With each passing week, it’s getting harder to square the discourse around natural gas as a generation source for the AI data center market. There’s a lot of rhetoric about gas being central to the expansion of AI — but there are also many opposing forces at work.
For instance, the Trump administration is trying to put its thumb on the scale for the gas industry — from reopening federal lands and waters to exploration and extraction, to the removal of restrictions on LNG exports to non-free trade agreement countries. The consultancy Rystad Energy sees enough tailwinds here to say “natural gas emerges as a critical power source to supply firm and flexible power within an immediate time frame.”
Yet anyone paying attention to the power industry can be forgiven for feeling gaslit.
For 2025, the EIA forecasts that of the 63 GW of total capacity additions on the grid this year, 93% will be wind, solar, and battery storage. Gas is left with only 4%, while also facing retirements, rising equipment costs with limited inventories, volatile fuel prices exposed to geopolitics, constrained pipelines, and unevenly distributed supply across the U.S. In markets like ERCOT, for instance, solar and batteries are helping meet a rising peak while lowering wholesale and retail prices, and are being deployed much faster than gas.
In short, it can be hard to come up with a single, comprehensive take on what the role of natural gas is — or should be — in the AI-energy nexus.
Enthusiasm versus skepticism
Energy companies and data center developers are increasingly cutting deals for new gas generation, slated specifically to serve AI. Just in the past week we’ve witnessed the following:
- GE Vernova, Kiewit, and NRG formed a joint venture to accelerate the deployment of natural gas-powered generation specifically for AI data centers. The first four projects together will bring up to 5 gigawatts of capacity to ERCOT and PJM, between 2029 and 2032.
- Amazon and GE Vernova followed suit with a strategic framework supporting the scaling of AWS data centers. The plan will primarily include substations and other grid infrastructure, as well as wind project development. The two also committed to an exploration of other power generation, which could include gas.
- Baker Hughes and Frontier Infrastructure formed a strategic partnership that pairs gas generation with carbon capture and storage technologies to serve data centers, among other markets.
- PPL’s utilities Kentucky Utilities and Louisville Gas and Electric filed for permission to build a combination of gas generation and battery energy storage to serve a set of data center customers, which they estimate to require around 6 GW of capacity. The utilities estimate they together have more than 50 GW of active data center requests across their territories today. The potential new gas generation will be built over a five-year period.
- Oil and gas major Energy Transfer entered into a long-term agreement with CloudBurst Data Centers for natural gas supply and storage for either direct or behind the meter generation for 10 years.
And looking back a full year, there are even more, as reflected in the following (non-exhaustive) chart:
However, there are also examples of an industry pullback from gas.
Policy expert and chair of 38 North Katherine Hamilton, speaking on a recent episode of Open Circuit, isn’t feeling sanguine at all about the fossil fuel’s prospects.
“They’re doing [gas] in the name of dispatchability and flexibility, but that is exactly what wind and solar and batteries provide,” she said. “Even the CEO of NextEra says, look, you can build a wind project in 12 months, a storage facility in 15, and a solar project in 18 months. Gas plants take years to build, and so why not use what we already have?”
In the company’s fourth quarter earnings call, NextEra CEO John Ketchum announced that the company is expanding its gas generation via a partnership with GE Vernova — with the major caveat that gas costs are rising in light of both labor and supply chain challenges, so in the near-term, renewables are still the best option.
Meanwhile, Engie recently withdrew two gas projects from consideration that would have been supported by the Texas Energy Fund, citing equipment procurement constraints.
“So this is a train wreck,” said Jigar Shah on Open Circuit, referencing the Engie pullback. “I don’t exactly know where this is going to go but forcing everyone to do natural gas when it’s coming in at such expensive prices and nobody wants to build merchant natural gas. You see that in Texas. You see that in lots of places.”
Where does this leave gas? Today it feels like a favored player, the team owner’s son who starts every game regardless of performance or disadvantage.
One clear example of this dynamic came from Andrew Wheeler, who led the EPA during Trump’s first term. Speaking at a recent ACORE Forum, he suggested that the interconnection queue could be “reordered” based on system needs, clearly favoring natural gas over renewables. Policy support for the fossil fuel is consistent and ubiquitous, and appears at every roadblock the industry may face.
But contradictions abound. Executive orders link the support for gas with energy affordability, while recently imposed import tariffs on Canadian energy (even at a lower rate of 10%) will drive prices up.
Ultimately, we’re not in a marketplace where the outlook can be forecasted by understanding the economics or regulatory constraints in isolation from an administration whose north star is making fossil fuels supreme.
The recent slew of announcements suggests that new gas generation will be developed in one of two ways: either utilities will look to front-of-meter natural gas in trying to meet load growth, or else data center developers will bring gas generation onsite, either behind-the-meter or colocated with a grid connection. Both of these are evidently already underway; only the pace and price of development (in both dollars and emissions) remain to be seen.
A version of this story was published in the AI-Energy Nexus newsletter on March 5. Subscribe to get pieces like this — plus expert analysis, original reporting, and curated resources — in your inbox every Wednesday.
