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NewsMaterial4 min readDisconfirmAI Editorial

SemiAnalysis: Texas Environmental Permit Freeze Is the Single Largest Risk to US Datacenter Construction in 2028, as Both Parties Tighten Regulation

SemiAnalysis links the results of the US November midterm elections to datacenter capacity by state for 2028, noting that if the Texas Commission on Environmental Quality (TCEQ) permit freeze continues until the end of the 2027 legislative session, approvals will be interrupted for approximately eight months; if further waiting for new rules to take effect is required, this approaches one year, affecting about 30% of all new US capacity planned for 2028.

2026-11-02 02:40 GMT+8

Datacenter construction in the United States for 2027 is largely locked in. In an analysis released on November 1, SemiAnalysis estimated that roughly three-quarters of the 33.8 GW of delivery capacity across its top 20 states scheduled for 2027 are already under construction, meaning next week's midterm elections cannot prevent their completion. The real battleground lies in 2028: the model predicts a net addition of 62.2 GW in the US that year, most of which has not yet started construction, and these unstarted projects are highly concentrated in states electing governors on November 3.

The single largest current risk is the permit freeze at the Texas Commission on Environmental Quality (TCEQ). Texas accounts for nearly 30% of the new US capacity added in 2028 within the SemiAnalysis model. Since September 21, TCEQ has frozen new permits, and combined with the interconnection queue audit begun on August 3, this pause now also covers onsite power generation projects. Two scenarios cited by SemiAnalysis differ significantly: Republican incumbent Governor Greg Abbott may resume permit issuance after the Electric Reliability Council of Texas (ERCOT) submits its audit report on December 10, resulting in an interruption of about three months; Democratic challenger Gina Hinojosa advocates maintaining the freeze throughout the legislative session (January 12 to May 31, 2027) until new laws are passed, meaning the pause would last about eight months from September. If developers must wait further for new rules to take effect in late summer, the interruption approaches one year—five to nine months longer than a December restart. For campuses racing toward delivery in 2027, this time window may be untenable.

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SemiAnalysis divides the 13 states with the largest 2028 net additions (accounting for 70% of the national total) into three risk tiers based on election scenarios. Tier 1 includes Texas, Ohio, Arizona, and Georgia, where unstarted capacity exceeds 2 GW and stricter conditions will apply regardless of who wins—Texas, Ohio, and Arizona have candidates from both parties leaning toward tightening regulations, while Georgia is included due to a tight governor's race and simultaneous elections for majority seats on the Public Service Commission. Tier 2 comprises Pennsylvania and Oklahoma, where additional restrictions depend on whether there is a change in party control. Tier 3 includes Illinois, Oregon, and Iowa, where unstarted capacity is smaller but regulatory tightening is almost certain. If all candidates advocating for a moratorium are elected, approximately 30 GW of planned 2028 capacity across these states faces delay risk; if only candidates advocating for conditional requirements are elected, exposure drops to 5.7 GW.

Bipartisan consensus centers on three points: making datacenters bear their own grid costs (advocated by 15 candidates), eliminating tax breaks (12 candidates), and limiting or disclosing water usage (11 candidates). SemiAnalysis argues the key difference between the 'conditional' and 'moratorium' camps is that conditional demands alter development costs and terms, allowing developers to continue by funding grid upgrades, adjusting cooling designs, or negotiating community agreements. Moratoriums, by contrast, directly block projects that still require necessary permits, preventing them from starting. The article cites interviews with six current and former employees of hyperscale cloud service providers, noting that while these companies can afford higher compliance costs, having money does not guarantee on-time delivery—permits, equipment, and construction schedules remain constrained by freezes, and shifting development to other states is difficult because any new location would similarly require power, permits, and construction arrangements matching the delivery timeline.

It is important to emphasize that all GW figures above come from SemiAnalysis's proprietary paid model; the public article presents conclusions rather than tracking data building-by-building. The article itself explicitly states that it evaluates candidates' positions literally, acknowledging uncertainty regarding whether promises translate into actual policy and whether freezes happen to interrupt critical project milestones. The value of this framework lies in providing trackable scenario boundaries: whether TCEQ resumes permitting after the ERCOT report release on December 10, and the results of the November 3 state elections, are key variables observable within the next two months.

Sources

  • newsletter.semianalysis.com↗
  • newsletter.semianalysis.com↗
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