Texas Approves AI Data Center Co-Location Next To Wind Farm, With Curtailment Caveats

By Marlene Wilden of UtilityDive

The Public Utility Commission of Texas last week approved a net metering arrangement for a 260-MW AI data center co-located with a wind farm of approximately the same capacity in a case that could serve as a template for other co-located loads in the Lone Star State.

The data center is the second one planned for the site, and the developer had argued it should not be subject to the same curtailment requirements as the first because the total load of both – about 525 MW – exceeds the generation resource’s capacity of 265.5 MW. 

The commission rejected that argument. According to the July 23 order, the data center must be capable of curtailing its full load within 30 minutes during grid emergencies, with physical breaker disconnection if necessary. It is also barred from participating in paid demand response programs tied to the arrangement.

The proceeding represents one of the first major tests of Texas’ SB 6, which became law last year and established new rules for large loads in the Electric Reliability Council of Texas’ territory, including giving the grid operator the authority to disconnect data centers during grid emergencies.

Rather than creating a project-specific exception, commissioners largely adopted ERCOT’s proposed reliability conditions. The order allows the co-location arrangement to move forward while establishing operating requirements for future behind-the-meter projects. 

Chris Talley, co-founder of GridTracker, wrote in a LinkedIn post following the decision that the order is not a “death blow” to co-location in ERCOT.

“It just means that this architecture now essentially requires full backup capacity,” he said.

In a follow-up message to Utility Dive, Talley clarified that by “full backup,” he meant resources capable of carrying the load off-grid for a meaningful period of time, rather than simply riding through a short interruption. He cautioned that this was an “untested assumption” and pointed to a pending co-location application from Amazon and Vistra to build a data center campus next to the Comanche Peak nuclear plant, southwest of Fort Worth, as a case to watch. 

“How ERCOT and the Commission treat that arrangement will be very telling,” Talley said.

The decision requires the data center to operate with greater flexibility than a traditional industrial load. The order states ERCOT should provide 60 minutes’ advance notice “when practicable,” while allowing the operator to voluntarily commit to a faster 10-minute response. 

By prohibiting the project from receiving compensation for reducing its load during grid emergencies, the order distinguishes mandatory emergency curtailment from voluntary grid services. The ruling treats the ability to rapidly shut down as a reliability requirement for operating behind generation.

Crusoe, the developer of the AI data center, and Ensign, the large load customer that plans to operate the site, argued that forcing the entire site offline was disproportionate and that additional curtailment was unnecessary after the earlier reliability condition on the co-located wind project. Commissioners largely adopted the administrative law judge’s recommendation, including revisions from Chairman Thomas Gleeson, and concluded that allowing the second load to remain online while the first is curtailed would undermine the goal of ensuring generation capacity is available to the grid during emergencies. 

The case also attracted filings from the Texas Competitive Power Advocates and natural gas producer BKV, which argued the proposed framework could discourage future co-location projects. PUCT staff contended those parties lacked standing under the governing statute, and the commission’s final order did not address their arguments.