What’s Happening
Cisco Grants Office, October 2026: The United States is experiencing unprecedented growth in data center construction, driven by Artificial intelligence (AI), cloud migration, and demand for digital services. The U.S. houses thousands of data centers, with Virginia remaining the premier national hub, and Texas running a close second. Multi-gigawatt campuses are currently planned or under construction in Utah, New Mexico, Texas, and Illinois. Beyond creating harmful environmental effects such as heavy water use, habitat loss, air pollution, and carbon emissions, data centers drain a massive share of America’s energy supply. U.S. data center electricity use is projected to grow from about 177–192 terawatt-hours (TWh) in 2024 to roughly 380–790 TWh by 2030, according to the Electric Power Research Institute (EPRI).
Because of this rapid growth, electric providers face two main issues: insufficient supply to meet rising demand and grid instability from sudden voltage disturbances. Research is being conducted into alternative energy sources, like natural gas, as are efforts to revive retired nuclear power plants, and requiring data centers to build their own power sources. Work is also underway to make data centers more efficient by rescheduling flexible computing work like AI model training and shifting workloads to regions with less grid stress.
What’s Being Done
The U.S. government is responding to these crises. The Federal Energy Regulatory Commission (FERC) oversees how data centers connect to the grid and who pays for it. The NERC (North American Electric Reliability Corporation) sets rules for how data centers must behave once connected. In May 2026, the NERC issued a Level 3 alert, only the third in its 58-year history. The alert requires providers to take seven actions, including better modeling of data centers, testing new ones before they go live, installing monitoring equipment, and setting up real-time communication with data center operators. New standards are being proposed on an ongoing basis. In June 2026, the FERC ordered all six regional grid operators to justify or reform their data-center connection rules. They must address the following issues: how data centers connect alongside power plants; how data centers will be curtailed (dialed down) when the grid is stressed; requiring data centers to pay 100% of the grid upgrades they cause; and requiring grid protection equipment. In July 2026, FERC ordered NERC to create enforceable reliability standards for data centers by December 31, 2026.
The federal government is investing in grid capacity through federal grants to utilities and local government agencies. In September 2026, the U.S. Department of Energy selected 31 projects across 26 states for funding through its Speed to Power through Accelerated Reconductoring and other Key Advanced Transmission Technology Upgrades (SPARK) program. SPARK was the third round of DOE’s Grid Resilience and Innovation Partnerships (GRIP) program and focused on increasing grid capacity in the face of rising electricity demand. Most awards went to utilities, but local governments were eligible, particularly under the Grid Innovation Program. The Biden administration authorized GRIP as a five-year, $10.5 billion program under the Infrastructure Investment and Jobs Act (IIJA), and SPARK is in its final year of funding, so it’s unclear whether new funding will follow. Future federal grid funding will largely depend on the direction Congress takes in its next term. Lawmakers elected in November 2026 will take office in January 2027, and their priorities will shape whether programs like SPARK/GRIP receive new funding, are restructured, or are replaced by other approaches. With the IIJA’s five-year funding window now ending, the next Congress will play a key role in deciding how the federal government supports grid capacity as data center demand grows.
How Texas is Managing Growth
North Texas is a top data center market because of land availability, taxes and regulations, lower power costs, and established network infrastructure. After Virginia, Texas has more data centers than any other state in the U.S. However, in August of 2026, Gov. Greg Abbott directed the Public Utility Commission of Texas (PUC) and the Electric Reliability Council of Texas (ERCOT) to audit every data center project seeking to connect to the state’s grid and finish that audit before approving any additional projects. The directive followed a surge in connection requests. The audit asks developers to disclose expected power and water use, tax incentives, ownership, and other details, and it will deny grid connection to projects that don’t comply. ERCOT has said it aims to finish by December, but the pause has already delayed the first phase of the new large-load approval process created under SB 6. It isn’t a ban on data centers, but it signals that Texas will scrutinize new projects much more closely, and the Legislature may take up further changes when it convenes in January 2027.
Additionally, the Texas Legislature passed Senate Bill 6 in May 2025. The law applies to “large loads” of 75 megawatts or more and directs the PUC to set standards for connecting them to the grid. Large users must pay a share of the costs utilities face to connect them, and the law requires disclosure of similar connection requests elsewhere in Texas. SB 6 also gives ERCOT authority to curtail large loads during energy emergencies, while offering those customers access to new demand response programs and encouraging them to invest in backup power. The goal is to support continued growth while protecting grid reliability and keeping connection costs from shifting to other ratepayers. For local governments, SB 6 offers some protection for residents, but the details will depend on how the PUC finalizes its rules.
Looking Ahead
Data center growth shows no sign of slowing, and the grid is struggling to keep pace. Without continued federal and state investment in grid capacity, and clear rules for how data centers connect and share costs, communities risk higher electricity bills and less reliable power. Federal and Texas regulators are moving quickly, but many new rules are still being written, and future federal grid funding remains uncertain. Local governments interested in future grid funding should watch for new federal opportunities and share local impacts with their congressional representatives, since any new round of grid funding will likely depend on the new Congressional representatives. Leaders should also talk with their utilities now about load growth and potential partnerships, since utility-led projects can still bring capacity upgrades to their communities.