I asked the smartest friend I know (Perplexity) about the environmental challenges facing Texas as it continues to attract businesses.

Perplexity also suggested alternative locations (VA, OR, VT) for businesses to relocate should Texas be unable to handle the challenges. Some of these places are excellent for quality of life—- just not as housing-friendly as Texas.

Prompt for Perplexity:

Does Texas have enough water and energy supplies to run upcoming data centers and semiconductor plants? Will Texas residents’ prices go up for water and electricity due to the potential shortfall?

Response:

Texas is facing significant challenges in balancing water and energy resources to support the rapid expansion of data centers and semiconductor plants, while also managing residential supply and prices. The growth in tech-driven energy and water demand is outpacing current infrastructure and planning, especially as large-scale AI and semiconductor projects come online.

### Water Supply Impact

– In 2025, Texas data centers are projected to consume up to 49 billion gallons of water annually, a volume that can serve millions of households, primarily for cooling servers running AI and cloud systems.[1][2]
– Water used by data centers currently constitutes a small fraction of the state’s total use, but rapid expansion, drought risk, and population growth could push some regions to the brink of shortages.[3][2]
– Localized shortages are possible, especially in arid areas where planners worry about competition between industrial and residential needs. Leading projects, such as the Stargate AI data center, are adopting advanced cooling to limit long-term water draw, but start-up and maintenance requirements remain substantial.[2][3]

### Energy Supply Impact

– Texas is seeing large-scale grid requests: in October 2025, interconnection demands reached 205 GW, up sharply from 56 GW the previous year, driven largely by data center and semiconductor investments.[4][5]
– Some data centers are building private gas power plants, often tapping West Texas shale, to secure reliable supplies, while others aim for wind, solar, and hydrogen but will use fossil fuels initially.[6][5]
– The state’s grid is strained, but expansion of solar and renewables is helping stabilize supply in many areas, though local bottlenecks and transmission constraints linger.[5][6]

### Price Effects on Residents

– Residential electricity prices in Texas are forecast to rise by about 2% in 2025. Rates now average 15-18¢/kWh, with average monthly bills at $165.82—already higher than many other states, largely due to deregulation, weather, and surging demand from tech sectors.[7][8][9]
– Wholesale electricity prices could drop due to solar growth, but residential bills may not decrease much because of infrastructure investments and volatility hedging.[8][7]
– Water rates are under pressure: experts warn that competition between new data centers and residential use could eventually force price hikes or rationing, particularly in underserved or drought-prone communities.[3][2]

### Outlook

– Texas can currently support data center and semiconductor expansion, but risks of regional water and grid shortfalls are increasing, and the next phases of tech growth might exhaust resources planned for future residents.[1][2][4][3]
– Residents should anticipate modest increases in both water and electricity bills, especially if local supply shortages emerge or extreme weather persists.[9][8]
– Future price stability depends on continued investment in renewable energy, advanced cooling technologies, and integrated water management strategies.[5][3]

Sources
[1] Texas Data Centers Use 50 Billion Gallons of Water as State Faces … https://www.newsweek.com/texas-data-center-water-artificial-intelligence-2107500
[2] Texas Data Centers Consume 50 Billion Gallons Of Water As State … https://finance.yahoo.com/news/unquenchable-thirst-texas-data-centers-010128313.html
[3] Data centers are thirsty for Texas’ water, but state planners don’t … https://www.texastribune.org/2025/09/25/texas-data-center-water-use/
[4] Texas became the nation’s data center battleground | TRENDS 01 https://read.texasstreet.co/p/texas-became-the-nations-data-center
[5] Texas Data Centers 2025: Top Upcoming Hyperscale Projects https://www.blackridgeresearch.com/blog/largest-biggest-upcoming-new-data-centers-in-texas-united-states
[6] Data centers are building their own gas power plants in Texas https://www.texastribune.org/2025/06/05/texas-data-centers-gas-power-plants-ai/
[7] Texas Electricity Prices Forecast 2025 | Rising or Falling? https://comparepower.com/texas-electricity-prices/
[8] Texas Electricity Rate Trends & Price Forecast for 2025 https://electricityplans.com/texas-electricity-trends/
[9] Texas Electricity Bills in 2025: Why They’re High and How to Save https://www.ecoflow.com/us/blog/lower-texas-electricity-bill
[10] Why gas turbine shortages could limit AI growth in Texas – Research https://modoenergy.com/research/en/ercot-data-center-buildout-projection-load-forecast-senate-bill-six-gas-turbine-shortage