Gas vs. Renewables: Powering Data Centers' Future Demand

Texas: A State at the Crossroads of Energy Transition

Texas is a state known for its vast ranching industry, but it is also becoming a hub for modern energy solutions. The state has integrated renewable energy sources like solar and wind into its infrastructure, with over 15,300 wind turbines across 239 projects and 197 utility-scale solar farms. These renewable sources now supply more than 45% of the state’s electricity needs.

Despite this progress, there are proposals to build more than 100 new gas-fired power plants in Texas. Environmental groups have raised concerns about these plans, as they could lead to increased reliance on fossil fuels. According to the Environmental Integrity Project (EIP), as of April 2025, there were plans to build 108 new facilities and expand 17 others, adding up to 58GW of capacity. Some of these proposals include accessing the Texas Energy Fund, which uses state taxpayer dollars.

Dennis Wamsted of the Institute for Energy Economics and Financial Analysis notes that while many of these proposals may not be built, Texas will continue to lead in renewable energy. However, Pavan Vyakaranam, an energy analyst at HAWXTECH, points out that Texas is also the leading market for gas-based thermal power. In 2024, the state had 81.53GW of gas power capacity, far exceeding Florida’s 54.96GW.

This juxtaposition raises questions about whether Texas can balance its clean energy push with the need to reduce thermal power. The answer lies in the growing demand for data centers driven by AI and automation markets. According to the International Energy Agency (IEA), data center investments in the US nearly quadrupled between 2019 and 2024. This surge in demand is placing pressure on the Electric Reliability Council of Texas (ERCOT).

The Role of Gas in Meeting Data Center Demands

Data centers require a reliable and consistent power supply, which has led to increased interest in gas power. The Trump administration has supported data center and energy co-expansion through favorable policies, such as tax incentives. Pennsylvania, for example, secured over $90bn in investment to become an AI hub, with some projects including plans for new natural gas facilities.

Vyakaranam explains that gas power offers grid stability and flexibility, making it appealing for data centers. “Renewable power, due to its intermittent nature, cannot be a sole solution without backup power or storage,” he says. However, Wamsted argues that renewable sources can meet rising demand in Texas, given its significant renewable capacity.

Renewables vs. Gas: A Balancing Act

Texas has shown that it can transition grids from fossil fuels to renewable energy. Many data centers in the state are already operating on 100% renewable energy. For example, Sabey Data Center Properties in Austin and Equinix in Dallas are committed to using renewables. Similarly, Soluna Holdings’ Project Hedy in South Texas will be powered entirely by wind.

Other countries, like Malaysia, are also exploring renewable energy for their data centers. Bridge Data Centres is integrating 400MW of renewable energy into its operations, with a goal of carbon neutrality by 2040. However, Malaysia also plans to add 6–8GW of gas-fired capacity to meet growing demand, highlighting the complex interplay between renewables and gas.

Challenges Facing the Renewable Sector

Despite these efforts, the US renewables sector faces challenges under the current administration. Vyakaranam notes that Trump’s pro-fossil fuel policies may result in a growth of gas-powered energy production and stagnation of the renewables market. Additionally, the lead time for gas turbines has increased to around 5–7 years, creating backlogs and increasing costs.

Wamsted warns that these challenges could hinder Texas’ new gas turbine plans. “Both of these capacity problems are raising the cost of gas-fired generation, which could put a brake on planned additions,” he says. New gas pipelines will also be needed, which will take time and have significant capital costs.

The Future of Energy: A Collaborative Approach

While some argue that gas must be part of the mix to support the AI revolution, others believe that renewables can meet the growing demand. Wamsted emphasizes that renewables can quickly and affordably meet the US’ rising electricity needs. However, he also cautions against relying on one resource, noting that all generation systems require maintenance and face outages.

The reality may lie somewhere in between. With battery storage still lacking and nuclear power a long-term investment, the best way to meet the exponentially increasing demand from data centers may be for renewables and gas power to work together.

To ensure a reliable and sustainable AI future, power capacity additions – regardless of energy source – will need to be paired with efforts to upgrade ageing grids, expand energy storage, and decentralize energy systems. Tailoring energy solutions for each data center to its local surroundings will also be essential.