Jun 23, 2025
Fueling the Future: Why Natural Gas Is Powering the AI Data Center Boom
Data centers are a hot topic in Texas right now. The Lone Star State is ground zero for new data center construction, with dozens of new facilities already in the pipeline. The federal government has also pledged up to $500 billion to help develop AI data center infrastructure. At the heart of it all is natural gas.
Power generation and data centers go hand-in-hand. As recently as five or six years ago, data centers were among the most power-hungry buildings on the planet. Their hunger for power has only increased with the advent of generative AI. Furthermore, the reality is that the grid is not keeping up.
Renewables Aren't the Answer, Either
Just a few years ago, the talk of building new data centers in Texas involved the prospect of powering them exclusively with renewables. Data center operators had neither the time nor the patience to connect their facilities to the grid. Renewables seemed like the obvious solution. Data centers could be built with their own solar and wind farms to completely eliminate dependence on grid energy.
It has not worked out that way. Moreover, a lack of success with renewables has left data center operators in a precarious position. They have three options:
Hold off on plans to build new facilities in hopes that renewables will catch up.
Jump through the hoops necessary to connect to a grid that may not be able to supply enough energy.
Find a different way to generate their own power.
Why Gas Is Attractive
Data center operators are increasingly choosing the third option. They still want nothing to do with the grid, but necessity has forced them to move on from renewables. Instead, they are building their own gas power plants side-by-side with new data centers. The power plants are dedicated exclusively to keeping the data centers online.
Here's why gas is so attractive:
1. Reliability
Natural gas is among the most stable and reliable options for power generation. It delivers consistent, around-the-clock energy that high-powered data centers demand. In an industry that cannot afford downtime, gas is superior to other forms of energy production.
2. Deployment
Nuclear might be the only power source that is more reliable than gas. But it takes forever to get a new nuclear power plant approved and built. Gas-powered plants can be deployed much more quickly. They are also less expensive to build.
3. Operating Costs
Dollar for dollar, generating electricity with natural gas costs a lot less than diesel. In many cases, its total costs are less than the total cost of renewables. It makes little sense to not go with gas.
4. Availability
Natural gas is preferred as a power generation fuel because it's available in abundance. Right now, there is no shortage of natural gas. Its supply looks very strong for future years as well. In short, there is plenty to go around.
5. Scalability
Last, power generation with natural gas is more easily scaled than other forms of generation. That's exactly what the data center industry needs. We already know that AI consumes a tremendous amount of energy. Consumption will only grow as AI matures. We don't know by how much, but data center operators need to be prepared to scale up their power generation. Gas makes it possible.
We are all for renewables. They have their place in the overall power generation landscape. But we also know that data centers need to be built now. And right now, the best option looks like the independent, gas-powered plant that guarantees a new data center can continue operating around the clock.
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