The next generation of AI infrastructure may owe as much to transmission planning as semiconductor design.
That became clear in April 2025, when Texas regulators approved a 765-kilovolt transmission strategy estimated at roughly $13.8 billion, embracing the first extra-high-voltage transmission backbone in ERCOT history.
By accepting staff's recommendation, the Public Utility Commission of Texas (PUCT) concluded that the new transmission corridor would better accommodate decades of growth in data centers, cryptocurrency mining, hydrogen production and other large electrical loads than the continued expansion of the existing 345 kV grid. The decision capped a five-year planning effort that evolved from electrifying the Permian Basin's oil fields into preparing Texas' grid for AI-era demand.
The proposal follows a familiar Texas pattern. As Data Center Knowledgepreviously reported, the Competitive Renewable Energy Zones (CREZ) transmission buildout, originally designed to move West Texas wind generation, helped influence where hyperscale data center development clustered by creating high-capacity transmission corridors and substations that later attracted major AI projects.
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As AI infrastructure demands increasingly hinge on reliable, high-capacity power delivery, the 765 kV decision reflects a more deliberate effort to build transmission before planners know exactly where the next generation of major power users will emerge.
From Oil Fields to AI Factories
Like CREZ before it, the groundwork for the 765 kV network predates today's AI boom.
ERCOT's 2019 Delaware Basin study and its 2021 Permian Basin planning work focused on replacing onsite generation with utility power as drilling operations electrified. By 2024, transmission providers were forecasting an "exponential increase" in non-oil-and-gas demand driven primarily by cryptocurrency mining, data centers, and hydrogen electrolysis.
Those projects represented 11.6 GW of projected demand by 2030 – nearly matching the forecast oil-and-gas load that originally justified the Permian reliability initiative. Combined demand reached 23 GW by 2030 and 26.4 GW by 2038.
Instead of asking how many additional 345 kV lines the Permian required, ERCOT concluded that the projected load growth justified evaluating extra-high-voltage transmission infrastructure.
Neil Osnato, founder of Persistence Analytics Group, told Data Center Knowledge that the shift reflects a broader change in transmission planning. Historically, planners designed the grid around known generation additions, regional reliability needs and identifiable industrial customers. AI is forcing planners to prepare for demand that is larger, faster-moving and less geographically predictable.
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"The AI era is different because the load is larger, faster-moving, less geographically fixed, and more sensitive to power availability than many traditional forms of economic development," Osnato said.
Choosing 765 kV
After months of workshops, technical studies and stakeholder meetings, PUCT staff recommended the commission adopt the 765 kV option for the Permian Basin Reliability Plan.
ERCOT estimated the full 2038 reliability plan would cost $13.8 billion under the 765 kV option, including common local upgrades, import paths and incremental local transmission improvements. The comparable 345 kV plan was estimated at $12.95 billion, while a 500 kV alternative was projected to cost $15.32 billion.
Staff concluded the commission had "a unique opportunity" to address ERCOT's current and expected rapid load growth by deploying an extra-high-voltage transmission network. The recommendation described the decision as a forward-thinking policy that balances forecast uncertainty, cost and reliability while preparing the ERCOT region for the future.
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ERCOT reported the system is experiencing "unprecedented load growth." The memo notes that "a notable characteristic of the new growth is that it is primarily composed of large loads that can be added to the ERCOT system in as little as 6 to 12 months." Staff said that a rapid interconnection timeline could cause actual demand in the Permian region to exceed today's 2038 forecast.
"ERCOT cannot know precisely where future load and generation will site in Texas," the memo states. Staff argued a 765 kV network would better accommodate that uncertainty while providing the foundation for "a looped, networked statewide plan."
Osnato said the planning philosophy extends well beyond Texas.
"Texas is not just planning for more electricity. It is planning for uncertainty," he said.
Higher-capacity transmission allows utilities to absorb uncertainty in where AI data centers, hydrogen production, oil-and-gas electrification and other large electrical loads ultimately emerge, he said.
"In that sense, flexibility becomes infrastructure."
The commission unanimously adopted the recommendation.
Commissioner Kathleen Jackson said the Permian Basin had "outgrown its infrastructure" and argued that while the 765 kV option carries a higher initial cost, it provides "more transfer capability" and longer-term benefits. If demand continues to rise, she said, "it will be an investment for the future."
Jackson also said building the system "for the future" while using today's dollars was an important consideration.
More Than Bigger Wires
The decision wasn't simply about moving more electricity into West Texas. ERCOT found the 765 kV network would provide 600 MW to 3,000 MW more regional transfer capability than the comparable 345 kV alternative, reduce annual transmission losses by about 5%, require fewer transmission corridors, and provide "a greater range of siting options for both Generation Resources and large loads."
For hyperscale developers, the payoff isn't bigger transmission lines. It's more places where campuses requiring hundreds of megawatts can connect to the grid. Higher-voltage transmission increases the number of substations that can support AI infrastructure, easing congestion and expanding developers' siting options.
Osnato said transmission capacity is becoming a competitive advantage for regions pursuing AI investment because power deliverability is rising alongside land, fiber, tax incentives and permitting, which are becoming deciding factors in site selection.
"The winning regions will not be the ones that simply announce land, tax incentives, or data-center interest," Osnato said. "They will be the ones that can prove power can be delivered at scale, on schedule, and without shifting unpriced risk onto utilities, ratepayers, or other customers."
Although the overall 765 kV reliability plan carried a relatively modest premium over the comparable 345 kV plan, much of the cost was common to both approaches. The commission concluded the additional investment in the extra-high-voltage architecture was justified by greater transfer capability, lower transmission losses, fewer transmission corridors and more flexibility to accommodate future generation and large electrical loads.
Beyond the Permian
Although the reliability plan focuses on West Texas, ERCOT's broader planning documents point toward a larger vision.
The 2024 Regional Transmission Plan concluded that a statewide 765 kV network would provide greater transfer capability, reduce congestion and transmission losses, and expand siting options for both generation resources and large electrical loads. It also found that major portions of both the 345 kV and 765 kV plans would still be needed even if forecast load growth falls roughly 20 GW short of current expectations.
Osnato said Texas' circumstances are unusual because of ERCOT's growth, the Permian Basin and the scale of emerging demand, but he believes the underlying planning philosophy will spread.
"Texas may simply be showing the rest of the country what the next planning problem looks like earlier than others," he said.
CREZ unlocked West Texas wind and later became a magnet for hyperscale AI development. The 765 kV decision reflects Texas' next wager: build the transmission first and let the next generation of major power users follow.
