In recent times, major technology firms such as Microsoft and Meta have increasingly turned to natural gas as a primary energy source for their data centers. However, this growing reliance has come with a significant financial implication: the cost of constructing new natural gas power plants has soared by 66% over the past two years, as reported by BloombergNEF.
Despite the relatively low prices of natural gas in the U.S., the expenses associated with building combined cycle gas turbine (CCGT) power plants have risen dramatically, from under $1,500 per kilowatt in 2023 to approximately $2,157 last year. Additionally, the construction timeline for these facilities has extended by 23% on average.
Data centers are a key factor behind the increasing demand for electricity, prompting not only tech companies but also utility providers to invest heavily in natural gas solutions. The push for data centers to "bring their own power" has led to a notable increase in electricity costs passed on to consumers, which has sparked public concern regarding the proliferation of these facilities.
As one of the fastest-growing electricity consumers, data centers are projected to amplify their energy demand significantly, potentially reaching 106 gigawatts by 2035, up from the current 40 gigawatts. This surge is fueled by the trend toward larger data centers, with projections indicating that over the next decade, the average facility will exceed 100 megawatts in capacity.
Previously, tech companies predominantly opted for grid-connected data centers supported by renewable energy sources like wind and solar. However, the escalating electricity demand, driven by advancements in AI and rising public scrutiny of data centers, has led to an uptick in new natural gas projects.
The rush for natural gas power plants has resulted in a shortage of gas turbines, which are essential components of these facilities. By year's end, turbine prices are expected to rise by 195% compared to 2019 levels, partly due to the complexities involved in their manufacturing, which hinder rapid scaling. Consequently, waitlists for these turbines are extending into the early 2030s.
Amidst this trend, Google has begun to explore alternative solutions, focusing on integrating renewable energy with long-duration energy storage technologies. Innovations such as Form Energy's iron-air batteries, capable of delivering electricity over extended periods, present a promising avenue for sustainable energy generation. As solar and battery technology continues to decrease in cost, they offer a viable alternative to the escalating expenses associated with natural gas power plants.
