Natural gas is booming as AI companies compete to secure power for data centers.
Data centers are getting bigger and consuming more power. These are being built to tighter schedules than ever before. And America’s current power infrastructure is struggling to keep up.
“Speed is key,” Vivian Lee, managing director and partner at Boston Consulting Group, told Business Insider. “Getting a site online as early as a year can have a significant economic impact.”
Lee said data centers typically take two to three years to build, assuming local community cooperation. If not, it may take longer. At the same time, AI companies are looking for ways to secure power more quickly, as power grid upgrades can take four to eight years, Lee said.
These days, one of the easiest ways to do that is by leveraging existing natural gas infrastructure. Gas plants can often be built or expanded faster than nuclear projects, can be connected to large pipeline networks, and offer better energy security than renewable sources.
Meta adds seven natural gas plants to Hyperion data center in Louisiana. Chevron and Engine No. 1, which last year announced a partnership to build natural gas-fired plants next to data centers in the United States, recently added Microsoft to its fold and are now working to power data center campuses in West Texas. Google also confirmed that it is working with Crusoe Energy to build a natural gas plant that will provide some of the electricity to its Goodnight data center campus in the Texas Panhandle.
“Right now, the most important metric is power-to-power, and a lot of it is important. That’s why gas is getting a lot of attention again,” said Jamie Webster, senior director and partner at BCG.
Renewable energy takes a backseat
Although natural gas emits less carbon dioxide per unit of energy when burned than coal or oil, it is still a fossil fuel and contributes to the climate crisis.
Therefore, Silicon Valley’s recent introduction of natural gas is noteworthy.
U.S. technology leaders have long positioned themselves as leaders in the transition to renewable energy. Tech giants like Google, Amazon, Microsoft and Meta signed large-scale wind and solar power deals last year to help offset the growing power needs of their data centers.
But these deals may have been more about money than principle.
Webster said the focus on renewable energy is being driven not only by sustainability goals, but also by renewable energy’s ability to reduce energy costs over time, as it is the only energy source whose costs tend to decline.
“Over the past decade, technologies such as solar power, wind power and batteries have reduced costs by up to 90% and fundamentally changed the equation,” he said.
He said the underlying factors are currently driving a return to natural gas, especially as AI companies are raising huge amounts of capital to build out technology infrastructure while comparative returns are still largely unseen.
In conversations with developers and energy suppliers, Lee said renewable energy is seen as “essential, but not sufficient.”
Carbon capture technology can help reduce the environmental impact of increased use of natural gas. This process captures carbon dioxide from power plants and industrial facilities before it reaches the atmosphere and stores it underground or reuses it. This could allow companies to continue using natural gas while reducing emissions, which are a major contributor to the climate crisis.
But Webster said carbon capture technology, also known as CCUS (‘carbon capture, utilization and storage’), is still in the early stages of expansion.
Webster said the world is currently in a “tectonic supercycle” driven in part by demand for data centers, electrification and cooling.
“That growth is putting pressure on supply, and gas is often one of the quickest ways to respond to supply.”