Tech giants such as Microsoft and Meta have increasingly turned to natural gas as a primary energy source for their data centres. However, the surge in construction costs for natural gas facilities has raised concerns. A recent report from BloombergNEF highlights that the price of building a combined cycle gas turbine (CCGT) power plant has jumped by 66% over the past two years, climbing from under $1,500 to $2,157 per kilowatt of capacity in just one year. Additionally, the construction timeline has stretched by 23%, further complicating projects.
Despite stable natural gas prices in the U.S., largely unaffected by the ongoing conflict in Iran, the demand for electricity—especially from data centres—continues to rise. The Trump administration’s call for data centre operators to “bring their own power” has led to significant investment in natural gas by both tech companies and utilities. However, this trend has sparked public criticism as utilities typically transfer the costs of new generation plants onto consumers.
Data centres are one of the fastest-growing electricity consumers, with predictions that demand will soar from 40 gigawatts today to 106 gigawatts by 2035. A contributing factor is the increasing size of data centres, with only 10% of current facilities exceeding 50 megawatts. In contrast, future data centres are expected to average over 100 megawatts.
While tech firms have historically favoured renewable energy sources, the combination of rising electricity demand and public discontent has prompted a shift towards natural gas projects. The escalating demand has also led to a shortage of gas turbines, critical components for new power plants. As of the end of this year, turbine prices are anticipated to rise by 195% compared to 2019 levels, with production lagging due to the complexity of manufacturing these turbines. As a consequence, wait times for delivery are now extending into the early 2030s.
In contrast to other companies, Google is exploring alternative approaches to energy supply. The company is advocating for a shift towards renewable energy paired with long-duration storage solutions, such as Form Energy’s iron-air batteries, which can deliver power for extended periods. This strategy presents a potential solution to the soaring costs associated with natural gas facilities, as the price of solar and battery technologies has been declining, making them increasingly viable alternatives for energy generation.
As the tech sector continues to evolve and adapt to increasing energy demands, the balance between fossil fuels and renewable energy will remain a crucial topic, influencing both construction costs and public perception of data centre operations.
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