Why Aren't Gas Industry Giants Jumping On AI Power?

Forbes

08-04-2025

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So why is the oil and gas industry interested in providing electrical power that can be generated by gas turbines? First, learned industry people are predicting peak oil around 2030; oil declines after this. Second, natural gas is likely to grow, particularly LNG (liquified naturel gas). But there are headwinds: uncertainties in LNG due to such long-term investments, and solar/storage batteries are now cheaper than new-build gas power plants.
Third, in their Global Energy Review 2025, IEA (the International Energy Agency) shows that almost all regions of the world saw an acceleration in the rate of electricity consumption growth in 2024 compared with the annual average from 2012 to 2022.
Globally, electricity consumption increased by 1,080 TWh (TerraWatt hours), nearly twice the average of the previous ten years. This was caused by record global heat and cool air conditioning, rising industry consumption, electrification of transport, and growth of data centers and AI (artificial intelligence).
The IEA report has an eye-popping interpretation by Roger Pielke. A global increase of 1,080 TWh in 2024 is the equivalent of bringing online 135 new nuclear reactors in 2024. This sudden growth of electrical power is clearly a big deal because it opens doors for new investment in natural gas, solar and batteries, geothermal, and nuclear technologies. Hence the prospect of a Big-Gas jump on AI power. But this is the global picture, what about the U.S. situation?
Projected electricity demand in U.S. through 2040.
In the U.S., one estimate is that 5,000 new data centers will be needed to feed the new AI industry. One data center uses an amount of power equal to that used in 10,000 houses. By 2040, in a milestone report by S&P Global, to meet U.S. electrical needs would require both renewables plus battery storage and gas-fired energy: an extra 940 GW (GigaWatt) of the former, and about 80 GW of the latter. 'Adding above 900 GW to the supply mix through 2040, renewables and batteries are by far the main source of supply … on a nameplate basis given their availability, low-cost, preference from consumers, and policy support.'
Altogether, about 1,000 GW of extra power (940 GW + 80 GW) by 2040 converts to 81.9 bcfd (billion cubic feet per day) of gas wells. For comparison, the U.S. currently produces ~100 bcfd of natural gas, so 81.9 bcfd would be a huge jump, akin to the industry's enormous present-day supply of U.S. gas. Although there are reasons why it's not feasible to pull this off, a potential Big-Gas jump on AI power has got to be stirring attention.
The big data tech firms Microsoft, Google, Meta, Amazon, initially favored carbon-free sources of electricity for their data centers. When AI appeared, some firms even looked to uncommercial startup sources such as geothermal and small nuclear reactors (SMRs). But the new AI power requirements are immense, and now these digital companies are embracing fossil natural gas.
Texas is a case in point. Texas has the second largest number of data centers, after Virginia, partly because the cost of business is low. One observer speculated 56 GW of electrical power would be needed in Texas. The S&P Global study estimated the U.S. would need 1,000 GW of extra power by 2040: 940 GW of renewable/batteries and 80 GW of gas-fired power.
While in the U.S. renewables like SoWiBess (solar, wind, and batteries for storage) are continuing to grow, the gas side of the equation has serious headwinds, as described below. Still, some companies have been proactive. Engine No. 1, famous for its successful clash with ExxonMobil in 2021 to elect new candidates to the board, has booked gas turbines from GE Vernova, a manufacturer. This means any other buyer will have to wait until 2028. Engine No. 1 has joined with developer Crusoe in a project near Abilene, Texas, which is rumored to be a part of the $500 billion Stargate enterprise supported by Trump.
The Houston Chronicle also reported that Big-Gas companies are moving in. Diamondback Energy, out of Midland, wants to develop a gas-fired power plant in the Permian basin. Chevron has partnered with Engine No. 1 and GE Vernova to leverage their gas turbines. ExxonMobil are in, but haven't revealed their nascent projects. NRG Energy, who develops gas-fired power plants, has acquired six power plants last month, the first in a decade.
To generate more electricity for AI, it makes sense to expand commercially proven SoWiBess renewables rather than natural gas. Battery storage prices have come down significantly since 2023, and this may continue. With this, the cost advantage lies with solar and batteries—and it's also cleaner energy than fossil gas plants, as desired by the big digital companies.
Gas is likely to be a small part of the solution, especially since the U.S. produces more than any other nation. But urgent new gas-fired plants for AI power will be difficult to come by because there currently exists a gas turbine backlog. GE's backlog of gas turbines was $73 billion as of January 1, 2025.
Nuclear SMRs and geothermal are barely proven commercially, and are expensive. Altogether, cheap and reliable clean electricity for AI data centers can best be provided by solar and battery storage, as the S&P Global study found.
In the U.S., renewables (excluding nuclear) accounted for about 90% of new installed capacity in 2024. In this, the market has spoken about accessible power for AI data centers. Renewables plus battery storage (SoWiBess) now make up 30% of U.S. power capacity. In the U.S., installed solar capacity now totals 220 GW. Batteries doubled in 2024 to 29 GW, and are likely to grow almost 50% in 2025. This dispatchable energy from batteries stabilizes the U.S. power supply. The U.S. has only to look down under to Australia to see how in 16 years one state has gone from zero to 75% renewable electricity, and it expects to reach 100% by 2027.
Discerning statements have been made by people in the know about electrical power: gas versus renewables. One by Brian Faist of Avangrid, who owns the solar farm at Waco, Texas, which will provide power for Meta's new data center at Temple: 'You have development cycles for thermal [gas] plants that are pretty long. For wind, that's pretty long. Solar is just the fastest.'
And from Jason Grumet, CEO of American Clean Power Association, in a panel at CERAWeek: 'The energy that is moving forward in this country right now is clean power.'