Natural Gas, Net-Zero, and the Grid: What’s Powering the Next Generation of Data Centers?

Written by Matt Stansberry – Executive Director, Data Center Practitioner Insight and Experience

The Uptime Network is a community of data center owners and operators under mutual NDA, representing the world’s largest IT infrastructure operators. This newsletter provides a highly abbreviated, anonymized readout of member insights and discussions, with the goal of advancing the data center industry and providing feedback for continuous improvement to the supplier community. Uptime Network

Across the data center sector, a shift is underway. Not toward the all-renewable future touted in ESG reports and keynote speeches. but toward pragmatic, sometimes contradictory responses to a tightening energy landscape.

Last month, Uptime Network held a roundtable session with technical experts from the Gas Technology Institute (GTI Energy), an 80-year old non-profit energy research organization with ties to the utility and government agencies focused on advancing energy technology. 

GTI walked through emerging natural gas technologies, including fuel-flexible gensets, microgrids, and hydrogen systems that can provide behind-the-meter prime power or supplement backup capacity.

According to Uptime Intelligence, operators in Virginia, Oregon, and Ireland have already begun deploying on-site gas power at scale. Microsoft’s 170 MW plant near Dublin and AWS’s 20 MW gas-powered facility in Silicon Valley are just two examples of operators bypassing delayed interconnection with firm on-site generation.

Natural gas is not a clean energy solution. But for many operators, it is the only reliable option that meets current deployment speed, density, and uptime requirements.

“Natural gas generation runs counter to the net-zero pledges made by the largest data center operators. But its increased deployment is inevitable given a coming crunch in electricity demand, and the likely problems with grid interconnectivity and stability.” – Jay Dietrich and Peter Judge, Uptime Intelligence, October 2024

While gas infrastructure may offer a short-term solution, the long-term externalities have not gone unnoticed by policymakers. In the first half of 2025 alone, three U.S. states passed laws that reassert public control over large-load siting and interconnection:

• Texas SB 6 gives ERCOT the authority to curtail large data centers, mandates participation in demand response programs, and imposes full cost recovery for any required transmission upgrades. Behind-the-meter generation, including natural gas, is now subject to regulatory approval.
• Minnesota Omnibus 25-05730 creates a service class for data centers, requires design for water reuse, and applies a new fee of $2–$5 million per year to fund conservation programs.
• Oregon POWER Act (HB 3546) mandates 10-year power contracts for large loads to prevent rate shocks for other customers, driven in part by a 2.5× price gap between residential and industrial electricity.

Case Study: xAI’s Memphis Turbine Controversy

In mid-2025, Elon Musk’s AI venture, xAI, came under fire for deploying dozens of natural gas turbines at its Memphis, Tennessee data center without proper air permits. Local environmental and civil rights groups alleged that the company installed up to 35 turbines more than double the number disclosed to the permitting authority, near a predominantly Black neighborhood already burdened by industrial pollution. The move triggered a notice of intent to sue under the Clean Air Act, with claims that the turbines constitute a major pollution source due to emissions of nitrogen oxides and formaldehyde.

Despite community opposition, local regulators approved a temporary permit for 15 turbines through 2027, citing exemptions for “non-road” engines, a legal interpretation now being challenged in court.

The case underscores a broader risk: as operators turn to on-site gas power to bypass grid delays, they need to realize that they are installing a grid comparable natural gas generation plant subject to full air quality, grid interconnection, and public utility commission review. They may also face escalating scrutiny from environmental justice advocates and the courts, especially when projects intersect with vulnerable communities.

Data center leaders now face a dual challenge:

1. Infrastructure risk is no longer just technical, it’s political. The traditional model of connecting large loads with little visibility or consequence is eroding. These gargantuan facilities are at a much larger scale than facilities built even 5 years ago and the grid no longer has sufficient excess capacity to easily absorb the new facilities. Lawmakers are responding to public concern and grid stress with aggressive new legislation. And more states are likely to follow.
2. There’s no single path forward. Natural gas might enable some deployments where electric infrastructure is a dead end, but it won’t exempt operators from regulatory scrutiny, emissions challenges, or long-term climate pressures.

If there was a clear message from both GTI and the legislative landscape, it’s this: the conditions under which data centers are planned, approved, and powered are changing quickly.

GTI’s presentation showed that energy research is moving to support new deployment models. The legislative updates show that governments are moving even faster to constrain them. Data center operators now sit in the middle, between infrastructure that can’t keep up and public systems no longer willing to accommodate growth without limits.

Gas might be part of the answer. But no energy source will shield the industry from the accountability that’s now arriving in policy, in permitting, and in the public’s willingness to tolerate opaque expansion.

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