Tech corporations, together with Microsoft and Meta, have been falling in love with natural gas recently, dashing to construct power vegetation fed by the fossil gas to drive their knowledge facilities. But their embrace could be a bit too tight — the fee to construct one of many services has spiked 66% in the final two years, in line with a brand new report from BloombergNEF.
While natural gas costs stay low in the U.S. regardless of the continued struggle in Iran, the worth to construct a brand new mixed cycle gas turbine (CCGT) power plant has risen from lower than $1,500 per kilowatt of producing capability in 2023 to $2,157 final yr, the report stated. What’s extra, it now takes 23% longer to finish a brand new facility.
Data facilities are one of many primary drivers of a surge in demand for electrical energy, pushing not simply tech corporations to speculate in natural gas, however utilities as properly. Data center operators have been urged by the Trump administration to “bring their own power,” however utilities are likely to move on the price of new era to prospects. That has led to a rising backlash to knowledge facilities among the many common public.
While knowledge facilities aren’t the one driver of recent demand for electrical energy, they’re one of many fastest-growing customers. New additions are anticipated to achieve 2.7x present demand, pushing it up from 40 gigawatts right this moment to 106 gigawatts by 2035. Part of the motive force is the sheer scale of recent knowledge facilities. Today, solely 10% of services are 50 megawatts or bigger. Over the subsequent decade, the common knowledge center will likely be bigger than 100 megawatts.
Until lately, tech corporations have favored grid-connected knowledge facilities backed by power buy agreements for wind, photo voltaic, and batteries. But rising demand for electrical energy, pushed by AI and public animus towards knowledge facilities, has pushed extra new natural gas initiatives.
The scramble for natural gas power vegetation has triggered a scarcity of gas generators. By the tip of this yr, costs for the gear, which constitutes as much as 30% of a brand new power plant’s value, are anticipated to be up 195% over 2019 costs. The manufacturing method required to make gas generators doesn’t lend itself to scaling rapidly, both. As a end result, waitlists are stretching into the early 2030s.
Not everyone seems to be all in on natural gas, although.
Google has began to stipulate a brand new method to including producing capability to the grid that depends on renewables paired with long-duration vitality storage, together with Form Energy’s huge iron-air batteries, which may launch electrical energy over the course of 100 hours. Unlike gas generators, photo voltaic panels and batteries have gotten cheaper over time, providing a substitute for sky-high costs for natural gas power vegetation.
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