Data center operators looking to capitalize on rising generative AI demand face a growing challenge – how to power these behemoths, which will consume more energy than existing regional grids are able to provide.
This has become the primary motivator for operators to adopt on-site generation, as Jon Healy, MD EMEA at IT consultancy and service provider Salute, explains.
“Traditional hubs are at or near saturation, which has created long connection queues with waits of typically seven-to-ten years and in some cases 13-15. The International Energy Agency (IEA) estimates that globally, nearly 20% of planned data center projects risk delay due to grid bottlenecks, and as a result developers are building ‘behind the meter’ primary generation. This offers speed to market in months rather than years.”
But gas generators also come with higher emissions and the potential for more pushback from those who live close to data centers.
Natural gas – a quick fix
Sustainability goals have driven many data center operators towards renewable power, such as solar and geothermal, but there are some opting for a more traditional choice – natural gas.
Crusoe, for example, has to date ordered 29 natural gas generators to power its data centers per Data Center Dynamics. Then there’s xAI, which uses natural gas generators at its Colossus data center in Memphis, USA. The company went so far as to double the number of turbines in use, a move opponents say was done without the required permits. Since then, the local county health department has approved 15 . Now looking to build Colossus 2 in the same city, xAI recently purchased a former natural gas power plant close to the site.
In discussions around data center power sources, Alvin Nguyen, senior analyst at Forrester has heard natural gas valued for its ease of transport to sites and lower emissions compared to other fossil fuels. But he tells ITPro that gas is mainly chosen because it’s the fastest and easiest way to generate your own power. Turbines and engines can be set up and begin providing reliable energy quickly, while renewable power generation can be intermittent without costly storage – and takes time and money to be set up.
Furthermore, in some cases natural gas may not be subject to the same level of regulatory scrutiny, he notes, which can be leveraged to operators’ advantage.
“If a generator’s mobile, perhaps mounted to a platform or on wheels, it may be allowed onsite for a certain length of time – even in parking lots or next to buildings. These enable you to get what you need now rather than waiting a few years to get the infrastructure in place. But I’m not sure how long that ‘loophole’ will be allowed to continue.”
Locations and geography may also make natural gas the most suitable power source. For example, it makes the most sense in areas with stranded natural gas resources, like flared gas from oil fields that would otherwise be wasted.
“If the gas is going to be burned anyway, better to turn it into AI compute than just smoke,” says Neil Sahota, CEO of simulation technology company ACSILabs. “This is the logic behind Crusoe’s flare-gas-to-compute model. Remote regions with poor grid access but pipeline availability also benefit by using gas to bootstrap datacenter operations until renewables or small modular reactors arrive. In some disaster-prone areas, gas offers a more stable fuel source than diesel, which is hard to deliver post-disaster. Ultimately, the key is aligning with regional realities,” he adds.
"...many frame gas as a bridge fuel, but historically, bridges tend to turn into highways."
Trading sustainability for speed
While natural gas is the most environmentally-friendly fossil fuel, it still emits CO2 when burned – and causes significant methane leaks when extracted and transported. Community opposition could therefore be an issue, as we’re seeing in Mississippi where local communities continue to voice pollution concerns regarding xAI’s data center sites.
It's worth noting, however, that operators do have some options to make natural gas work within their sustainability frameworks. Facilities equipped with carbon capture and sequestration technology can potentially meet ESG goals, says Jenny Gerson, senior director of sustainability at data center operator DataBank, who adds that this does “add significant cost and complexity”.
Choosing natural gas also risks locking the industry into a slower decarbonization path, adds Sahota. “Once companies invest in gas infrastructure, there’s financial and operational inertia to keep it running, delaying renewable adoption. Publicly, many frame gas as a bridge fuel, but historically, bridges tend to turn into highways. The optics also matter because critics paint AI as a climate laggard and accuse the industry of greenwashing, which will only increase if high-profile projects tie AI’s growth to rising fossil fuel use.
“The flip side is gas could displace dirtier diesel and buy time for renewable projects to catch up. The challenge is ensuring the ‘bridge’ has an actual off-ramp, like contractual sunset clauses, hybrid systems that integrate renewables, or modular gas units designed to be decommissioned quickly. Without those guardrails, the sector’s net-zero goals risk becoming aspirational rather than achievable.”
Another area of concern is that natural gas has similar limitations to that of more sustainable sources in terms of scalability. “In the case of hyperscalers it can only be supplemental,” explains Nguyen. “If you had tens or hundreds of thousands of racks, it wouldn’t be viable to have a gas generator per rack. This also means it wouldn’t be a suitable back-up power source as there wouldn’t be enough capacity. It becomes much more viable at enterprise-level however, because the energy levels required would be an order of magnitude or two lower.”
Gas today, renewables tomorrow?
Experts agree that the current focus on natural gas simply reflects the collision between explosive AI growth and grid limitations, and it’s not a sustainable long-term solution to the power needs of data centers.
What we’re really seeing is a temporary mismatch between demand and infrastructure – once the push for AI slows down and new energy infrastructure is built, the demand for natural gas could wind down.
“The most encouraging sign is that companies are already planning for flexibility by shifting loads, curtailing activities during peak demand and investing in cleaner alternatives,” notes Gerson. “Gas is filling a gap, but it’s not where the industry is heading long-term,” she concludes.
