Data center demands spark reevaluation of energy generation sources

The rapid growth in data center construction is complicating the energy transition, said a panel of energy specialists during a recent online event.

The webinar, hosted by Roxana Bekemohammadi, founder and president of the U.S. Hydrogen Alliance, and presented by Reuters, featured three experts from Mitsubishi Power who addressed the demands that new data centers are putting on the grid and how to meet this demand while achieving decarbonization goals.

What is that demand going to look like? “If you ask three people you will get four answers,” said Xiufang Gao, senior director of market intelligence & strategy at Mitsubishi Power. “There’s actually a big range and we have been looking at all of these different projections.”

Citing a 2024 study from Lawrence Berkeley National Lab, Gao reported that researchers predict demand from data centers could double or triple by 2028. That’s a range of 260 TWh to 580 TWh of new load from data centers, which in 2023 required 180 TWh. That’s anywhere between 70 GW and 120 GW of new generating capacity needed.

“If it triples, that will be 12% of the nation’s total electricity generation,” she said.

*Source: Lawrence Berkeley National Lab*

The spike in demand is putting tremendous pressure on commitments to decarbonize through renewables such as solar, wind and battery storage, along with other clean energy sources, such as hydrogen, geothermal and nuclear power. There was a time when the relatively leisurely pace of the energy transition enabled renewable sources to cost-effectively replace legacy fossil-fuel-burning sources on predictable schedules. This is no longer the case.

Utilities are still investing in large-scale renewable projects, and big tech companies had once been able to achieve their decarbonization targets through power purchase agreements. Gao noted that the tech sector has done many such contracts in the past and is planning to do so in the future. However, physical demands of data centers are requiring huge amounts of absolutely reliable generating capacity onsite or nearby.

“When they are investing tens of billions, hundreds of billions to build a data center, then they kind of want it up and running as much as possible,” she said. “And that’s when it comes to: ‘Yes, we do love renewables, but we cannot only rely on renewables.’ [Energy providers] have to look at the 24/7 demand requirement and look at ways to decarbonize that.”

Peter Sawicki, vice president of emerging technologies at Mitsubishi Power, said the focus on clean energy has not disappeared with the rise in data center demand, even with the power requirements of artificial intelligence. In many cases, the big tech customer still very much prioritizes clean energy. However, the availability of that energy at all times is non-negotiable.

“Obviously, power now is on a lot of these data center players’ lists because ultimately their survival depends on who develops a large language model first,” Sawicki said. “Who’s the most relevant in this space, right? So, we are seeing that amazing demand.”

Reconciling such demand with decarbonization goals requires serious cost-benefit analysis as well as a willingness to invest in new technology. Sawicki said Mitsubishi has lines of gas turbine power systems that use natural gas, some of which are small enough to use in behind-the-meter arrangements on data center campuses.

If using natural gas is a non-starter, the company is developing versions of its gas turbine generators that burn hydrogen instead. It is developing new systems and conversions of existing models to use 100% hydrogen. In support of this effort, it has established a hydrogen generation and storage facility in Delta, Utah, which Sawicki said is scheduled to begin operations this year. The facility will generate hydrogen from renewable energy using electrolysis and store the gas underground in salt caves.

Mitsubishi Hydaptive electrolyzer *Image: Mitsubishi*

More immediately, Sawicki said, Mitsubishi is working on integrating batteries from its Prevalon business and solar through its Oriden solar development company.

“We’re looking at several data center projects, which include a solar component, a battery component and then a gas turbine component,” he said. “So, you can really lower your [corporate equality index] score by implementing all of those technologies together and providing more of a solution-based response than just a of a product-based response.”

Again, if using natural gas seems like cheating, strategy director Gao says that is just part of the equation now with electricity demand from data centers, at least in the near future. As an example, she described a customer wanting to build a data center in Texas with a peak behind-the-meter requirement of 100 MW. Since this is a data center, peak is what is needed at any given time.

“We looked an all-renewable case,” she said. “Putting in wind, solar and battery storage, all new build. And then we looked at another case with combined-cycle [gas turbine] only. And then there were four different cases in between where we limit the emissions by varying degrees because decarbonization is still a very important goal for all data centers and big tech. So, if you don’t care about the cost, for this specific case, it probably would double your cost to actually reach 100% zero emissions.”

In the end, Gao concluded, they found a sweet spot where the customer could achieve 60% emissions reduction that would increase the construction cost by 15 to 20%, including operations and maintenance costs. “So yes, renewables can play a very important part of this case, and, as I mentioned, cleaner gas-burning turbines.”

According to Andrew Knapp, senior director for government relations for Mitsubishi Power, the change in U.S. presidential administrations and control of the House by Republicans should not necessarily panic supporters of clean energy.

“I think it’s very safe to say that data centers are a bipartisan issue,” Knapp said. “They are a nonpartisan issue. It’s a recognition of where we’re going as a society and where we’re going in terms of need from a power perspective.”

Data centers are important to future U.S. growth. Builders and operators still regard clean energy as a priority. In Knapp’s view, the policy implications of changes at the Department of Energy, the fate of the Inflation Reduction Act, tax incentives and infrastructure implications still need to be worked out, while helping industry to deliver on its commitment to address data center energy demands.

“With this administration we are looking at some more federalism,” he said. “Sending things back to the states to let governors make more decisions on behalf of their states. Every state’s not the same, every region’s not the same, and when we’re talking about meeting [data center] demand, whether it’s with hydrogen or any one of the fuels that are out there, there’s going to be a lot more to understand about those needs and how we address them.”

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