- Data centers need more power to meet AI demand but the grid is tapped out
- Nuclear power is one alternative option but likely won't be online fast enough to meet short term demand
- Natural gas companies are responding to the call
Data center damsel in distress, meet your knight in shining armor. Natural gas is emerging as the hero most likely to swoop in and solve the power problem data centers are facing amid a wave of demand driven by artificial intelligence.
Goldman Sachs recently estimated that the U.S. alone will need an additional 47 gigawatts of power generation to meet data center demand through 2030. With the grid tapped out in many places, some data center providers are eyeing nuclear power as a potential option. But the stringent regulations surrounding nuclear energy likely mean it’s not a short term solution.
It appears data center operators are increasingly realizing this.
“I would just say that what we're seeing is a shift because I think that the big developers are realizing that they're kind of up against a brick wall right now in terms of extracting more generation off the grid,” Alan Armstrong, CEO of natural gas supplier Williams Companies, said on an earnings call last week.
He continued: “In terms of the hyperscalers and their approach right now, we are seeing them look all the way back into areas where the gas resource is abundant, and the permitting allows for getting on with developing the infrastructure that they need to have reliable and affordable power into those markets.”
Williams Companies isn’t alone in seeing this interest. Marshall McCrea, chief operating and commercial officer for oil and gas company Energy Transfer, said on its earnings call last week that it is having conversations with data centers in four or five different states about supplying them with on-site power generation.
“Some of them, or many of them, want to put generation on site and wanting as much as 200,000 or 300,000 CEP for each one,” he said. “So, it's an enormous opportunity for us.”
Meeting the need
Goldman Sachs predicted the aforementioned incremental data center power demand in the U.S. will drive around 3.3 billion cubic feet per day of new natural gas demand by 2030 as well as the construction of new pipelines. All told, gas is expected to cover about 60% of the incremental data center power demand mentioned up top.
The opportunity appears so great that another natural gas company, New Fortress Energy, last month announced the launch of a new business arm – Klondike Digital Infrastructure – dedicated to creating behind-the-meter, on-site power solutions for data centers.
“New grid connections can take three to five years, and data center tenants need power now,” CEO Wesley Edens said on New Fortress’ call.
Klondike’s solution? Modular power units that can be deployed in roughly 120 days and essentially serve as power islands wherever data centers need them (check out slide 21 here).
Where it’s happening
McCrea didn’t elaborate on where exactly these conversations are happening, but Armstrong said it’s seeing strong interest in the Southeast and Mid-Atlantic U.S. It is also “trying to figure out how we can respond in the Rocky Mountain states, particularly in Eastern Washington, in the Quincy area, and in Idaho, in the Salt Lake City region.” He also called out Wyoming by name.
His comments make sense if you think about the location of known data center hubs like Northern Virginia (Mid-Atlantic), Atlanta (Southeast) and Salt Lake City. Idaho is also emerging as a data center hub, with a number of facilities – including a major one from Meta – popping up in the Boise area.
For New Fortress’ part, Edens said it’s preparing to file permits for a site it owns in Pennsylvania, and the company believes Pennsylvania as well as Ohio “are very attractive because of their physical proximity to large population centers as well as very abundant and inexpensive natural gas.” He added the company also owns sites in Shannon, Ireland and Brazil that could be used to serve data center clients.