Our annual Market Forecast in 2023 predicted data centers as a major factor driving new gas turbine sales. The scale of that impact is now coming to light, and new gas turbine sales are expected to increase over the coming years.
Amazon, Microsoft, Google, Meta, and others are in a rush to secure power. Nuclear contracts and power purchase agreements (PPAs) are especially popular. Microsoft is even engaged with Constellation Energy in the reopening of the famous Three Mile Island Nuclear Plant in Pennsylvania to secure access to abundant power in the Northeast Corridor.
With the timeline for small modular reactors (SMRs) being permitted, built and commissioned extending well into the next decade, the hope is that plants like Three Mile Island can provide power promptly. However, regulatory hurdles in its path and the environmental lobby will cry foul at some point.
Tech giant PPAs and backing are one thing; project financing and approvals are another. It is no easy task to navigate what is almost always a lengthy and costly licensing process to move any nuclear project forward. Both Microsoft and Constellation have pledged $1.6 billion to restart one reactor at Three Mile Island plant by 2028. But much more will probably be needed.
Amazon also has a nuclear deal with Energy Northwest in Washington state related to SMRs and with Dominion Energy for SMRs in Virginia. Data Center giant Switch of Las Vegas has developed a partnership with nuclear firm Oklo which could result in 12 GW of nuclear energy between now and 2044..
But it isn’t all nuclear, so natural gas and solar are also getting a piece. Natural gas producer EQT issued an earnings report projection that coal plant retirements and data centers could boost U.S. natural gas demand by 10 billion cubic feet per day (Bcf/d) by 2030. Many California data center developers view solar as their best option.
These announcements represent projects that may eventually see the light of day. However, more than half of all wind and solar announcements never materialize. And the red tape related to nuclear and gas generation will scupper more than a few developments.
The environmental backlash has already begun. One Virginia country recently denied a rezoning application from a company planning to develop up to 3.5 GW of natural gas-fired generation for a large data center campus. This would have turned over more than 2000 acres of agricultural land to industrial usage. The developer has scaled back the project to around 700 acres and resubmitted, but local opposition is strong.
Still, the IT industry is going full throttle in developing projects and solutions to power the AI revolution. Pure Storage and Micron Technology announced that they are collaborating on high-capacity and energy-efficient solutions to solve some of the power challenges that AI presents.
Pure Storage provides storage modules while Micron provides advanced chips. Together, they hope to help data centers store more data and provide abundant processing power while greatly lowering energy consumption.
“Micron’s technologies, combined with Pure’s storage solutions, enable data center operators to address the increasing performance, efficiency, and scalability needs for today’s hyperscale data centers,” said Jeremy Werner, SVP & GM, Storage Business Unit, Micron.
Latest numbers from the DOE’s Energy Information Agency confirm this data center and AI trend. Consumption of electricity in the U.S. commercial sector totaled 14 billion kilowatt-hours (BkWh) in 2023, or 1%, more than in 2019. Growth is concentrated in a handful of states experiencing rapid development of large-scale data centers. Electricity demand has grown the most in Virginia, which added 14 BkWh, and Texas, which added 13 BkWh.
Demand in Virginia is largely driven by Dominion Energy. Virginia has become a major hub for data centers, with 94 new facilities connected since 2019 given its access to a densely packed fiber backbone and to four subsea fiber cables.
Now Chevron is getting in on the act. Engine No. 1 and Chevron U.S.A. have announced a partnership to build a new company to power solutions for U.S. data centers running on natural gas. The release said that the early actions of the Trump Administration are setting the critical foundation to encourage investment leveraging America’s energy abundance to enable America’s AI leadership.
GE Vernova is also involved. One project includes seven GE Vernova 7HA natural gas turbines to serve co-located data centers in the U.S. Southeast, Midwest and West regions.
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