North Carolina Repeals Its Power Tax Break. Texas Never Had One to Lose.

Texas keeps the permitting door open while its competitors slam theirs shut. North Carolina Governor Josh Stein signed a 2026 budget repealing the state's sales tax exemption on data center electricity, a move that will pull $21.4 million into the state General Fund next fiscal year and $28.6 million annually by 2030-31. Virginia already imposed the nation's first data center electricity consumption tax at $0.011 per kilowatt-hour, effective July 1.

Texas has done neither. That's the opening: developers weighing retroactive tax exposure in other states will look hard at ERCOT's competitive wholesale basins. But North Carolina kept its capital investment incentives intact, so this is a reordering of site economics, not a collapse. As Persistence Analytics Group's Neil Osnato put it, the tax change matters at the margin, but power delivery schedule and interconnection speed remain the first-order questions. Developers who weight power availability first and tax packages second will move fastest.

National Grid Ventures put $1.75 billion into a 35% stake in Joulent, a spinout built to serve GW-scale AI loads with dedicated gas microgrids. The flagship is Project Kilby, a 2.67 GW gas facility in West Texas through a 50-50 joint venture with Chevron, with Microsoft signing a 20-year PPA to buy its output for a co-located data center. Engine No. 1 locked in four gigawatts of GE Vernova turbines two years ago, before the turbine crunch hit. The logic is plain: ERCOT's interconnection backlog runs past 300 GW, and grid timelines don't match data center urgency.

The alternatives are stacking up alongside gas. Renew Home, Tesla, and Sunrun announced a combined 16 GW of residential virtual power plant capacity to sell directly to hyperscalers, while GridMarket and Deployable Energy target 3 GW of nuclear microreactors through 2035, with Houston-based Deployable's Unity reactor hitting zero-power criticality at Idaho National Laboratory on June 30. The risk cuts across all three paths: behind-the-meter doesn't exempt anyone from local opposition, water sourcing, or multi-state permitting, and NRC commercial licensing remains the schedule wildcard on any 2030 microreactor timeline.

The water cost of AI isn't one number, it's a site-selection variable. Researchers Li, Yang, Islam, and Ren estimated GPT-3 could consume roughly 500 milliliters per 10 to 50 responses depending on where and when it runs, while Google's 2025 paper reported median Gemini text prompts at 0.26 milliliters. The gap is the point: cooling system, grid composition, and local weather drive the real footprint.

Hardware is starting to close that gap. NVIDIA's liquid-cooled Rubin design routes coolant directly through cold plates and claims a reduction from about 2.6 million gallons per megawatt annually to near zero under favorable conditions, though hot-climate sites may still need chillers part of the year. For Texas developers competing for water-constrained Permian and West Texas sites, that's the leverage: model cooling water baseline before site commitment, or watch a mild-climate rival underprice you over a 15-year hold.