Data center demand drives a 66% increase in natural gas prices

Technology companies, including Microsoft and Meta, have been falling in love with gas Recently, they are rushing to build energy plants fed by fossil fuels to run their data centers. But their embrace may be slowing down — the cost of building one of these facilities has risen 66% in the past two years, according to a new report from BloombergNEF.

Even gas prices stay low in the US despite the ongoing war with Iran, the cost of building a new combined cycle gas turbine (CCGT) power plant has risen from less than $1,500 per kilowatt of power to be produced in 2023 to $2,157 last year, the report said. In addition, it takes 23% time to complete a new site.

Data centers are one of the drivers of increased demand for electricity, pushing not only technology companies to use gas, but utilities as well. Data users have been encouraged by the Trump administration to “bring their power back,” but utilities prefer to offer new generation pricing to customers. This has made a strong growth to data centers among civilians.

Although the data center is not the only driver of new electricity, it is one of the fastest growing users. New additions are expected to arrive 2.7x current demandand pushing from 40 gigawatts today to 106 gigawatts by 2035. The driver part is the amount of new data centers. Today, only 10% of sites have 50 megawatts or more. Over the next decade, the average data center will be larger than 100 megawatts.

Until recently, technology companies favored grid-connected environments with the help of power purchase agreements for wind, solar, and batteries. But the rise in demand for electricity, driven by AI and human exposure to data centers, has led to an increase in natural gas projects.

The discussion of gas-fired power plants has led to a shortage of gas-fired power plants. By the end of this year, the prices of these devices, which make up 30% of the cost of new electricity, are expected to have increased. up to 195% at the prices of 2019. The process of making gas turbines is necessary it does not commit to rapid expansionon. As a result, waiting lists are reaching the early 2030s.

However, not everyone has gas.

Google has started describe a new method to add production capacity to the grid that relies on renewables associated with long-term energy storage, including the large iron-air batteries of Form Energy, which can produce electricity within 100 hours. Unlike gas turbines, solar panels and batteries have cheaper in the long runproviding a cost-effective alternative to gas-fired power generation.