Microsoft Weighs Natural Gas With Carbon Capture For AI Data Centers, But Cost Is Key

As the need for power in AI data centers escalates, Microsoft Corporation MSFT is considering the possibility of utilizing natural gas.

What Happened: Microsoft’s Vice President of Energy, Bobby Hollis, told CNBC that the tech giant is considering the use of natural gas with carbon capture technology to power its AI data centers. However, this option will only be explored if it proves to be “commercially viable and cost competitive.”

Despite the hefty costs associated with carbon capture technology, it has been under development by oil and gas companies for several years. The technology is designed to capture industrial carbon dioxide emissions sites and store them deep underground.

Microsoft has set bold climate targets, striving to offset its entire electricity usage with carbon-free energy by 2030. However, the tech sector has realized that renewables alone cannot fulfill the high power requirements of data centers.

Last Year, Microsoft turned to nuclear power and signed a deal to support the restart of Three Mile Island. However, the U.S. is unlikely to expand nuclear power significantly before the 2030s.

Despite its carbon dioxide emissions, natural gas is increasingly seen as a near-term power solution by data center developers. Energy Secretary, Chris Wright stated on Monday that renewable energy cannot fully substitute gas in electricity generation.

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Why It Matters: By considering natural gas for powering data centers, Microsoft is following Meta Platforms META and Amazon AMZN who have partnered with Entergy Corporation ETR subsidiaries in Louisiana and Mississippi, respectively, for the same reason. This also represents a larger effort by U.S. power companies to expand natural gas infrastructure to meet the rising electricity demand driven by AI.

A report released by the Institute for Energy Economics and Financial Analysis (IEEFA) in January highlights that utility providers in Virginia, Georgia, North Carolina, and South Carolina intend to develop a total of 20 GW of new natural gas generation by 2040, driven mainly by the growing demand from data centers.

Image via Shutterstock

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.