AI and Data Centers Are Increasing Demand for Natural Gas and Natural Gas Turbines
The rapid advancement of artificial intelligence (AI) is reshaping industries worldwide, but it’s also creating an unprecedented strain on global energy systems. As AI applications proliferate—from generative models like ChatGPT to complex machine learning algorithms—the data centers that power them are multiplying at an astonishing rate. These facilities require massive amounts of reliable, round-the-clock electricity, leading to a surge in demand for natural gas as a primary fuel source and the turbines that convert it into power. This article explores how AI-driven data centers are fueling this energy boom, the U.S. Department of Energy’s (DOE) planned capacity additions that fall short of needs, the scale of ongoing data center construction, and the clear correlation between these facilities and access to low-cost energy like natural gas.
The AI Energy Crunch: Why Natural Gas Is Stepping Up
Data centers are the backbone of AI, housing the servers and GPUs that process vast datasets and run intricate computations. According to the International Energy Agency (IEA), electricity demand from data centers worldwide is projected to more than double by 2030, reaching approximately 945 terawatt-hours (TWh).
In the U.S. alone, Deloitte estimates that power demand from AI data centers could grow more than thirtyfold by 2035, hitting 123 gigawatts (GW).
Goldman Sachs Research forecasts a 165% increase in global data center power demand by the end of the decade.
This explosive growth is outpacing the expansion of renewable energy sources like wind and solar, which are intermittent and often unable to provide the consistent baseload power AI requires. As a result, natural gas has emerged as the go-to solution for its reliability, dispatchability, and scalability. Chevron and other energy giants are positioning natural gas as essential for powering AI’s “insatiable demand for reliable electricity.”
In fact, AI data centers are driving a wave of new natural gas power plants across the U.S., with projections indicating that data centers could require up to 6 billion cubic feet of natural gas per day by 2030.
Natural gas turbines are at the heart of this shift. These efficient machines convert gas into electricity quickly and can ramp up or down to meet fluctuating demands—ideal for data centers that experience spikes during AI training sessions. However, this boom has led to challenges: a years-long waitlist for turbines is slowing new plant construction, exacerbating supply bottlenecks.
Industry experts warn that without accelerated production, the U.S. could face delays in meeting AI’s energy needs, potentially hindering technological progress.DOE’s Pipeline: 22 GW of Firm Capacity, But Far From Enough
The U.S. Department of Energy has acknowledged the looming energy crisis in its recent reports on resource adequacy and grid reliability. According to a DOE analysis, utilities plan to bring 210 GW of new capacity online over the next five years. However, only 22 GW of this is “firm generation” from reliable sources like coal, natural gas, or nuclear power—the rest is predominantly intermittent renewables such as 124 GW of solar and 32 GW of wind.
This 22 GW of firm capacity, which includes nuclear and natural gas additions, is a step in the right direction but woefully inadequate to address the AI-driven demand surge. AI data centers alone are expected to add between 35 GW and 108 GW to U.S. electricity load by 2030, with peak-hour demand potentially rising by at least 100 GW overall.
The DOE warns that if current utility plans persist—focusing heavily on renewables without sufficient backup—the risk of blackouts could increase by up to 100 times. Regions like the Eastern U.S., including Maryland, Pennsylvania, and Virginia, could face weeks or even over a month of annual power shortages under severe weather conditions.
The issue stems from the mismatch between AI’s need for 24/7 power and the variability of wind and solar. Natural gas and nuclear provide the baseload stability required, but with 104 GW of existing coal and gas plants slated for retirement, the net addition of firm capacity is minimal. The DOE concludes that the nation’s bulk power system cannot support AI growth while maintaining reliability and affordability, underscoring the urgent need for more investment in natural gas infrastructure.
Data Centers Under Construction: Scale and Key Locations
The data center construction boom is already underway, with thousands of facilities in various stages of development to support AI expansion. As of the end of 2024, there were 1,240 data centers in the U.S. either built or approved for construction—a near quadrupling of permitted projects since 2010.
Globally, data center capacity is projected to grow at 15% annually, but even this may not suffice for demand, with over 100 sites worldwide under consideration for facilities exceeding 10 MW.
Introduction
In a significant move to address surging electricity demand driven by the explosive growth of data centers, PPL Corporation’s Kentucky utilities—Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU)—have reached a settlement agreement to construct approximately 1.3 GW of new natural gas-fired generation capacity.
This development, cleared by the Kentucky Public Service Commission (PSC), underscores the utility sector’s rapid adaptation to the energy-intensive needs of artificial intelligence (AI), cloud computing, and digital infrastructure expansion. The agreement not only facilitates new gas plants but also delays the retirement of existing coal units, ensuring grid reliability as data center loads escalate.Details of the Kentucky AgreementThe settlement involves building two 645 MW simple-cycle combustion turbine units, expected to come online in 2030 and 2031, respectively.
These facilities are primarily aimed at serving an estimated 5.7 GW of potential data center load in Kentucky, reflecting “unprecedented” projected electricity demand from prospective hyperscale operators.
Notably, the plan withdraws an earlier proposal for a 400 MW battery storage system and extends the operational life of a 297 MW coal-fired unit at LG&E’s Mill Creek plant, pushing back its retirement to maintain baseload stability during the transition.
This initiative comes amid broader industry trends where data centers are forecasted to consume up to 8% of U.S. electricity by 2030, driven by AI training and inference workloads. PPL’s Kentucky utilities, serving over 1.4 million customers, are positioning themselves to capture this growth while balancing reliability and cost considerations. However, the plan has faced pushback from environmental groups and residents, who argue against new fossil fuel infrastructure in favor of renewables, citing climate concerns and potential rate hikes.
Broader Growth in PPL’s Data Center Strategy
PPL’s ambitions extend beyond Kentucky. In Pennsylvania, where PPL Electric Utilities operates, the company boasts an advanced-stage data center interconnection pipeline of about 14 GW—a 33% increase from just three months prior.
This could balloon the data center load from 800 MW in 2026 to a staggering 14.4 GW by 2034, with 5 GW already publicly announced, including Amazon’s $20 billion expansion and CoreWeave’s $6 billion project in Lancaster.
Overall, data center interest in PPL’s Pennsylvania territory has reached over 60 GW of potential projects, highlighting the region’s appeal due to its proximity to shale gas resources and supportive policies.
To support this surge, PPL has launched a joint venture with Blackstone Infrastructure Partners, holding a 51% stake while Blackstone owns 49%.
The partnership focuses on developing natural gas combined-cycle power plants in Pennsylvania, strategically located above the Marcellus and Utica shale formations for quick access to gas pipelines. These “front-of-the-meter” facilities will serve data centers through long-term energy service agreements (ESAs), addressing an anticipated 6 GW generation shortfall within five to seven years if advanced projects materialize.
PPL estimates a need for 7.5 GW of new generation in the region over the next five to seven years, emphasizing faster grid connections and new power development as key strategies.
This multi-state approach positions PPL at the forefront of the data center energy race, where global electricity demand from data centers could double by 2026, according to the International Energy Agency. Competitors like Dominion Energy and Duke Energy are pursuing similar gas and renewable builds, but PPL’s shale-adjacent locations provide a competitive edge in cost and reliability.Outlook for InvestorsFor investors, PPL’s data center-focused expansions present a compelling growth narrative. In its Q2 2025 earnings report, PPL reaffirmed its full-year ongoing earnings forecast of $1.75 to $1.87 per share, expecting to hit at least the midpoint of $1.81.
The company targets 6% to 8% annual EPS growth through 2028, underpinned by a $20 billion capital investment plan from 2025 to 2028.
This includes infrastructure upgrades for grid resilience and data center integrations, driving an average annual rate base growth of 9.8% during the period.
Analysts view PPL as well-positioned to capitalize on the AI-driven data center boom, with favorable regulatory environments in Pennsylvania and Kentucky enabling higher returns.
The Blackstone venture, in particular, is seen as a “creative solution” to re-enter generation without full merchant risk, potentially mitigating rising electricity prices and delivering shareholder value.
PPL’s stock has shown resilience, with the company committed to a safe dividend yield and net-zero carbon emissions by 2050, blending growth with sustainability.
However, risks include regulatory hurdles, natural gas price volatility, and environmental opposition, which could delay projects or increase costs.Key Investor Metrics
|
Key Investor Metrics
|
2025 Forecast
|
Long-Term Outlook (2025-2028)
|
|---|---|---|
|
EPS Range
|
$1.75 – $1.87
|
6-8% annual growth
|
|
Capital Plan
|
N/A
|
$20 billion total
|
|
Rate Base CAGR
|
N/A
|
9.8%
|
|
Data Center Load Growth
|
Up to 14.4 GW by 2034
|
Supports economic development and revenue uplift
|
Supports economic development and revenue uplift
Challenges and Future Considerations
While the greenlighting of these gas plants signals confidence in fossil fuels as a bridge to renewables, it has sparked debate. In Kentucky, public comments to the PSC have urged rejection of the plans, advocating for solar, wind, and efficiency measures instead.
PPL counters that gas provides reliable, dispatchable power essential for data centers’ 24/7 operations, with federal and state support for pipeline expansions and permitting reforms aiding deployment.
Looking ahead, PPL’s strategy aligns with industry projections of data center power demand reaching 35-60 GW in the U.S. by 2030.
By investing in both regulated and unregulated assets, PPL aims to drive economic development, job creation, and grid modernization. Investors should monitor execution on these projects, as successful integration could solidify PPL’s role in the energy transition while boosting returns.
In summary, PPL’s 1.3 GW gas expansion in Kentucky is a pivotal step in harnessing data center growth, with Pennsylvania ventures amplifying the upside. As the digital economy powers forward, utilities like PPL stand to benefit, provided they navigate environmental and regulatory landscapes adeptly.
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