The rapid expansion of data centers, particularly for artificial intelligence, is driving a significant trend where these projects are securing their own dedicated, off-grid power supplies directly from natural gas producers to avoid straining public electricity grids and raising consumer costs.

Major Agreements and Scale of Demand

A landmark $2.4 billion agreement involves Applied Digital, Babcock & Wilcox, and Base Electron to build gas-fired turbines for AI data center campuses. Applied Digital alone requires at least 1.2 gigawatts of new gas-fired capacity for its North Dakota sites, which equates to the power for a medium-sized U.S. city and could create nearly 200 million cubic feet per day of additional natural gas demand. The company is evaluating a further 1.2 GW for future development. This deal is part of a broader wave of similar gas-powered data center plans in the U.S., prompting upstream gas producers to factor AI-driven demand into their investment decisions.

Broader Market Impact and Industry Response

Globally, data center power demand is projected to surge from 460 terawatt-hours in 2024 to over 1,000 TWh by 2030, with natural gas expected to meet about 26% of this need initially. In North America, over 35 GW of data center capacity was under construction at the end of last year—a volume comparable to the annual electricity consumption of the UK or Italy. Analysts project new U.S. data centers could add nearly 4.1 billion cubic feet per day of natural gas demand by 2030 if all planned projects use gas. However, the overall electricity market impact may be modest as these projects seek off-grid solutions. This trend is already influencing producer activity, with companies like Comstock Resources shifting drilling to areas like northeast Texas due to planned data center construction, and securing supply agreements with power companies like NextEra Energy.

Policy Pressure and Further Industry Commitments

U.S. policy is actively encouraging this shift. Citing concerns over grid strain and rising consumer electricity prices from the AI boom, the administration has urged major technology companies to self-provide their power needs. This led seven major tech firms, including Amazon, Google, Meta, and Microsoft, to sign a pledge committing to build, bring, or buy new generation resources and cover associated infrastructure costs, preventing expenses from passing to households. This policy environment is accelerating direct deals, such as a 20-year supply agreement between AES Corporation and Google for Texas data centers, alongside recent contracts secured by Meta, OpenAI, and CloudBurst.

Smaller-Scale Deal Example

Illustrating the trend on a smaller scale, Atlantic Energy finalized an agreement to supply up to 150 MW of power primarily from northeastern natural gas fields to Viking Data Centre's AI and cryptocurrency facility in Ohio. The agreement includes provisions for additional gas-fired power delivery if the facility expands its processing capacity in the future.