Natural Gas Shifting Tech Industries: Could Data Centers Depend on It?
The increasing demand for artificial intelligence (AI) is driving up the U.S. electricity demand, and the emissions associated with AI have become a consistent focal point for tech companies. In light of this, natural gas with Carbon Capture and Storage (CCS) could offer a significant solution to meet energy needs and reduce carbon emissions.
According to a June report from Carbon Direct, natural gas with CCS could meet as much as 63 percent of projected U.S. data center power demand. However, it's important to note that carbon capture hasn't been deployed at a commercial-scale natural gas power plant in the United States yet.
Retrofitting existing natural gas plants with CCS equipment or installing the technology on a "greenfield" facility each come with their own set of trade-offs. On one hand, adding CCS to natural gas power plants increases the levelized cost of electricity by 50-100%. On the other hand, natural gas plus CCS has a lower levelized cost of energy than coal.
Despite the challenges, some companies see carbon capture technology coupled with gas generation as an answer for power-hungry developments. Companies like Exxon Mobil and Uniper are already taking steps in this direction. Exxon Mobil announced plans for a roughly 1.5-gigawatt gas plant that would generate "high-reliability electricity" for a data center, using CCS to trap an estimated 90 percent of the facility's CO2 emissions. Uniper, meanwhile, is installing CCS at their gas power plants to reduce CO2 emissions and support climate goals.
The Republican megalaw signed in July axed federal tax incentives for wind and solar projects but maintained and expanded the 45Q credit - the top incentive for carbon capture. This move suggests a shift in focus towards carbon capture technology.
The nation's largest tech companies have set goals to achieve net-zero carbon emissions in the coming decades. Companies like Microsoft and Google include carbon capture when evaluating their climate goals. Employees at these companies care strongly about climate as an issue, and this continued interest in carbon capture and other clean power is driven by the goals of achieving net-zero emissions.
However, it's worth noting that wind and solar power cannot offer the around-the-clock power that data centers need without accompanying battery storage. This makes natural gas with CCS a potentially attractive option for tech companies seeking to reduce their carbon footprint while maintaining reliable power supply.
The debate over the role of fossil-fuel-fired plants in the grid continues, with electric industry trade groups previously pushing back against the Biden administration's power plant climate rule. Despite this, some experts view natural gas with CCS as a way to address the challenges posed by the growth in power consumption from data center development, and a "really meaningful way" of meeting energy needs and reducing carbon emissions.
In June, the EPA proposed a repeal of the Biden standard under President Donald Trump. Regardless of the political landscape, the drive towards net-zero emissions and the need for reliable, low-carbon power sources will likely continue to shape the energy landscape in the coming years.
