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For the past few years, the story around Texas data centers has mostly been about growth: more projects, more investment, and more demand for land and power. Governor Greg Abbott’s August 3, 2026 directive changes that conversation, at least for now. New projects seeking access to the ERCOT grid will have to wait while the state takes a closer look at what is being proposed and what it would take to support it.

The size of the queue helps explain why. ERCOT was tracking more than 1,800 proposed projects representing over 474 gigawatts of new load, which is more than five times the state’s record peak demand. Roughly 90 percent of those requests were tied to data centers. The numbers are striking, but they also raise a basic question: how many of these projects are likely to move forward, and what would it take to serve them?

Abbott directed the Public Utility Commission of Texas and ERCOT to audit projects seeking a grid connection. Developers are being asked for information about tax incentives, power demand and generation, water use and cooling, ownership, and efforts to reduce effects on nearby communities. Projects that do not meet the requirements can be denied a connection. ERCOT also paused its batch-zero review, which is the first group of large-load projects being studied under its revised interconnection process.

The pause has limits. A facility with its own generation may not need a traditional ERCOT connection, and ERCOT does not cover every part of Texas. Even so, state officials are clearly looking for better information. A recent survey on water and power use drew responses from only 28 of the 377 companies contacted, which is not much to go on when you are planning a grid, a water system, or a local economy.

The first thing we are watching is timing. No one knows how long the audits will take, and delays can get expensive quickly for projects carrying land costs, construction obligations, financing expenses, and customer commitments. We are also watching how the state treats projects that are already well along in development. A nearly completed facility with committed capital is in a very different position from a speculative request sitting in the queue, and that distinction may matter as the audit process takes shape.

Tax incentives are another piece of the picture. Abatements and other public benefits are often built into a project’s economics from the beginning, so delays, ownership changes, or a restructuring can put pressure on those arrangements at the very moment the project needs them most.

Water may turn out to be the most local issue of all. Statewide demand can be discussed in gigawatts, but a developer still has to explain its cooling plan, water source, and infrastructure costs to the community next door. Developers and lenders need to be prepared for both conversations.

Some projects will also run into financial distress. That is not a prediction of widespread failure. It is simply a risk that comes with delay and uncertainty in large, capital-intensive developments. When that happens, the question is whether a sale, recapitalization, or other restructuring process can preserve the project, its contracts, and its value before too much is lost.

We’ve seen how complicated this can get through our representation of RELLIS Campus Data and Research Center, LLC in its Chapter 11 case. The company was building a data and research center on the Texas A&M University System’s RELLIS Campus when its financing partner withdrew funding for the construction, which led to the bankruptcy filing. The matter involves financing, construction, real estate, public-sector relationships, tax incentives, contracts, and ongoing operations. Once a project like this runs into trouble, nothing stays in its own box. The Chapter 11 process gave the debtor a path to interim funding and a longer-term solution through a sale to a new partner that intends to finish construction and begin operations.

Texas is still going to build data centers. But no one should assume the power, water, incentives, and approvals will just work themselves out. For the next group of projects, those issues will need to be part of the deal from the start.