BloombergNEF: Natural gas power plant costs surge 66%

The cost to build natural gas power plants in the U.S. has spiked 66% over the last two years, according to a new report from BloombergNEF. While natural gas prices remain low in the U.S., the price to build a new combined cycle gas turbine (CCGT)—a power plant that uses both gas and steam turbines to generate electricity—has risen from less than $1,500 per kilowatt of generating capacity in 2023 to $2,157 last year. Additionally, it now takes 23% longer to complete a new power plant facility. This surge comes as technology companies, including Microsoft and Meta, turn to natural gas to power their expanding data centers.

This expansion is driven by a projected increase in electricity consumption. New data center electricity demand in the U.S. is expected to reach 2.7x current demand by 2035, rising from 40 gigawatts today to 106 gigawatts. This growth is fueled by the increasing scale of these facilities: currently, only 10% of data centers are 50 megawatts or larger, but the average size of data centers over the next decade will be larger than 100 megawatts. In response to the grid strain, the Trump administration has urged data center operators to “bring their own power.”

The rush to build natural gas power plants has triggered a shortage of gas turbines. By the end of this year, prices for gas turbine equipment, which constitutes up to 30% of a new power plant’s cost, are expected to be up 195% over 2019 prices. Because the manufacturing process for these turbines cannot scale quickly, waitlists for the equipment now stretch into the early 2030s. This bottleneck complicates the transition for tech companies, which have historically favored grid-connected data centers backed by power purchase agreements—long-term contracts to buy electricity directly from renewable energy developers—for wind, solar, and batteries.

Faced with rising costs and long delays for natural gas, some technology companies are exploring alternative energy approaches. Google is looking at adding generating capacity to the grid by pairing renewable energy with long-duration energy storage—systems designed to store and discharge electricity over extended periods. This includes utilizing Form Energy’s iron-air batteries, which can release electricity over the course of 100 hours. Unlike gas turbines, the costs of solar panels and batteries have historically decreased, offering an alternative to the rising capital requirements of fossil-fuel infrastructure.

Why it matters

The rising cost and difficulty of building natural gas power plants for data centers, driven by surging electricity demand, is forcing tech companies to reconsider their energy strategies. As turbine shortages and construction delays persist, operators must balance immediate computational needs against the shifting economics of grid infrastructure.