Why are most AI data centers still powered by fossil fuels?
Reliability is still the biggest factor in energy source selection
While renewable energy has been dominating the headlines over the last few years, it seems that there has been a shift recently, especially ever since the recent boom in AI data center construction projects. Instead of installing large solar fields and battery storage systems, data center developers have been installing natural gas power generation. In this week’s edition of AI Power Weekly, we will dive into the recent surge in data centers, why most of them are getting their power from natural gas, and when we might see a shift to renewables.
Don’t we have cheap clean energy available? Why can’t data centers just run on wind and solar?
It is true that solar and wind are very cheap right now on a $/kW installed basis, but it isn’t the cheapest for 24/7 power.
Data centers require 24/7 power availability because any interruptions could be catastrophic and cause mass interruptions in service, which simply cannot happen. When data centers go down, the software services that rely on them also go down. This can result in everything from your flight being cancelled because their systems went down, to your local coffee shop needing to go cash-only for the day because their payment system stopped working.
Solar and wind aren’t available when the sun isn’t out and the wind isn’t blowing, and the only way to fill that gap with clean power is with large battery banks, and those typically only come with 2- or 4-hours’ worth of storage. In order to provide 24/7 reliable power with only wind and solar, powerplants need to be significantly oversized by 3-5x to provide much more power generation and energy storage than is actually necessary, resulting in incredibly high costs and long construction timelines.
The solution for this is firm energy, a power generation source that can be turned on any time with the flip of a switch. Natural gas or diesel generators are a couple of examples. Firm power generation sources can be used on their own to power entire data centers, or alongside solar/wind installation to bridge the gap when not enough power generation is coming from the renewables.
So, data centers need firm energy. Are there any clean options for that?
They exist, but none of them can be deployed fast enough or cheaply enough to keep up with the current pace of data center construction.
The cleanest source of firm power generation available today is nuclear, but it takes years to deploy new nuclear powerplants, with most new construction not expected to be online until the 2030’s due to regulatory or technical challenges.
Long duration energy storage is available today, but the technology is either experimental, too expensive, or unable to support the scale required to support a 50+MW data center campus.
Hydrogen is also an option that can be used in the same generators that use natural gas (with some upgrades), but the technology is still too young and green hydrogen is also too expensive to produce at scale for it to be competitive pricewise with natural gas. There are currently no green hydrogen production facilities operating in the US that can provide enough fuel to power a large data center.
There are also some new power generation technologies that have been developed in recent years that can use hydrogen, biofuels, and even natural gas to generate firm power without combustion or with little to no emissions. Companies like Emission Free Generators, Petra Power, Bloom Energy, and Mainspring Energy are working on these solutions, but they’re still much too small (the largest generator available is 1MW) to meet the scale required by data center developers today.
When will we see a shift?
A major breakthrough in one of these areas will need to happen before data centers can completely switch away from natural gas
Cleaner firm generation methods need to reach scale
The timeline of nuclear SMR deployments needs to be sped up
Long duration storage needs to become much more affordable
Major tax breaks or incentives need to be put into place to incentivize clean energy generation even when it’s not the most economical option