The news over the past several months regarding rising electricity demand is unprecedented. Led by growth from data centers and the massive onslaught of AI, electricity demand is expected to rise significantly for the first time in decades.
U.S. data center demand was 19 gigawatts (GW) in 2019. It grew to 25 GW in 2024, and, according to some sources, is expected to reach 80 GW by 2030. Data centers currently account for over 4% of total U.S. electricity demand, with demand expected to rise to 9% by 2030.
While there is little doubt that there is a large increase in demand underway, there is uncertainty about what the source of that generation is going to be. Natural gas, nuclear, solar, wind, battery storage and geothermal generation are all positioning themselves to supply the power. After years of steady growth for renewables, issues regarding reliability and dispatchability are making them less attractive in some markets, with greater interest in gas, nuclear and geothermal.
A case in point is Homer City, Pennsylvania, where in April it was announced that the nation’s largest natural gas-fired power plant would be built on the site of a former coal-fired power plant to support a $10 billion-plus data center campus with a capacity of 4.5 GW. Such announcements are taking place with greater frequency.
For example, before taking office, President Donald Trump announced a $20 billion investment in U.S. data centers by DAMAC Properties, an Emirati company managed by billionaire Hussain Sajwani. The investment will focus on building centers in Texas, Arizona, Oklahoma, Louisiana, Ohio, Illinois, Michigan and Indiana, with a goal of providing 2,000 megawatts (MW) of natural gas and solar power for data centers over a period of four years.
Stargate, the joint venture between OpenAI, SoftBank and Oracle, announced it will deploy $100 billion to build data centers in West Texas, with an eventual goal of spending up to $500 billion on 50 MW-capacity facilities.
Additionally, there is a series of actions taking place at the federal level that could be impactful to delivering natural gas to data centers. The Trump administration has supported a number of global efforts.
First, the National Energy Dominance Council, established by the White House, is a new multi-agency body created to support U.S. energy projects and related infrastructure. The White House has also issued a number of executive orders that focus on reforming regulations for energy projects, and we will continue to see administrative actions designed to lessen the regulatory burden and help increase domestic oil and natural gas production.
The administration is also very supportive of nuclear energy, including small modular reactors and microreactors that could support data centers and other large energy consuming entities. However, challenges remain that need to be addressed, such as the large upfront capital costs for new nuclear projects, and the administration is working on creative solutions to address them, as is Congress.
For example, bills have been introduced that would direct the U.S. energy secretary to establish a working group focused on the commercialization and industrialization of small modular reactors.
At the same time, there remain a number of questions about the ability to build the generation capacity and related infrastructure quickly enough to meet demand for data centers and AI. For example, in addition to tariffs and current global trade dynamics, there are severe supply constraints for items like transformers that are critical to transmission, as well as price fluctuations for turbines and other equipment used by utilities.
For natural gas-fired power facilities located in the ERCOT region in Texas, cost recovery due to the lack of a capacity market remains a challenge.
In this environment, several companies that had made announcements to install gas-fired generators have since backed out. While there are a number of factors cited, including availability of turbines, the biggest overall factor identified is the risk of an investment in generation where there is no capacity market.
The Trump administration is also very focused on supporting a strong global export market for U.S. LNG for both energy dominance and geopolitical reasons. While this will put additional pressure on U.S. gas production to meet growing demand for exports and for domestic use, efforts to lessen the regulatory burdens and boost domestic production should offset some of that pressure. At the end of the day, things look pretty bright for U.S. energy production, and data center demand is making it brighter.