AI companies are building massive natural gas plants to power data centers. What could go wrong?

Who doesn’t love a good round of FOMO? From dot-com to Web 2.0, from virtual reality to blockchain, the tech industry has had its share of intense fear of missing out on any trend.

The AI ​​bubble is the big daddy of them all. His first offspring — the rush to him Power security for data centers There is now a mad rush to secure natural gas supplies and equipment. If FOMO objects can have children, then the AI ​​bubble already has grandchildren.

Microsoft said Tuesday it is working with Chevron and Engine 1 to Construction of a natural gas power plant In West Texas it could grow to produce 5 gigawatts of electricity. Google this week certain They are working with Crusoe to build a 933-megawatt natural gas power plant in North Texas. Last week, Meta announced it would add seven more natural gas power plants to its Hyperion data center in Louisiana, bringing the site’s capacity to 7.46 gigawatts. Enough to power the entire state of South Dakota.

Are we missing anyone?

Recent investments are focused in the southern United States, home to some of the world’s largest natural gas reserves. Recently, the US Geological Survey estimated that there is enough energy in one area to power the entire United States 10 months By itself. It seems like every data center operator wants a piece of it.

The scramble for natural gas has led to a shortage of turbines for power generation plants, with prices likely to rise by 195% by the end of this year compared to 2019 prices. According to To Wood Mackenzie. The equipment contributes 20% to 30% of the cost of the power plant. The consulting company notes that companies will not be able to place new orders until 2028, and it takes six years to deliver the turbines.

This means that technology companies are betting that the AI ​​fever will not end, and that AI will continue to be needed Massive amounts of powerNatural gas generation will be essential for success in the age of artificial intelligence.

They may regret this third assumption.

Although supplies of natural gas are plentiful in the United States, and because the fuel is not cheap to ship, the country remains somewhat insulated from the turmoil in the Middle East. But supplies are not unlimited, and recently, production growth in the Big Three regions — responsible for three-quarters of total U.S. shale gas production — has been on the rise. slowed down considerably.

It is not clear how insulated the tech companies are from price fluctuations, as none have disclosed specific terms of their agreements. A lot will depend on how stable the price is in those contracts.

Even if contracted prices are as stable as possible, companies may face repercussions.

Because natural gas generates about 40% of electricity in the United States, According to According to the Energy Information Administration, electricity prices are closely linked to natural gas prices. Technology companies may be able to shield themselves from scrutiny for a while by moving their gas-fired power plants behind the meter — by bypassing the grid and connecting directly to their data centers. But natural gas is not an unlimited resource, and if their ambitions grow too large, even behind-the-meter operations could drive up energy prices for everyone. We’ve all seen how it’s done.

And it won’t be just ordinary families who will be upset either. Other industries, including those that still rely more heavily on natural gas and cannot yet shift to renewables, may balk at resource-hogging data centers. Powering a data center with solar, wind, and batteries is easy. Operating a petrochemical plant? Not much.

Then there’s the weather. A cold winter could change the calculations by increasing demand among households. Wellheads may freeze, significantly reducing supplies. As happened in Texas In 2021. When the gas runs out, suppliers will face a choice: keep AI data centers running or let people heat their homes?

By snapping up natural gas supplies and moving behind the meter, technology companies can claim they are “bringing their own energy” and not straining the electric grid. But in reality, they’re just shifting their usage from one grid to another, the natural gas grid. The surge of artificial intelligence has made clear just how physically limited the digital world remains. Does it make sense for them to bet big on a limited resource? Tech companies may regret falling into the FOMO trap.