The Energy Department has finalized a $3.26 billion loan for a subsidiary of utility giant American Electric Power to upgrade thousands of transmission lines across Texas, helping the state’s electrical grid supply energy to power-hungry data centers.
The agency said it closed the loan with AEP Texas on Wednesday, marking the third time that its Office of Energy Dominance Financing has committed to supplying utility financing under President Donald Trump.
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“This investment will modernize Texas’ electric grid, support the energy needed for AI, advanced manufacturing, the Permian Basin, and help keep electricity costs down for Texans,” Energy Secretary Chris Wright said.
The $3.26 billion loan is expected to finance roughly 100 transmission projects across Texas, including the rebuilding or reconductoring of existing transmission lines, as well as the construction of new transmission infrastructure spanning 2,800 miles.
The Energy Department said these projects will double the power-carrying capacity of transmission infrastructure in Texas, helping meet rapidly growing electricity demand caused by data centers that power artificial intelligence technology, as well as increased manufacturing and oil and gas development in the Permian Basin, which is in the western part of the state.
Texas has found itself at the center of the AI boom, with at least 248 data center projects planned in the state, on top of the already 335 existing facilities, according to an analysis conducted by the Texas Tribune. These data center projects account for the overwhelming majority of new power requests in the state, with grid operator ERCOT saying in June that they account for 89%.
Amid this demand boom, Texas has seen a massive increase in natural gas-powered generation waiting to connect to the state’s grid. In May, the Texas Tribune reported that the volume of gas projects in Texas’ interconnection queue jumped by more than 400% from March 2023 to April of this year. A significant number of renewables are also waiting to connect to the grid, with the analysis finding that the number of wind projects in the interconnection queue increased by 87% over the same period.
While a traditionally red state, much of Texas’s electricity generation is made up of wind and solar power. As of Wednesday morning, solar and wind accounted for the largest share of generation at 62.9%, while natural gas made up 33.3%.
The Office of Energy Dominance Financing, formerly known as the Loan Programs Office, was revamped under the Trump administration to reallocate billions of dollars in federal loans away from renewable energy projects and toward traditional fossil fuels and grid infrastructure.
In January, the administration canceled nearly $30 billion in loans for clean energy projects finalized under the Biden administration. Trump officials also said they would be revising an additional $54 billion to support the president’s energy agenda.
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Early last year, there were fears that the Trump administration would scrap the lending office completely, but Wright advocated for the Energy Department’s authority to finance projects such as nuclear power and natural gas.
With the loan closed on Wednesday, the agency’s lending office now has nine projects under its portfolio, with some focused on upgrading transmission infrastructure, others on deploying nuclear energy, and one investing in the coal industry.
