleet of Germany and France combined. And the craziest part? A huge chunk of this isn’t going where the fiber is thickest anymore. It’s going where the energy is cheapest and most abundant.
Welcome to the new reality: access to power has quietly morphed into access to energy itself.
From Data Center Alley to Data Center Prairie
For decades, northern Virginia reigned supreme. Everyone called it Data Center Alley for good reason – proximity to Washington D.C., massive fiber optic crossroads, and relatively cooperative utilities made it the obvious choice.
That model is cracking under its own weight.
The sheer scale that AI training demands has flipped the script completely. We’re talking about facilities that can suck down a gigawatt or more each – enough to power a medium-sized city. Traditional utility service territories simply can’t keep up with both the volume and the timeline that hyperscalers demand.
Texas Takes the Crown (And Then Some)
If you look at where the real action is happening right now, one state dominates every conversation: Texas.
More than a quarter of the entire national pipeline targets the Lone Star State. Their planned capacity nearly doubled in just nine months – from 35 GW at the beginning of the year to 67 GW by fall. I’ve been following energy markets for years, and I can’t remember anything moving this fast.
But here’s what really caught my attention – these aren’t your grandfather’s data centers carefully tucked into existing industrial parks near substations.
We’re talking about giga-scale campuses sprouting up in places that barely show up on most maps. West Texas. North Texas. The Permian Basin. Places where the horizon stretches forever and the main economic activities have traditionally been cattle and cotton.
Following the Gas, Not the Grid
The logic is brutally simple when you step back and look at it.
Developers have largely given up waiting for utilities to build transmission lines and upgrade substations fast enough. Instead, they’re planting flags right on top of America’s most prolific natural gas reserves and building their own power plants.
- Pacifico Energy’s 5 GW ranch-style project
- Poolside’s 2 GW Horizon development
- FO Permian’s 5 GW campus smack in the middle of Midland County
These aren’t small demonstrations. These are facilities that would rank among the largest power plants in the country, period.
And they’re not alone. The Permian Basin in particular has become ground zero because, well, there’s already a ridiculous amount of natural gas coming out of the ground there, and building new pipelines to move it elsewhere takes time that AI companies simply don’t have.
Why wait three to five years for transmission when you can permit and build gas turbines in eighteen months?
That’s the calculation driving billions of dollars right now.
The Renewable Angle (It’s Complicated)
Now, don’t get the wrong idea – this isn’t exclusively a natural gas story.
Some developers are indeed chasing sun and wind. Projects in Nevada, Utah, and even Montana are being designed around massive solar arrays and wind farms. But let’s be honest with each other: these remain the exception rather than the rule for the really big AI loads.
Batteries get mentioned a lot in press releases, but when you look at actual plans, they’re mostly there to firm up renewables or provide the fast-ramping capability that gas turbines already do naturally. The physics of AI training – these enormous, somewhat predictable loads that run 24/7 – match gas generation characteristics almost perfectly.
Money Flows Where the Mega-Projects Are
Perhaps the most fascinating distortion – and the one that keeps me up at night – is how this trend is completely warping capital allocation in the sector.
Check this out:
| Project Size | % of Projects | % of Total Capital |
| Over $17 billion | 2% | 42% |
| Under $1 billion | 60% | 8% |
Two percent of projects are eating nearly half of all the money flowing into data center development. That’s not a market – that’s gravitational capture by mega-projects.
The most expensive ones I’ve seen make even the biggest hyperscaler builds look modest. There’s a $160 billion project proposed for New Mexico and a $100 billion monster in Missouri. These numbers are so large they’re using municipal bonds in ways that would make a Wall Street structurer blush – essentially having local governments issue debt that the developers themselves will pay back, all to capture tax advantages.
The Onsite Generation Revolution
Historically, big tech companies have been crystal clear: they want grid power. Less operational headache, shorter contract terms, and – crucially – no direct emissions to report on their sustainability dashboards.
All of that is going out the window.
Only about 10% of projects in the pipeline include onsite generation… but those projects represent over a third of total planned capacity. And guess where almost all of them are? If you said Texas, give yourself a gold star.
This shift represents a fundamental bet: either the urgency to deploy AI infrastructure will overcome traditional concerns about operational risk and emissions, or a new generation of customers will emerge who care less about green credentials and more about having their GPUs yesterday.
The Coming Storm for Energy Markets
Here’s where things get really interesting – and potentially painful for anyone who pays an electricity bill.
All these gas turbines, whether connected to the grid or running independently, need fuel. Lots of fuel. And they’re competing directly with LNG export terminals for molecules.
Basic supply and demand suggests this can’t end well for natural gas prices over the medium to long term. More demand, constrained pipeline capacity in many areas, and export terminals that pay premium prices… you can see where this is heading.
But there’s another problem that’s less obvious until you start talking to utility engineers: turbine supply.
The manufacturers that make these massive gas turbines have order books stretching out years. If significant chunks of data center capacity go off-grid and buy their own turbines, that leaves fewer available for utilities trying to keep the lights on for everyone else. We’ve already seen lead times blow out dramatically.
Policy Backlash Feels Inevitable
At some point – and I suspect sooner rather than later – regular electricity customers are going to notice their bills climbing while massive data centers seemingly get whatever they want.
State legislatures and public utility commissions aren’t known for sitting quietly when residential and small business customers start complaining about affordability. We’ve already seen the opening shots in Virginia with special rate deals coming under scrutiny.
Texas, with its uniquely deregulated market, might handle this differently than other states. But even there, the sheer scale of what’s being proposed is going to force some kind of reckoning.
The question isn’t whether policy intervention is coming. The question is what form it will take and who it will hurt most.
Looking at all this, I can’t help but think we’re witnessing one of those fundamental shifts that only becomes obvious in hindsight. The internet’s physical infrastructure is literally relocating across the country based on energy availability rather than connectivity.
Whether this turns out to be the greatest real estate arbitrage in history or the setup for an epic bubble (or both), one thing feels certain: the old rules about where and how to build digital infrastructure are dead.
The new rule is simple and brutal: find the energy, secure it any way you can, and build fast. Everything else is secondary.
And all of us who just want to stream Netflix and charge our phones? We’re along for the ride whether we like it or not.
