Why Texas Data Centers Must Build Their Own Power

In the latest episode of The Building Texas Show, host Justin McKenzie takes listeners to San Antonio for a deep dive into one of the most pressing infrastructure challenges facing the Lone Star State: how to power the explosive growth of data centers. Joined by Nash Whitney of Stella Power Company, the conversation, titled "Why Texas Data Centers Must Build Their Own Power," unpacks the complexities of behind-the-meter generation at a time when ERCOT's interconnection queue has swelled to over 300,000 megawatts by 2032—roughly four times the grid's current peak load of 85 gigawatts.

Whitney frames the issue directly: "Behind-the-meter power is ultimately going to be one of the only viable solutions to do that at the scale that everyone is asking it to be done." As utilities across the country demand non-refundable deposits in the hundreds of millions of dollars for substation buildouts—with no guaranteed timelines—hyperscalers like Microsoft, Amazon, Meta, and Google are increasingly looking to generate their own power. McKenzie, drawing on his utility background at Bandera, recalls the crypto boom era: "We wouldn't touch it unless they prepaid for everything." The takeaway is clear: large loads must bear their own costs.

The episode breaks down the technical and economic fundamentals. Whitney explains the difference between power and energy, kilowatts and kilowatt-hours, and the role of on-site generation as a hedge against ERCOT's volatile real-time prices, a lesson reinforced by Winter Storm Uri. The discussion also covers Senate Bill 6 and Governor Abbott's expanded large-load rules, which now include both power and water considerations.

When it comes to fuel, Whitney acknowledges diesel's BTU density for backup roles but emphasizes Texas natural gas—from the Marcellus and Bakken—as the scalable solution. He notes that Caterpillar remains sold out of backup units, underscoring the surging demand. Stella Power Company, backed by Arroyo Energy Investment Partners, develops, owns, and operates natural gas plants long-term, with sister company Mesa manufacturing generators in Wyoming and San Antonio.

Whitney invokes Milton Friedman and Thomas Sowell to explain how ERCOT's energy-only market sends price signals for investment, and he argues that reshoring manufacturers face the same grid constraints as data centers. His practical advice for Texans: download the ERCOT app and be a good grid citizen.

This episode is a must-listen for anyone interested in the future of Texas energy and infrastructure.