Anti-Innovation Energy Policy Could Short-circuit America’s future

Originally published to RealClear Policy. 

President Donald Trump made explicit promises: reshore jobs, unleash American innovation, and secure the country’s lead in artificial intelligence. That vision took shape early in his second term with the bold announcement of Stargate—a $500 billion commitment to build out an AI-driven data infrastructure across the U.S., starting in Texas.

This project isn’t just a tech upgrade. It’s a national strategy to fuel the next wave of prosperity, ensure U.S. dominance in AI, and protect American security from authoritarian competitors like China. However, a misguided bill in the Texas Legislature threatens to wreck this once-in-a-generation opportunity.

Senate Bill 6 (SB 6) would weaponize energy regulation against data centers—jeopardizing Trump’s innovation agenda, Texas’s economic leadership, and America’s digital infrastructure.

SB 6 would let the grid operator, ERCOT, discriminate against large energy users like data centers. Under the bill, these facilities would be saddled with higher transmission costs and required to build redundant on-site generation. Even worse, ERCOT could shut them down remotely during emergencies. That’s right—Texas is proposing a kill switch for the digital backbone of modern life.

Texas lawmakers are right to care about energy reliability. ERCOT projects that electricity demand will rise from 85 to 150 gigawatts by 2050 due to a growing population and booming tech sector. But SB 6 solves the wrong problem in the worst way—by punishing one of the state’s most promising industries.

Data centers aren’t causing grid instability. They’re a potential part of the solution. 

Many are exploring advanced, zero-carbon power sources—like small modular nuclear reactors (SMRs)—to power their operations. Not only would this take pressure off the grid, but these facilities could also supply electricity back to the grid during periods of scarcity. Imagine that: rather than shutting down data centers, they could be stabilizing the grid and helping keep homes powered. SB 6 ignores this innovation entirely.
Texas has attracted more than 150 data centers due to its low taxes, business-friendly climate, and abundant energy. These facilities power everything from AI systems and cloud computing to hospital networks and financial transactions. Without them, modern life doesn’t function. They’re also central to America’s security, housing sensitive government data and communications infrastructure.

Yet, SB 6 fails to classify data centers as “critical infrastructure,” leaving them vulnerable to being cut off during grid emergencies. That’s not just short-sighted—it’s reckless. Imagine another deep freeze like Winter Storm Uri in 2021. ERCOT could decide to power down data centers to protect residential heating. But that would shut down 911 systems, cripple hospitals, and paralyze emergency services.

The consequences would be severe. An elderly person could suffer a medical emergency and be unable to call for help. Even if help arrived, hospital records might be inaccessible. And all of this would happen because a state regulator made a split-second decision without input from families or the private sector.

These are not theoretical risks. In 2024, a botched software update impacted 8.5 million Windows devices, grounding flights and disrupting global operations for hours. That was just one company. Now, imagine the chaos if multiple data centers were forcibly shut off during a crisis.

Beyond the physical risks, SB 6 opens a national security hole. While exemptions could be made to account for data centers that hold classified data, that exemption becomes a neon sign for America’s enemies. Policymakers must consider the geopolitical risks of treating strategic infrastructure as expendable.

Let’s not forget the economic costs. AI and technology are not just conveniences but pillars of the modern economy. 

AI applications in logistics, medicine, defense, and manufacturing are already saving time, cutting costs, and boosting productivity. These gains are compounding fast. The companies building and deploying these innovations rely on robust, uninterrupted access to data centers. Undermining them out of fear risks throwing away the enormous prosperity and job creation they bring.

This boils down to a failure to keep up with innovation. Policymakers are stuck in yesterday’s thinking while the world races forward. Data centers are critical infrastructure now. Treating them like a liability instead of a strategic asset is a mistake Texas cannot afford.

There’s a better path. Texas should embrace energy innovation, not stifle it. SMRs and battery storage can strengthen grid resilience. Regulatory flexibility can attract billions more in investment. Recognizing data centers as vital infrastructure can ensure national security and economic progress.

Texas can lead the AI revolution or regulate it into oblivion. SB 6, as written, risks dismantling years of economic growth, forfeiting high-tech jobs, and threatening national security. Most of all, it would derail President Trump’s boldest economic initiative before it begins.

Texas lawmakers must act wisely. The freedom to innovate and the opportunity to prosper are on the line.