06-03-2025
US clean power investors see strong outlook despite gas plant rush
The rapid uptake of AI and cloud computing is rapidly increasing U.S. electricity demand and raising the need for 24/7 power supply solutions.
Solar, wind and battery storage have dominated new power installations but data centers need a steady supply of power both day and night, requiring either dispatchable power plants or a combination of generation technologies. The growing use of electric vehicles will also require more overnight power supply as owners take advantage of lower power prices.
Power demand from data centers is predicted to reach 325 to 580 TWh in 2028, compared with 176 TWh in 2023, the U.S. Department of Energy (DOE) said in December. Data centers are representing a growing share of power demand, shifting the overall shape of demand and opening up new opportunities for power generators.
Virginia has the greatest concentration of data centers, hosting 536 facilities of which the vast majority are in a tiny area just west of Washington DC, according to the Data Center Map website. By 2030, data centers will require 50% of Virginia's power generation, compared with 26% in 2023, the Electric Power Research Institute (EPRI) said.
Solar and wind are the cheapest form of power in many parts of the U.S. but the rising need for 24/7 power has spurred a flurry of new gas-fired power generation projects. In one example, Entergy plans to build its first gas-fired plant in Mississippi for half a century and the 754 MW facility is set to supply Amazon data centers from 2028.
CHART: US planned power generation installations in 2025
For renewable energy developer RWE Clean Energy, the fundamentals of the U.S. market remain unchanged, Andrew Flanagan, CEO of RWE Clean Energy, told Reuters Events. RWE group owns gas-fired capacity in Europe but is yet to invest in U.S. gas plants.
Broad-based demand growth in the coming years will "require the deployment of all available energy resources 'as part of an all-of-the-above energy strategy," Flanagan said.
U.S. power demand is set to grow by at least 1.5 to 2.5% per year over the next 15 years, 'driven by data center demand, the relocation of industry and manufacturing back to the U.S. and broad-based electrification,' he said.
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In one example, Arizona utility Salt River Project (SRP) aims to double the generating capacity on its power system over the next ten years to meet growing demand in the Phoenix metropolitan area, in part due to new data centers, an SRP spokesperson told Reuters Events.
SRP has committed to cut carbon emissions by 82% by 2035 in its Integrated System Plan, by adding renewables, energy storage and gas-fired capacity, while retiring 1,300 MW of coal capacity.
Dispatchable power
Utilities and developers are seeking to build gas-fired plants to supply data centers as 'firm capacity is valued more than intermittent capacity," Patrick Finn, Senior Analyst, North America Power Markets at Wood Mackenzie, told Reuters Events.
Blackstone Energy Transition Partners announced in January that it would acquire Potomac Energy Center, a 774 MW gas plant in Loudoun County, Virginia to supply local data center requirements. The plant is close to 130 existing data centers.
Virginia utility Dominion Energy recently lowered its renewable energy forecast to 80% of power production within 15 years, down from 95% previously, and the company is now building a new 1,000 MW gas-fired power plant in Chesterfield County.
MAP: Change in US commercial sector power demand by state
Despite the surge in gas plant activity, 'renewables are still a valuable piece of the puzzle' so it makes sense for clean power developers to identify areas with large load growth, Finn said.
The need for 24/7 supply boosts the business case for battery storage, although the deployment of batteries will face tariff and supply chain challenges as most are imported from China or other Asian countries, Tom Atkinson, Portfolio Manager, AXA Investment Managers, told Reuters Events.
Many Big Tech companies have ambitious zero carbon goals but several are also looking to develop new nuclear plants as they seek dispatchable power capability.
Anything that provides 'firm and clean capacity would be ideal', including long duration energy storage and nuclear small modular reactors, Finn said.
Deployment speed
While some utilities are seeking gas-fired power capacity, overall the outlook for clean power developers remains positive as solar and wind are faster to develop, have fewer supply chain constraints, and are cheaper than new gas capacity in much of the U.S., Atkinson said.
Tech groups are seeking fast deployment of power resources to meet soaring AI demand and solar and wind can be built faster than gas-fired plants. Some companies are even partnering with power developers to co-locate power generation and data centers and speed up development. To minimise development times, solar and wind developers must find suitable land areas and navigate bottlenecks in grid capacity that can delay grid connections. A lack of skilled labour can also be a challenge.
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President Donald Trump has injected fresh uncertainty into the clean energy sector by freezing federal funds pending a review and issuing policies that promote fossil fuel development, but years of cost reductions in clean power have bolstered the underlying fundamentals. Trump has also thrown his support behind a $500 billion pledge by tech groups and investors to develop infrastructure for AI facilities.
Meanwhile, a lot of clean power deployment is being driven at state level, through Renewable Portfolio Standards (RPS) that require energy providers to supply a stated minimum of zero carbon power.
The RPS directives 'remain binding and instruct the technology mix of new capacity," Atkinson said.
"We do not think they are vulnerable to federally led change," he said.
