A surge in power demand from artificial-intelligence data centers and semiconductor plants is creating a new investment opportunity in Texas, with South Korea and the U.S. nearing an agreement on a $22 billion gas-fired power project that could become the first major undertaking under Seoul’s broader $350 billion U.S. investment pledge.
The proposed project in Encinal, Texas, would ultimately have about 6.3 gigawatts of generating capacity, positioning it to serve one of the fastest-growing power markets in the U.S. For American utilities, power developers and investors, the project underscores the scale of new generation needed to keep pace with the expansion of data centers and advanced manufacturing.
The two countries are also discussing a potential follow-on investment to build as many as eight large nuclear reactors in the U.S., according to people familiar with the negotiations. The projects would give South Korea a significant role in expanding America’s electricity-generation infrastructure at a time when grid capacity and reliable power supplies have become increasingly important to technology and industrial companies.
The Encinal project has been under negotiation as the two sides worked to determine its size and investment structure. South Korean officials initially considered a project costing about $20 billion, while the U.S. side pushed for $25 billion. The two sides are now understood to have settled on a figure of roughly $22 billion.
The power plant is expected to be developed in stages, reducing the risks associated with committing billions of dollars before demand is fully established. The first phase would include about 1.4 GW of gas-turbine generation. If demand and project economics meet expectations, an additional 4.9 GW of higher-efficiency combined-cycle capacity could be built in subsequent phases.
Texas has emerged as a major destination for data centers, semiconductor manufacturing and other power-intensive industries. The resulting increase in electricity consumption has prompted utilities and developers to seek new generation capacity, including natural-gas plants that can provide dispatchable power while renewable and grid infrastructure expand.
Nuclear power is emerging as another potential pillar of the investment package. The U.S. has proposed directing $120 billion of the $200 billion in planned investment outside the shipbuilding sector toward construction of as many as eight nuclear reactors, according to people familiar with the discussions.
South Korean officials are seeking to avoid attaching a specific dollar amount to the nuclear commitment at this stage. Instead, the two governments are discussing broader language covering cooperation on the construction of as many as eight reactors in the U.S.
The nuclear proposal would deepen cooperation between the two countries in an industry that Washington is seeking to expand as part of efforts to strengthen domestic energy security and meet rising electricity demand.
The investment package isn’t expected to include U.S. memory-chip manufacturing projects sought from Samsung Electronics and SK Hynix, according to people familiar with the discussions.
South Korea’s government is moving toward completing the domestic procedures needed to finalize the investment package. The projects must go through review by a strategic-investment management committee chaired by the industry minister and approval by a separate committee chaired by the finance minister before being reported to the National Assembly.
A closed-door meeting between government officials and lawmakers on September 7 was held ahead of that final parliamentary reporting stage, signaling that the investment agreement could be nearing completion.
The two countries could sign a memorandum of understanding as early as September 18 once the remaining details are resolved, according to people familiar with the discussions.
South Korea’s Ministry of Trade, Industry and Energy disputed the report, saying the details hadn’t been finalized.
“Consultations between South Korea and the U.S. are currently under way,” the ministry said. “No specific details have been finalized.”
