Natural gas and the AI revolution: Powering the future of data centers
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Insights
Topic
Private Equity
Published
October 07, 2025
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7 mins
Author
Matt Willer
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Artificial intelligence (AI) is reshaping industries, economies and infrastructure. At the heart of this transformation lies the exponential growth of AI data centers—facilities that demand vast, reliable and scalable electricity. As renewable energy sources face intermittency and infrastructure constraints, natural gas is emerging as a critical fuel to meet the surging power needs of AI workloads.  

 

AI data centers: A new frontier in energy demand

AI processing tasks—particularly training large language models and running inference engines—require high-performance computing systems that operate continuously. The scale and complexity of these operations have grown dramatically in recent years, with hyperscale data centers now housing tens of thousands of servers dedicated to AI and cloud computing tasks. These facilities are not only expanding in number but also in size, with some new builds consuming as much electricity as some cities.1

 

According to the International Energy Agency (IEA), global electricity demand from data centers is projected to more than double by 2030, reaching 945 terawatt-hours (TWh)—roughly equivalent to Japan’s current electricity consumption.2

 

In the United States, data centers are expected to account for almost half of the growth in electricity demand between now and 2030. In fact, the International Energy Agency expects the US economy to “consume more electricity in 2030 for processing data than for manufacturing all energy-intensive goods combined, including aluminum, steel, cement and chemicals.”3 That marks a significant shift from previous decades, when industrial and residential sectors dominated new demand.

 

The US is home to many of the world’s largest cloud and AI providers and the concentration of data centers in regions like Northern Virginia, Texas and the Pacific Northwest is creating new challenges for local utilities and grid operators.4

 

Globally, the trend is similar. Countries such as Ireland, Singapore and the United Arab Emirates are seeing rapid growth in data center development, often outpacing the ability of local grids to supply power.5,6,7 This has led to increased interest in dedicated energy solutions, including on-site natural gas generation and microgrids, to ensure uninterrupted operations.

 

Natural gas: The most viable near-term solution

While renewables are expanding, their intermittency and transmission bottlenecks make them less suited for the 24/7 operational requirements of AI data centers. Natural gas, by contrast, offers several advantages that make it the preferred choice for many operators:

  • Dispatchability: Natural gas plants can be ramped up or down quickly to meet fluctuating demand.
  • Infrastructure readiness: The United States already has extensive natural gas pipelines and generation capacity.
  • Scalability: The US is the world’s largest natural gas producer accounting for 25% of the world’s production.8  

 

According to McKinsey & Company, electricity demand for US data centers is expected to increase by roughly 400 terawatt-hours at a compound annual growth rate of about 23% between 2024 and 2030.9 In the near term, natural gas is positioned as the most scalable energy source to meet this demand.

 

Projected US demand for power for data centers

Projected data center share of total US power

Source: McKinsey & Company. “How data centers and the energy sector can sate AI’s hunger for power.” September 2024.

 

Investment implications and market dynamics

The intersection of AI and energy is creating new opportunities for investors in upstream natural gas production, midstream infrastructure and LNG export terminals. As a Bloomberg article last month noted: “With abundant supply and flexible generation, gas-fired plants are underpinning much of the new data center build-out in the US, especially in regions already reliant on the fuel.”10

 

This trend is attracting significant capital to the natural gas sector, with companies investing in new pipelines, storage facilities, and export terminals to serve both domestic and international markets.11 The rise of AI-driven data centers is also prompting utilities to reconsider their generation mix, with many planning new natural gas plants or retrofitting existing facilities to support flexible, high-capacity loads.12

 

For midstream operators, the growth in data center demand is creating new opportunities for long-term contracts and stable revenue streams. LNG exporters are also poised to benefit, as global demand for reliable, dispatchable power continues to rise. Regions with abundant natural gas resources and established infrastructure are likely to see the greatest investment, while areas with limited access may face higher costs and slower growth.

 

The market dynamics are further influenced by policy decisions, such as incentives for grid reliability and support for new infrastructure projects. As AI adoption accelerates, stakeholders across the energy value chain are positioning themselves to capture the benefits of this new era.

 

We believe that AI is not just a technological revolution—it’s an energy revolution. As data centers proliferate, the need for reliable, scalable electricity will intensify. Natural gas, with its dispatchability and infrastructure readiness, is poised to play a central role in powering the AI era. While renewables may play a larger role in the long term, natural gas remains the most viable near-term solution to support the AI revolution.

 

 

1Kimball, S. “Data centers powering artificial intelligence could use more electricity than entire cities,” CNBC. November 23, 2024.
2“AI is set to drive surging electricity demand from data centres while offering the potential to transform how the energy sector works,” International Energy Agency. April 10, 2025.
3Ibid. 
4“Data centers and their impact on the US power market” Aurora Energy Research. February 10, 2025. 
5Paraskova, T. “Data Center Boom to Boost Asia’s LNG Demand.” Oilprice.com. September 24, 2024. 
6Swinhoe, D. “Ireland’s energy regulator proposes policy requiring data centers to match load with new power generation,” Data Center Dynamics. February 19, 2025
7Varghese, J. “UAE is building the future of the internet with data.” Gulf News, July 25, 2025.
8“Statistical Review of World Energy 2025.” Energy Institute. 2025.
9“How data centers and the energy sector can sate AI’s hunger for power.” McKinsey & Company. September 2024. 
10Kou, H. “AI data centers fuel quicker growth in power demand.” Bloomberg NEF. September 19, 2025.
11Kimball, S. “Big oil wants to help big tech power artificial intelligence data centers,” CNBC. December 14, 2024.
12“How data centers and the energy sector can sate AI’s hunger for power.” McKinsey & Company. September 2024.

Important disclosures

Author

Matt Willer
Managing Director, Real Estate Private Equity
Matt Willer is managing director of natural resources private equity focusing on energy and natural resources. He has been responsible for investment sourcing, due diligence, asset management and financial reporting since 2007.  
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