AI companies are building large gas plants to generate electricity. What can happen?

Who doesn’t love a good cycle of FOMO? From dot-com to Web 2.0, virtual reality to blockchain, the tech industry has had its share of fear of missing out on trends.

The AI ​​bubble is the biggest daddy of them all. His first children – running shutting down the power of the data center – is now making a mad dash to secure natural gas and equipment. If FOMOs can have children, then the AI ​​bubble already has grandchildren.

Microsoft said Tuesday that it is working with Chevron and Engine No. 1 that to build a gas-fired power plant in West Texas that could grow to produce 5 gigawatts of electricity. This week Google it has been confirmed that it is working with Crusoe to build a 933 MW natural gas-fired power plant in North Texas. And last week, Meta announced that it is adding seven more gas-fired power plants to its Hyperion data center in Louisiana, bringing the facility to 7.46 GW of capacity – enough to rule the entire state of South Dakota.

Are we missing anyone?

Recent investments have concentrated in the southern US, home to some of the world’s largest natural gas reserves. Recently, the US Geological Survey reported that there is enough energy in one area to power the entire United States. 10 months itself. Every data center user seems to want their share.

The natural gas crisis has led to a shortage of power turbines, and prices are expected to rise 195% by the end of this year compared to 2019 prices, according to at Wood Mackenzie. These devices contribute 20% to 30% of the electricity cost. Companies cannot place new orders until 2028, and it will take six years for the turbines to be delivered, the advisory notes.

This means that tech companies are betting that the heat of AI will not break, AI will continue to be important the amount of energyand that natural gas emissions will be critical to the success of the AI ​​era.

They may come to regret that third decision.

Although natural gas is abundant in the US, and because it is not cheap to export the oil, the country was protected from the turmoil in the Middle East. But supplies are not limited, and recently, production growth in three major sectors — which account for three-quarters of US shale oil production — too late.

It is not known what the insulated tech companies are based on the price changes because none of them have disclosed their contracts. Much will depend on the price stability of those contracts.

Even if the contract prices are as tight as possible, companies can face problems.

Because natural gas produces about 40% of the electricity in the US, according to at the Energy Information Administration, electricity prices are closely related to gas prices. Tech companies can protect themselves from less scrutiny by moving their electricity behind the meter – by bypassing the grid and connecting them directly to their data centers. But natural gas is not an unlimited supply, and if their desires grow too much, even behind the meter can raise electricity prices for everyone. We’ve all seen how it’s played out.

It won’t be regular families who are hurting anymore. Some industries, including those that rely heavily on natural gas and are not yet able to use renewables, could disrupt data centers that are consuming too much. Powering data centers with wind, solar, and batteries is easy. Running a petrochemical plant? Not so much.

Then there is the weather. In winter one can change the calculation by driving the demand of families. Wellheads can turn off, mess things up a lot, as happened in Texas in 2021. As gas runs low, retailers will face a choice: keep AI data centers or let people burn their homes?

By taking natural gas and running it behind the meter, energy companies can say they are “bringing their own energy” and not wasting electricity. But the truth is, they are just changing their behavior from one grid to another, the gas grid. The speed of AI has shown how the digital world is still evolving. Does it make sense for them to gamble on unlimited resources? Tech companies can complain that they fell victim to FOMO.