Texas Co-op Takes First Step Into Data Center Market That Could Quadruple Its Size

While some utilities, notably in the Midwest and New England, fear they may not meet rising demand and will have to curtail supply, others are quietly surging ahead, particularly some rural electric cooperatives.

Rayburn Electric Cooperative, based in Rockwall, northeast of Dallas, a rural electric bulk-power supplier to four member co-ops, is planning to grow. It is negotiating with a data center to become its first data center customer next year.

David Naylor, Rayburn’s president and CEO, said the addition is small compared to most data center loads. “Just 400 megawatts, but it is a start,” he told me in an interview.

Naylor pointed out that if it accommodated all of the data center demand it has in prospect, the utility would triple or quadruple in size. Even without data centers, Naylor said their load is increasing by 4 percent to 5 percent a year.

Luckily for Rayburn, most of its power, whether self-generated or purchased, comes from natural gas, which is plentiful in Texas and has political support at the state level from the federal government.

Load Is Mostly Residential

This doesn’t mean that Naylor and Rayburn are opposed to renewables. “Our load is mostly residential and solar fits the shape of our load well, but we have nothing against wind,” he said. Although Rayburn’s wind purchases are modest and it doesn’t generate any power from wind, Texas is the wind capital of the nation.

More wind power is generated in Texas than any other state. If it were generated in another state, there might be tension between the state and the federal government. But, as Naylor said, “This is Texas, and we keep as far away from anything to do with the federal government as we can.”

Rayburn and the Texas system operator, ERCOT, haven’t felt any stress this summer and are in a strong position for winter. There is no chance that the disaster of Winter Storm Uri in 2021, when 254 known deaths from cold were reported, will be repeated.

Naylor said a lot of equipment which froze during that storm has now been winterized, and there is much more battery storage available on the Texas system.

While utilities seek to accommodate data center load, they also look warily at the impact of the big tech companies and their power demands on the shape of the utility.They are cautious about the impact of this massive new demand on the structure of the industry.

Naylor said if the data centers start generating their own power and “coming in before the meter,” that will change the nature of the utility business.

Big Tech Vies With Utilities For Workers

Another pressure — seldom mentioned but raised by Naylor — is the impact of the cash-rich tech behemoths on the skilled job market. “They can pay much more than we can, particularly for IT workers,” he said.

Rayburn compensates by trying to make itself a great place to work “and to devote your career to. It’s a very exciting place,” he said.

Over in Colorado, United Power has celebrated the commissioning of a new natural gas plant, Mountain Peak, which its president and CEO, Mark Gabriel, told me “was conceived and built in less than two years.”

Naylor and Gabriel agree: Co-ops have the ability to move with a dexterity and speed that their compatriots in the investor-owned sector of the industry don’t enjoy. Likewise, some public power entities.

Public power companies, mostly municipally owned, are answerable to a city council or other board which makes decision-making more difficult, more political and slower. The investor-owned utilities are subject to directors, shareholders and layered regulators.

Co-ops are, by comparison, free agents, answerable to their customers who double mostly as their regulators.

About 166 investor-owned utilities generate around 72 percent of the nation’s power. They hold many of the keys to the future, including the adoption of new small modular reactors and have the resources for large projects.

But co-ops enjoy the kind of freedom that makes them able to pioneer in some things — able to be adventurous, as at Rayburn and United.