Austin-based Core Scientific has ditched its crypto mining plans in Denton and now will be dedicating 100% of its Denton data center to high-performance computing for artificial intelligence — with no option to act as a “dimmer switch” when wholesale electricity prices become too expensive.
On Tuesday night, the Denton City Council unanimously approved modifying the power purchase agreement between Core Scientific and Denton Municipal Electric. Core Scientific’s facility is near the Denton Energy Center, the city’s natural gas-fired power plant.
Council members also unanimously approved allowing Core Scientific to lease an additional 42.9 acres at the location to expand its high-performance computing operations and build an office complex, as well as 6.7 acres for a future solid waste transfer station.
The change brings Core’s total land lease to 78 acres.
As a result of Core Scientific’s change in operations — along with normal growth affecting the area — DME’s overall peak load is projected to increase 73% by 2044, while the annual amount of electricity served is projected to increase 167% from 1.8 million megawatt-hours to 4.8 million MWh, DME spokesperson Stuart Birdseye said in an email Tuesday.
“Any increase to DME’s customer count allows the utility to spread fixed costs across a larger number of customers, which helps keep rates affordable for all customers,” Birdseye wrote.
It’s a deal that DME officials said would lead to 130 to 300 jobs on site for the local workforce at above-average wages and possible apprenticeships and cooperative programs with the University of North Texas and Texas Woman’s University, $4 billion in real estate investment and $194 million in property taxes over the first 10 years.
Birdseye said that because a private company is leasing city-owned property, the property and improvements are no longer tax-exempt. Core Scientific will still be subject to all applicable taxes, including taxes on personal business property such as computers and generators.
Core Scientific will pay about a $54,000 monthly lease, a one-time payment of about $5 million for estimated value loss associated with the change in transaction due to the removal of a land swap, and a $60,000 fee to cover the cost of redesign for the solid waste transfer station due to a smaller footprint.
“Core initially proposed a land swap for the City to relocate a proposed Solid Waste Transfer Station,” Birdseye wrote Wednesday. “This would have freed up property next to DME’s property to keep the proposed data center contiguous. Since the land swap did not occur due to economic reasons, Core agreed to pay the stated amount in consideration of the City’s agreement to redesign the Solid Waste Transfer Station within a reduced parcel of property and lease a portion of that property to them.”
DME also granted temporary construction easements on about 12.6 acres for a 48-month term at a monthly lease rate of $5,280 to enable construction of the high-performance computing project.
Chief Operating Officer Matt Brown said in an emailed statement Wednesday that Core Scientific is excited to expand its operation in Denton, “which has been a welcoming partner since we first established our presence here in 2021.”
“We are proud this city will be home to one of the largest GPU supercomputers in North America, and we welcome locals into the Core Scientific family with the job creation that this expansion is expected to bring,” Brown said in his email.
Birdseye echoed that message and pointed out that Core Scientific’s economic impact also includes construction jobs and local purchases associated with the 36-month construction — along with a projected $6 billion in total real property investment.
“It is worth noting that Core Scientific is expected to make this significant investment into the Denton community without requesting, or receiving, any tax incentives from the City of Denton,” Birdseye wrote.
However, DME General Manager Tony Puente told the council Tuesday night that Core Scientific will be seeking grants and tax abatements from the state.
Texas offers a sales tax abatement on equipment and electricity for data centers that are at least 100,000 square feet, invest at least $200 million and employ at least 20 people at above-average wages from the county where the data center is located, according to the state comptroller.
In a Facebook post Wednesday, City Council member Brian Beck pointed out that Core Scientific’s new operations are still under the Denton Renewable Resource Plan. Since it is a firm load now instead of a variable one, the city will be able to contract for a direct solar and wind power purchase agreement to cover the load, which he called the better solution.
“The conversion of the Core Scientific data center from cryptocurrency mining to standard data center not only aligns with our approved key priorities but ALSO gets rid of the problematic associations that crypto has, essentially Denton’s largest crypto mine is going away,” Beck wrote. “The data center will now be Nvidia-accelerated machine learning and AI-supportive, able to tackle a variety of computational needs instead of one legal but sometimes sketchy use. AND while the previous outdoor data center didn’t have noise pollution issues because of development code review committee driven development code requirements (Full disclosure, I am the chair of the DCRC), the newly converted center will be enclosed, making it even quieter.”
Beck stressed to the Denton Record-Chronicle that having more uses is better than simply hash mining for crypto, and it would also be “better to have it under 100 percent renewable than the 35% renewable (that ERCOT offers). This won’t be an interruptible (energy) source and that would be the same with other any large source coming to town.”
Beck said a contract for a firm load of electricity is more reliable than one for a variable load.
“It is better to have planned energy consumption than do crisis response (shutting down during high energy demand),” Beck said.
This is Core Scientific’s second request to modify the power purchase and lease agreements with the city. The first occurred in August. Core Scientific had pulled itself out of bankruptcy six months earlier and shifted part of its focus at the Denton data center from crypto mining to high-performance computing for AI and requested an additional 2 acres for backup generators and heat exchangers.
DME Assistant General Manager Terry Naulty told the council then that the backup generators and heat exchangers were needed since Core Scientific’s new AI operation requires air conditioning instead of air cooling like crypto mining.
“Interestingly, this is about a billion-dollar investment into the community and all the tax revenues associated with that,” Naulty said in August.
The council’s decisions in August and November have come at a time when experts are warning that Texas’ power grid faces new strains from a growing tech sector of data centers for AI computing and crypto mining with expectations to consume record levels of energy.
Both Puente and Birdseye pointed out that Core Scientific will now be treated the same as all other DME firm load customers and is subject to ERCOT-mandated load shed events, based on DME’s Load Shed Plan.
Load shedding is an emergency measure taken by ERCOT to reduce energy demand by requiring some customers to shut off power to prevent a catastrophic failure of the grid. Texas’ last load shed event took place during the deadly winter storm Uri in February 2021.
Load shed events are infrequent and vary in duration, Puente explained to the council Tuesday night.
Since Core is converting from wholesale price responsiveness to firm load, Puente said, Core’s operations will increase Denton’s ERCOT load shed requirement, moving it to 1% of total ERCOT demand, from 0.5%.
In a large load shed event, ERCOT tells its utility customers across the state that it needs to shed, for example, 5 megawatts of power, Birdseye explained Wednesday. After Core Scientific is at 100% buildout, Denton will be responsible for shedding 1% of the power, instead of the current 0.5%.
“It’s still a small percentage that we would have to drop at any given time,” Birdseye said.
During a load shed, Birdseye said, DME would work to keep power on for emergency services, hospitals and other public safety and public health needs.
Puente stressed that DME will prioritize the public health and safety of customers in a load shed event.
“Since Uri, there have been zero forced outages,” Puente said Tuesday. “Some calls to conserve but no forced outages since Winter Storm Uri.”
DME also plans to purchase renewable energy credits for short-term energy supply, while Puente said their long-term energy supply strategy will depend on the council’s direction via the upcoming Denton Renewable Resource discussion.
In August, DME projected that AI computing would come online at the Denton data center between April and July 2025. Now with the expansion and shift to 100% AI computing, those online projections have changed.
On Tuesday, Puente told the council that Core Scientific is implementing the new operation via three conversions from crypto mining to high-performance computing for AI with projected completions for November 2025, December 2025 and July 2026.
The final phase relates to the expansion and won’t come online until DME can complete the required transmission system upgrades, which include two new substations onsite and significant rerouting of transmission lines.
Core Scientific is financially responsible for the infrastructure upgrades.
In Tuesday’s presentation, DME stressed that the final phase of AI computing can only be powered up if DME remedies the transmission system overloads they’ve modeled. DME projected completion of all physical transmission improvements between 2027 and 2029.
“DME is currently analyzing the transmission system to consider the impact of the added electric demand and has identified several options to remedy transmission system limitations,” Birdseye said via email Tuesday.
On Wednesday, Beck highlighted that Denton needs to create a comprehensive large-scale energy plan. He wrote that this situation highlights the need for a “both/and approach” to renewables, such as commercial generation via wind farms and local generation via rooftop solar and virtual power plants — “different sustainability solutions for different needs giving us the flexibility to choose the right solution for each problem.”
“Texas and Denton will have a battle on its hands as entrenched fossil fuels interests bias ERCOT and the PUCT [Public Utility Commission of Texas] to apply policies that help their cronies at the expense of sustainability,” Beck wrote.
