Data centre developers in US state Texas, including hyperscalers, are looking at off-grid solutions and natural gas for new facilities, a new report has said. This could sideline renewable energy sources in the short term.
Renewables may only play a marginal role in powering a new generation of data centres in US state Texas as developers turn to off-grid systems linked to natural gas.
That is a key finding in a report called ‘Off-Grid Data Centers: A Potential Power Solution For AI’ that US law firm Troutman Pepper Locke published this month (17th March).
The report said developers in the US, including hyperscalers, are responding to the fast rise of artificial intelligence (AI) by scaling up the construction of data centres, but this growth brings with it challenges for developers about how to reliably power these facilities.
So far this decade, the preference of technology giants Apple, Amazon, Google, Meta and Microsoft has been to power their new data centres with renewable energy, including wind and solar. Indeed, these deals are still out there. Google announced in January that it would use power from Clearway wind and solar projects totalling 1.2GW in Missouri, Texas and West Virginia for its data centre operation; and, in October 2025, Meta signed a 600MW solar deal with Engie for electricity from four solar farms in Texas.
But the rate of growth in data centres in the US, and Texas in particular, is pushing companies to look at a wider range of power solutions.
This data centre ‘gold rush’ is driven by the rapid rollout of power-hungry AI tools globally and the emergence of a new generation of more energy-intensive microchips, with over $2.7 trillion of investment expected in US data centres alone by 2030. Developers must cope as data centres put more stress on the grid, and as they face growing concerns from communities about power prices, water availability and property values.
The report said these challenges are forcing developers to find new solutions to how they power data centres, with some hyperscalers and energy groups working together on off-grid solutions. These projects can also be known as ‘island-moded’ as they do not connect to the grid and are powered by self-contained energy generation systems, which can be on the same site as the data centre or on a nearby site and linked with private infrastructure.
Reliability and the ‘five nines’
An off-grid power set-up helps developers to alleviate some of the friction that they and energy companies often face from local communities when seeking to build data centres that would compete with existing loads for transmission and distribution capacity. The issue for renewables, however, is many data centre developers see natural-gas-fed power as the ideal short-term solution as it can be built quickly on a contained site and is reliable.
By contrast, interviewees in the report said they were concerned about intermittency in renewables, as this means the technology cannot be a source of power with the 99.999% reliability demanded by data centre operators, even when paired with energy storage. Even the high-energy-using bitcoin mining sector did not demand reliability in the ‘five nines’.
In addition, availability of large-enough sites for renewables near potential data centres is an difficulty that is hard to overcome.
Whitney Switzer, CEO at data centre development services company Sorellis, who has previously held leadership roles in data centre expansion at Amazon Web Services and Google, said developers have become more comfortable with behind-the-meter power solutions, and are in a “battle for what is available” in terms of their energy supply. She added that rapid growth and competition also put pressure on supply chains and skills.
“Even when you’re thinking about gas generation, there are only a couple of companies that produce the equipment that is validated and tried and true to deploy,” she said.
But there may be a future role for grid-connected renewables. Peter Perri III, managing partner at AI and data centre investor Jupiter Island Capital, said data centre operators would still look for grid connection in the long run. This is because even a gas-fired or coal-fired power plant cannot deliver 99.999% reliability in the same way as the grid.
He said the need to power AI demand was compounding a “generational challenge” for the Texas grid: “Even if you remove the AI demand, dispatchable generation was vastly underbuilt in the US for years, and you add to that markets like Texas are rapidly growing with population growth, reindustrialisation and electrification, including electric vehicles. You already had a generational challenge before AI came to the fore.”
The ways that data centre operators power their rapidly expanding and increasingly high-powered facilities are changing.
But whether future projects use gas, renewables with battery storage, or new nuclear technology, the main goal is to deliver stable projects in a fast-changing market. That is the challenge for renewables in this AI ‘gold rush’.
Troutman Pepper Locke was one of 63 law firms with lawyers featured in Tamarindo’s Legal Power List in March 2026. Find out more about them and the other 62 here
Strategic communications, insight and events for the global energy transition.