Welcome to Texas, the state where the stars shine brighter than the taxes! With an area larger than France and an economy that rivals that of entire countries, Texas is not just a state, it’s a planet in its own right. Businesses flock here like mosquitoes in summer, attracted by a tax climate as warm as the Texas sun. But be careful, even the most seasoned cowboys must be wary of winter storms that can turn the power grid into a rodeo. So, hold on to your Stetson and get ready to discover how Texas has become the new business El Dorado, while juggling energy challenges.
Texas, a multifaceted American giant
With its 696,241 km², Texas is positioned as the second largest state in the United States, just after Alaska. Its surface area exceeds that of mainland France, and its impressive dimensions, approximately 1,300 km from north to south and 1,400 km from east to west, give it remarkable geographical diversity. Texas is also the second most populous state in the United States, with a population of 30.5 million in 2023, according to the United States Census Bureau.
The Texas capital, Austin, is the political heart of the state, while Houston, its largest city, and Dallas-Fort Worth, its densest metropolitan area, are the economic engines. The majority of Texans, about 80%, are urban, and nearly half reside in the Dallas-Fort Worth or Houston metro areas. San Antonio and Austin complete the table of Texan metropolises, each with more than two million inhabitants.
Source : Wikipedia
Economically, Texas is an undisputed power. It is the second richest state in the United States, with a gross GDP of $2,389 billion in 2023 (just behind California at $3,579 billion and… France at $3,031 billion). Its economy is diverse, ranging from livestock to aerospace, biotechnology and a dominant energy sector. Texas is America’s largest producer of crude oil and natural gas, thanks to its vast mineral reserves. It also has an extensive pipeline network, with nearly 770,000 kilometers crossing the state.
Texas, nicknamed “The Lone Star State”, is one of a kind. It is the only state to have joined the Union by treaty, marking its independence from 1836 to 1845. This historical singularity is reflected in its cultural identity, its political choices and its economic decision-making which is discussed in this article.
An attractive environment
The state attracts businesses with a favorable tax environment, no corporate or personal income tax, a skilled workforce and easy access to global markets. These advantages have convinced tech giants like Tesla, Oracle and Hewlett Packard Enterprise to move their headquarters and factories to Texas, away from California’s high rents and strict regulations.
The state is also a leader in renewable energy, accounting for nearly 30% of its energy mix. It benefits from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, which support the development of clean energy and infrastructure projects.
The shift taken in 2021
Texas has fallen on hard times, most notably during the February 2021 cold snap that led to massive power outages, hundreds of deaths, and considerable economic losses. This crisis has highlighted the vulnerabilities of a deregulated and independent energy system, managed by the Electric Reliability Council of Texas (ERCOT). The crisis has also revealed the limits of a liberalized and private electricity market, where competition and deregulation have been unable to guarantee the reliability and fluidity of the network in extreme conditions.
In response, Texas – under the leadership of Brad Jones, the manager of Ercot – took steps to strengthen its energy infrastructure and avoid a repeat of such a disaster. The authorities have maintained market liberalization while emphasizing the need to improve the resilience of the electricity network. Massive investments are needed to modernize and protect energy installations against bad weather. They modernized energy production plants and developed power farms on the Ercot network. The latter can delete their consumption if necessary so as not to saturate the networks.
Data centers and power farms
Texas faces challenges from the rapid expansion of data centers, which are putting increasing pressure on energy and land resources. Managers of these data centers must now consider generating their own electricity to meet growing demand and environmental concerns. Flexible data centers are a response to not putting too much pressure on the network and freeing up availability in the event of extreme weather conditions, for example.
Texas has therefore entered a virtuous circle. They invest in renewable energies, gas and nuclear power and attract technology companies thanks to favorable taxation. This economy finances the development of clean or semi-clean energy sources. The scale effect reduces electricity costs. They promote the emergence of power farms. This improves the resilience of the network and therefore makes it possible to further reduce the price of electricity, which is even more attractive to businesses. In the event of a “winter storm” as in 2021, we can therefore adjust the Ercot network by starting a gas plant or by asking power farms to cut off their activity in exchange for remuneration (which costs less). In short, a virtuous circle which makes it possible to reduce the price of electricity, finance the energy transition and attract capital and businesses. (Why don’t we do that in France?).
If for over a century California was the place everyone wanted to move to, the Lone Star State seems to be stealing the spotlight. The sharply increasing population and the arrival of numerous technological and industrial giants are concrete proof of the attractiveness of the region.
