Gas and solar grow as hyperscalers continue search for 'clean-firm' power
Data centers have stringent “five-nines” uptime standards (99.999% availability), equating to less than five minutes and fifteen seconds of downtime annually. Energy reliability constraints require developers to secure either front-of-meter connections to highly reliable grids or behind-the-meter connections to firm (non-intermittent) energy sources.

Natural gas emerges as a critical power source to supply firm and flexible power within an immediate time frame. The inventory of planned gas generation projects within the utility sector – with the exclusion of independent power producers – has increased from 6 GW in late 2023 to a staggering 17.5 GW currently, the highest since 2017. These plans can be linked to either population growth or increases from data center demand. 

Integrated oil companies are building gas plants to take advantage of the potential power boom. In December 2024, ExxonMobil announced that it would join the power generation business for the first time, building a gas plant specifically for data centers. In January 2025, Chevron and Engine No.1 announced the creation of a new partnership with an objective to develop scalable and reliable power solutions for data centers running on domestic natural gas. The partners will cooperate with one of the leading gas turbine manufacturers, GE Vernova, on the first generation of so-called ‘power foundries’ – co-located data centers and power plants fueled by GE Vernova’s seven HA natural gas turbines in the US Southeast, Midwest and West regions. The initial capacity will be up to 4 GW with a behind-the-meter generation setup, wherein the electricity will not flow initially through the existing transmission infrastructure to mitigate potentially adverse implications for consumer power prices.

Hyperscalers such as Meta, Microsoft, Google and Amazon also have carbon-free energy goals and are trying to access ‘clean-firm’ power: resources like nuclear and geothermal that are zero-emissions while still providing stable electricity. For example, Microsoft is working to restart a reactor at Three Mile Island’s Unit 1, Meta has issued a request for proposals seeking up to 4 GW of nuclear energy, and Amazon has invested in X-Energy in an attempt to build up to 5 GW of nuclear projects by 2039. In the US, nuclear energy may see a limited increase in the short term via reactor repowering and technology upgrades. Yet, small modular reactors and other advanced nuclear technologies are not yet widely commercially available, meaning that they will not meet immediate demand.

In exchange of clean-firm power, hyperscalers are currently meeting their annualized clean energy goals through virtual power purchase agreements (PPSs) with solar and wind plants, while receiving a mix of energy sources directly from the grid. But even this strategy has its limitations. Although Microsoft maintains its 2030 carbon-free electricity goal, its emissions increased by 30% between 2020 and 2024, largely due to data center buildouts.

Data centers may opt for renewable energy sources that can be rapidly deployed to meet oncoming demand, so long as it is mixed with baseload sources to meet their 24/7 requirements. The US installed 30 GW of utility-scale solar in 2024, a 50% increase from 2023. The US also added 10 GW of battery storage, a 60% increase from 2023. In 2025, developers plan to add over 33 GW of solar and 18 GW of battery storage to the grid, showing that renewable energy sources still have an integral role in meeting rising demand.

Even so, renewable energy projects face unique deployment challenges in the US due to limited transmission availability. Over 2 terawatts of potential energy projects, mostly made up of renewable resources, await grid interconnection approval. Many of these will never achieve commercial operation as, historically, the approval rate for queued projects has hovered around 15%. Processing speeds have slowed in recent years partially due to inadequate transmission availability: high upgrade costs trigger project withdrawals, which in turn necessitate restudies and decision delays. Poor transmission disproportionately stifles renewable resource buildout. For example, in PJM – the mid-Atlantic independent system operator that supports most data center growth – a solar project generally pays $100,000 per MW to upgrade local networks and enable grid connection.

Energy availability is a key bottleneck for data center buildouts, but there are other constraints. The US lacks a domestic semiconductor supply chain, and supply may be further impacted by potential tariffs as soon as April 2025. Data centers also require fiber optic cable availability, water for cooling and diesel generators for backup power – all of which will have to be maintained if buildouts are to continue uninterrupted in the US.

The US and the global economic trajectory is increasingly reliant on tech companies’ success. Tech stocks make up over a third of the S&P 500, and the tech-heavy Nasdaq fell 3.1% on 27 January 2025, as investors reacted to recent developments from DeepSeek, a Chinese open-source large language model that competes with AI products like OpenAI’s ChatGPT and Google’s Gemini. The current US administration has ordered the removal of any regulations inhibiting AI’s progress, and private investors have poured in $500 billion into the Stargate data center initiative.

DeepSeek’s improved computational efficiency may provide a pathway to quell hyperscalers’ power requirement – but it could also escalate the AI arms race and compel companies towards more power-intensive innovation. OpenAI has outlined five steps on the road to the ongoing development of AI, and it is currently working towards its third stage, showing that there is still room for significant growth in the AI industry.

Sign up to be the first to receive REview every month.

Authors: 

Marina Domingues  

Vice President, Head of US New Energies Research
marina.domingues@rystadenergy.com

Surya Hendry

Analyst, New Energies Research
surya.hendry@rystadenergy.com

(The data and forecasts contained in this column are Rystad Energy’s and the opinions are of the authors.)