MS Power Struggle Data Center Pushback Update & Expert Call Takeaways

M August 17, 2026 04:00 AM GMT

US Thematics | North America Morgan Stanley & Co. LLC Foundation

Michelle M. Weaver, CFA Equity Strategist

Equity Analyst State-level action on data centers has continued to build in the David Arcaro, CFA Equity Analyst month since our deep dive, with news from Texas and Virginia.

We pair that update with takeaways from expert sessions on the Anna Feldman Equity Strategist drivers of community pushback, and with the read through for

utilities, PSPs, and colocation data centers. Amanda Huang Research Associate Policy action is building as community pushback to data centers intensifies. Texas Garo K Amerkanian is auditing every data center advancing through ERCOT's interconnection process Research Associate against more than 474 GW of pending requests, ~90% data center-related, with major developers indicating they will comply. Virginia's July 31 Rider T1 order moves Dominion toward "cost causer pays" for direct-connect transmission. Ohio's debate has become electoral through Vivek Ramaswamy's "Ohioans-First" proposal, which is not current law and is better read as a sentiment indicator than a change to project economics.

We expect this conversation to spread as it gains relevance with voters ahead of the midterms - the majority of community pushback is concentrated around 3 issues: (1) Affordability and the concern that data center power consumption will raise consumer power bills, (2) Environmental issues especially water use and air pollution, and (3) Quality of life concerns including noise, dust, and traffic. These dynamics favor off grid generation, an investible element of the theme with key ways to play including: CIFR, WULF, GLXY, SEI, BE, GEV, INIO, NEE, WMB, LBRT, EROC and CMI.

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Exhibit 1: Core Concerns In Data Center Opposition

Source: Morgan Stanley Research

Our expert sessions argue that opposition has become a development constraint rather than a communications problem. In that context, political risk now should be underwritten like land, power or labor, and an important distinction is between concerns that can be engineered away (water, farmland, emissions) and societal objections that cannot. Opposition scales non-linearly with project size and the earliest signals appear in municipal minutes and local social media well before litigation. Education campaigns do not yet have a durable proven track record of success, but the approach is more constructive on brownfield siting and on relocating location-flexible training and batch workloads to colder, less populated jurisdictions.

For utilities, the Texas audit reads as a timing issue rather than a demand issue. ERCOT has filed a Request for Good Cause Exception on Batch Zero deadlines while preserving the April 9, 2027 study date; we view the pause as likely 1-3 months for higher-quality projects. Softer 2027-28 ERCOT forwards are a marginal negative for VST, CEG and NRG, though the IPPs are heavily hedged, and prolonged uncertainty is the more relevant risk to the capex upside embedded in AEP and SRE plans. Additional grid uncertainty is bullish for onsite power (SEI, BE, INIO).

Batch Zero should be a positive catalyst for powered shell providers. Base Load designation is effectively a green light to connect, while Studied Load carries required system upgrades, no guaranteed MW and the prospect of an extended stay in study purgatory. We think more capacity clears into Base Load than expected, favoring names whose designation had been ambiguous. CIFR is our preferred play, with GLXY also likely to receive favorable notification. Determinations land within weeks. The same volume that confirms grid access also confirms demand, supporting ERCOT forwards that sit near half…