Texas Energy Market Report - Jul 7, 2026

What we are watching today

• Data center power demand and emissions are driving new energy infrastructure proposals in Texas.
• Grid operators in PJM and ERCOT face rising peak demand and new procurement strategies.
• Federal policy and clean energy cost trends are reshaping long-term power procurement.

Headlines and what they mean

Texas leads nation in proposed power plants for data centers, which would emit large amounts of greenhouse gases

Texas is at the forefront of a national surge in data center development, with hundreds of facilities in the planning or construction phase. These facilities require massive power loads, prompting utilities and developers to propose new generation capacity, including gas and battery storage. However, many of these projects rely on fossil-fuel-based power and lack transparency on emissions and water use. The lack of reporting from data centers on water consumption, despite regulatory requests, raises environmental and operational risks for local utilities and regulators. This trend increases pressure on ERCOT and the PUCT to evaluate long-term grid capacity and environmental compliance. source

PJM anticipates new peak demand record as heat wave tests power grid

A prolonged heat wave is pushing electricity demand in PJM to record levels, with forecasts indicating a new peak demand record. This underscores the growing strain on regional grids from both extreme weather and rising data center loads. Utilities in PJM are now accelerating procurement plans, including a backstop mechanism to ensure capacity is available for data centers and other high-load users. The situation highlights the risk of supply shortfalls during extreme events and reinforces the need for diversified, fast-responding capacity. Texas businesses should note that ERCOT is also facing similar demand pressures, especially during summer months. source

Analysts expect rising PPA prices as clean energy tax credits phase out

As federal tax credits for renewable energy projects phase out over the next few years, analysts project a sustained increase in Power Purchase Agreement (PPA) prices. This shift will make long-term fixed-rate contracts more expensive, especially for commercial and industrial buyers seeking to lock in stable rates. The decline in federal incentives reduces the financial viability of standalone solar and wind projects, pushing developers to rely more on hybrid solutions and storage. Texas buyers should consider locking in contracts now before rates rise further, particularly if they are planning to expand operations or build new facilities. source

Aalo Atomics’ Test Reactor Reaches Criticality at INL, Fourth DOE-Authorized Advanced Reactor by July 4

The successful criticality of Aalo Atomics’ advanced reactor at Idaho National Laboratory marks a milestone in the U.S. nuclear renaissance. As the fourth DOE-authorized advanced reactor, it signals growing momentum in small modular reactor (SMR) deployment. While not directly impacting Texas, this development could influence future energy mix planning and long-term grid stability. If SMRs become commercially viable by 2030, they may offer a low-carbon baseload alternative for Texas utilities and industrial users. This could affect procurement strategies for buyers seeking to reduce carbon intensity over time. source

Texas leaders are asking data centers how much water they use. Most aren’t responding.

Water use by data centers is emerging as a key regulatory concern in Texas, where water scarcity is a growing issue. The PUCT has issued a survey to collect water consumption data from data center operators, but most have not responded. This lack of transparency complicates long-term water resource planning and increases regulatory risk. For commercial energy buyers, this signals potential future compliance costs and supply chain risks, especially if water use becomes a factor in permitting or rate design. Proactive engagement with water reporting requirements may help avoid future penalties or delays. source

San Marcos becomes the first Texas city to ban data centers, testing its local control

San Marcos has become the first Texas city to pass a ban on new data center construction, citing concerns over energy demand, water use, and local infrastructure strain. The move reflects growing local resistance to large-scale data center development, even as state leaders like Governor Abbott advocate for expansion. This tension between state economic development goals and local control could lead to a patchwork of zoning rules across Texas, creating uncertainty for energy procurement and site selection. Businesses should monitor local ordinances when planning facility expansions. source

The Texas angle

The rapid expansion of data centers in Texas is reshaping the state’s energy landscape. ERCOT is under increasing pressure to assess and approve new power requests, with grid regulators nearing final approval on a new vetting framework. As demand grows, especially during peak summer months, commercial buyers must prepare for potential rate volatility and supply constraints. The 4CP (4th Quarter Capacity Procurement) season is approaching, making now the ideal time to lock in fixed-rate contracts to hedge against rising costs and supply uncertainty.

What to do this week

• Review current energy contracts and assess exposure to rising PPA and wholesale prices as tax credits phase out.
• Schedule a free Energy Health Check with UPG to benchmark your rate against current market conditions and identify potential savings.
• Evaluate site locations for new facilities with attention to local data center regulations and water use reporting requirements.
• Engage with ERCOT’s upcoming capacity procurement process to understand eligibility and timing for fixed-rate contracts.
• Consider block and index contracts for long-term stability, especially if you are expanding operations or entering new markets.

Bottom line

Texas is at a crossroads in energy planning, driven by data center growth, climate policy shifts, and grid reliability concerns. As demand surges and regulatory scrutiny intensifies, commercial buyers must act now to secure stable, cost-effective power. Proactive procurement, transparency on water and emissions, and early engagement with grid processes are critical to managing risk and maintaining operational resilience.