474 Gigawatts Requested, Power Scrutiny for Data Centers Intensifies

The bottleneck in U.S. data center investments is shifting from artificial intelligence (AI) demand to power grid connections, permitting, and local opposition. As AI computational demand drives investments in servers and memory, the process of securing actual sites and power has seen increased scrutiny from state governments and residents.

CNBC reported on the 23rd that the factors suppressing data center transactions are not a lack of demand but rather permits and politics. This information was relayed on the 24th in Korean time. If the pace of data center expansions in the U.S. slows, the actual execution timing for server, memory, and power equipment demand may also change.

Micron Technology ($MU) exemplifies both sides of this trend. Micron is constructing two advanced large fabs in Boise, Idaho, and has stated that this investment will create over 17,000 jobs. The company explained that DRAM production at its first Idaho fab is expected to begin in 2027.

DRAM is a representative memory semiconductor used in servers and computers. High Bandwidth Memory (HBM) is a high-performance memory used with AI accelerators, and its importance increases as large-scale AI computational demand grows. However, even with demand, if power and permits do not follow, the speed of investment execution may vary.

Texas Governor Greg Abbott directed on August 3 that data centers undergo comprehensive verification and audits before connecting to the ERCOT power grid. The Texas Governor's office stated that ERCOT is reviewing power connection requests exceeding 474 gigawatts, with about 90% of new power requests coming from data centers. This is more than five times the historical peak power demand for ERCOT in Texas.

The issues in Texas have already been addressed in previous reports regarding the concentration of data center power connection requests in the Texas power grid. This time, not only the magnitude of power demand but also the political burden has come to the forefront. Governor Abbott stated that projects that do not meet the criteria should be denied power grid connections.

ERCOT is the agency that operates the power grid for most of Texas. Data centers are facilities that consume large amounts of power 24/7, leading to issues of transmission network reinforcement, reserve power procurement, and cost allocation. The power connection scrutiny is not merely a technical procedure but has evolved into a policy judgment that affects residents' electricity bills and local infrastructure burdens.

New York Governor Kathy Hochul issued an executive order on July 14 to suspend state environmental permits for new ultra-large data centers for up to one year. New York State announced that during this period, it would establish standards for electricity rates, environmental protection, power grids, and community safeguards.

Pennsylvania Governor Josh Shapiro signed an executive order on August 18 requiring AI data center developers to not pass on electricity costs to residents and to meet water usage standards and local consent. Pennsylvania has excluded AI data centers from expedited permitting processes and restricted the use of non-disclosure agreements. The state government reported that over 100 data center proposals have been submitted, but only five have received all necessary permits for phase one development.

Local opposition is also reflected in funding conditions. Reuters reported on August 10 that banks are scrutinizing the completion of permits and local acceptance more rigorously when assessing loans for data center projects. Karen Fang, head of Bank of America’s Global Infrastructure and Sustainable Finance, stated that project readiness and credit quality are evaluated, with readiness including necessary permits and approvals as well as support from surrounding residents.

Policy directions are not flowing in one direction only. The White House announced on July 23 that it would expand the 'Ratepayer Protection Pledge,' stating that large data center operators must bear the costs of necessary generation and power infrastructure. Former President Donald Trump emphasized the need for development, stating that regions rejecting data centers are making a "mistake."

The crux of the issue is less about the development itself and more about who bears the costs. Data centers are core facilities that run AI and cloud services, but some facilities have become large loads consuming power equivalent to small cities. While state governments desire investment and job attraction, they cannot ignore residents' electricity bills, water usage, noise, and the impact on farmland and residential environments.

AP reported on August 18 that the data center issue is also influencing gubernatorial elections in the U.S. According to a Reuters-Ipsos poll reported by AP, only one-third of Americans supported the speed of data center construction, and only 14% agreed with the establishment of data centers in their local areas. Local acceptance has emerged as a simultaneous issue for permits and elections.

For domestic investors, the connections are clear. The demand for AI infrastructure can lead to demand for memory, servers, and power equipment, but actual revenue recognition requires alignment of customer contracts, power procurement, and data center operational schedules. Previous reports indicated that market questions surrounding NeoCloud companies have shifted towards GPU procurement, funding, data center construction, and the ability to convert computing capacity into revenue.

Ultimately, the next hurdle for U.S. data center transactions is not just server orders. Power grid connections, water usage, local approvals, and financial institutions' assessment criteria must all be met to lead to actual construction and operation. Micron's first Idaho fab DRAM production is expected to begin in 2027.

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