The rapid expansion of artificial intelligence (AI)-driven data centres and a wave of industrial reshoring are driving a surge in global electricity demand, with power markets scrambling to secure reliable supply. Global energy analyst Wood Mackenzie warns that in the US alone, electricity consumption is rising by as much as 3% per year.
While renewables are expanding, natural gas is proving to be a key stopgap solution, particularly in the US, Europe, and parts of Asia, as power grids struggle to keep up with AI-driven demand. But high costs and emissions scrutiny raise questions about whether gas can remain competitive in the long term.
Investment in AI and data centre infrastructure is now exceeding that of the entire US oil and gas industry. The International Energy Agency (IEA) reports that Google, Microsoft, and Amazon spent more on AI and data centres in 2023 than the entire US oil and gas sector, amounting to 0.5% of US GDP.
AI’s electricity needs could soon rival those of major industries, says the IEA. “Large hyperscale data centres, which are increasingly common, have power demands of 100 MW or more,” the report states. That is the equivalent of 350,000 to 400,000 electric cars annually.
The AI boom is already forcing utilities to expand gas-fired power generation. Microsoft’s planned $3.3bn data centre hub in Wisconsin is driving $2bn in new gas infrastructure investment from We Energies. Meta’s upcoming Louisiana data centre will require the local utility to build new gas plants for the first time in 50 years. Entergy has also announced a $1.2bn gas-fired plant to support Amazon’s growing Mississippi data centre footprint.
High LNG prices could be a stumbling block, particularly in Asia, where coal remains a cheaper alternative for baseload power. “Without a meaningful carbon price, gas cannot compete with the price of coal in powering Asia’s booming economies,” warns Wood Mackenzie.
Environmental concerns are another challenge. While gas produces fewer emissions than coal, methane leaks and CO2 output remain high.
The IEA notes that data centres now account for 2 to 4 percent of electricity consumption in major economies like the US, China, and the EU. In some areas, that figure is even higher.
“The sector has already surpassed 10 percent of electricity consumption in at least five US states. In Ireland, it now accounts for over 20 percent of all electricity consumption,” says the IEA.
With data centre growth showing no signs of slowing, industry leaders are exploring carbon capture and storage (CCS) as a way to mitigate emissions. ExxonMobil estimates that AI-driven data centres will account for 20 percent of the CCS market by 2050, with projects already underway to sequester emissions from new facilities.
The AI-driven energy boom presents a major growth opportunity for LNG. But without cost reductions and stronger emissions controls, gas risks losing its role as a transition fuel. The real question is whether LNG can adapt fast enough to stay competitive in the AI age.
