The Smart Bet: Natural Gas for AI
The rapidly growing energy demands of data centers powering artificial intelligence (AI) applications in the United States are likely to be met by natural gas in the short term. The AI revolution is at the forefront of the U.S.’s new tech revolution and a key battleground in the competition against China for dominance in this sector. Tech giants like Microsoft, Amazon, Google, Apple, and OpenAI are making significant investments, and the Trump administration has been supportive of unleashing energy to fuel this revolution.
However, the challenge lies in building numerous power plants and connecting them to power grids and pipelines. According to a new report by the International Energy Agency, more than 1,000 terawatt hours will be required by 2035. After years of relatively flat demand, the U.S. power system is experiencing significant growth, largely driven by the AI revolution.
Natural gas is emerging as the optimal short-term solution for AI applications in the United States. Turbines burning highly monitored and low-emissions domestic natural gas can provide stable, dispatchable power, making them ideal for data center operators either as grid backup or in a “behind the meter” configuration. The energy consultant group Enverus predicts that up to eighty new gas-powered plants, adding around 46 gigawatts of capacity, will be built in the U.S. by 2030. This represents more than 20 percent of what was added in the last five years and is equivalent to the size of Norway’s entire electrical system. AI center developer Crusoe has already secured around 4.5 gigawatts of natural gas turbines to power its centers.
While other options like small modular reactors (SMRs) and renewable technologies are being explored, they face significant challenges. SMRs are hindered by regulatory approval processes, which may delay their commercial deployment beyond the timelines required by data centers. However, there is potential for improvement in the medium term. Transmission infrastructure required to connect large projects often faces lengthy permitting delays, but regional systems have some capacity to accommodate new loads with improved system operations.
Geothermal energy is one renewable technology that is gaining traction due to recent technological advances borrowed from oil and gas directional drilling and fracking. Companies like Fervo Energy have partnered with tech giants like Google, making geothermal more geographically dispersed than its historical applications.
Big energy companies like Chevron and Exxon have announced plans to supply data center operators with power generation mainly from natural gas and are considering the inclusion of carbon capture and storage technology at certain sites. The biggest challenge for natural gas turbines is timing, as suppliers like GE Vernova, Siemens, and Mitsubishi Heavy Industries face post-pandemic supply chain constraints.
The main environmental concern with natural gas is controlling methane emissions, which can significantly erode its climate benefits if leaks occur during production and transport. However, recent advances in monitoring and mitigation have improved the industry’s performance, including satellite tracking, continuous monitoring, and tighter wellhead standards that have been shown to lower methane leakage by up to 80 percent.
In conclusion, while the long-term decarbonization of the grid is essential, the immediate reality demands pragmatic solutions. In the short term, natural gas turbines are likely to be the preferred choice for powering the next generation of compute infrastructure in the United States.
