Energy Currents
A Blog by Enerdynamics

How Rising Data Center Electricity Demand Is Reshaping Natural Gas and Power Infrastructure Planning

By Ryan C. Moore, Founder & CEO, Pheasant Energy

Data center electricity demand is the power required to operate servers, networking equipment, storage systems, cooling units, and supporting electrical infrastructure. As artificial intelligence, cloud computing, streaming, and digital services expand, this demand is increasing far faster than traditional commercial electricity use. This growth is forcing utilities, power generators, pipeline operators, regulators, and data center developers to rethink how energy infrastructure is planned.

The challenge is not simply producing more electricity. The power must be delivered continuously and reliably to specific locations, often within shorter timelines than those required to build power plants, transmission lines, substations, and pipelines.

Why Is Data Center Electricity Demand Rising?

Five factors are driving most of the growth:

• AI computing: Advanced models require powerful processors and extensive cooling.
• Cloud services: Companies are moving software, storage, and computing operations to remote data centers.
• Digital storage: Businesses and consumers are creating and retaining more data.
• Online services: Streaming, search, communications, and financial platforms operate around the clock.
• Hyperscale campuses: Large operators are concentrating enormous computing loads in a limited number of locations.

The geographic concentration of these facilities creates serious local planning issues. A region may have enough electricity overall but still lack the substation, transformer, or transmission capacity needed to connect a new data center campus.

What Makes Data Center Loads Different?

Data center loads are different from typical commercial loads because they are large, continuous, and highly sensitive to interruptions. Offices and retail buildings usually consume less electricity at night and on weekends. Data centers may operate near full capacity throughout the day.

These loads share several important characteristics:

• Continuous 24-hour operation
• Strict power-quality requirements
• Limited tolerance for outages
• Large, concentrated electricity demand
• Faster development schedules than traditional energy infrastructure

Utilities must therefore plan for both the amount of electricity required and the rate at which demand may rise.

How Is Power Infrastructure Planning Changing?

Data center growth is forcing utilities to move beyond traditional forecasting methods.

Utilities must now assess generation capacity, reserve margins, transmission access, substation availability, transformer supply, and interconnection timelines together.

A system may produce enough electricity annually while lacking the infrastructure to deliver hundreds of megawatts to a single location. New substations, transmission lines, protection systems, and transformers may be required before the facility can connect.

Why Is Natural Gas Important to Data Center Planning?

Natural gas is becoming more important because gas-fired power plants provide dispatchable electricity. Dispatchable generation is electricity production that system operators can increase or decrease in response to changing demand.

Combined-cycle natural gas plants can provide large amounts of relatively efficient electricity, while combustion turbines can respond quickly during periods of high demand. Some data center developers are also considering on-site gas generation and microgrids when utility connections cannot be completed quickly enough.

However, building a gas-fired plant does not automatically guarantee a reliable fuel supply. The project also requires sufficient pipeline capacity, pressure, storage access, and firm transportation agreements.

What Natural Gas Infrastructure May Need Expansion?

Natural gas infrastructure is the network that produces, processes, transports, stores, regulates, and delivers gas to power plants and other users. Growing electricity demand may require upgrades across several parts of that network.

The main infrastructure categories include:

• Transmission pipelines: Move gas across long distances and between major markets.
• Intrastate pipelines: Deliver gas within individual states.
• Plant laterals: Connect power plants directly to larger pipeline systems.
• Compressor stations: Maintain pressure and keep gas flowing.
• Storage facilities: Hold gas for peak periods and emergencies.
• Metering equipment: Measures and regulates deliveries.

Pipeline capacity becomes especially important during severe winter weather. Residential heating demand may rise at the same time that gas-fired power plants need additional fuel. Plants relying on interruptible transportation contracts may lose access when the network becomes constrained.

What Are the Main Planning Risks?

The largest risk is forecast uncertainty. Data center developers may request connections from several utilities, change locations, delay construction, or reduce their planned electricity use. Treating every request as guaranteed demand could lead to unnecessary infrastructure spending.

The opposite problem is equally serious. If utilities underestimate credible projects, new facilities may face long connection delays, and existing customers may experience tighter reserve margins.

Other major risks include:

• Stranded infrastructure: Pipelines, plants, or substations may become underused if projects are canceled.
• Cost shifting: Existing customers may pay for upgrades primarily benefiting one large user.
• Fuel dependence: Additional gas generation can increase exposure to supply disruptions and price volatility.
• Construction delays: Permitting, equipment shortages, and community opposition can slow projects.
• Environmental pressure: New fossil fuel infrastructure may conflict with emissions targets.

Utilities increasingly require data center developers to provide deposits, construction milestones, and stronger proof that proposed projects are financially committed.

How Should Infrastructure Be Planned?

Effective planning requires coordination among utilities, pipeline operators, grid managers, regulators, communities, and data center developers.

A strong process includes six steps:

1. Verify the proposed load: Confirm the site, financing, timetable, and expected electricity demand.
2. Create several forecasts: model low-, expected-, and high-demand scenarios.
3. Assess grid capacity: Review generation, substations, transformers, and transmission lines.
4. Evaluate fuel availability: Examine pipelines, storage, pressure, and firm transportation.
5. Compare resource portfolios: Consider gas, renewables, batteries, nuclear, geothermal, and flexible demand.
6. Assign costs clearly: Determine which upgrades developers, utilities, or other customers will fund.

Phased connections may become more common. Instead of reserving full capacity immediately, utilities can increase service as developers complete construction and meet agreed milestones.

Conclusion

Rising data center electricity demand is reshaping energy planning because these loads are large, concentrated, continuous, and growing rapidly. Utilities must expand generation and grid infrastructure, while natural gas planners must evaluate pipelines, storage, compression, and fuel-delivery contracts.

Natural gas can support reliable electricity, but it cannot solve every infrastructure challenge on its own. Renewables, batteries, nuclear power, transmission expansion, efficiency improvements, and flexible computing loads all have important roles.

Regions that coordinate energy development, permitting, cost allocation, and project verification will be better positioned to support data center growth without weakening reliability or placing unnecessary costs on existing customers.

Pheasant Energy is a leading upstream oil and gas company based in Fort Worth, Texas, specializing in mineral, royalty, and working interest segments. For more information, visit https://www.pheasantenergy.com/.

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