The race to power data centers is increasingly butting up against tech companies’ climate commitments — and some backers of carbon capture see an opening.
U.S. electricity demand is rising for the first time in decades, driven by a growing corporate push to develop artificial intelligence. With fossil-fuel-fired plants likely to play a greater role on the grid, some companies see carbon capture technology coupled with gas generation as an answer for power-hungry developments.
The Trump administration is promoting the use of AI and data centers even as it downplays efforts to cut greenhouse gas emissions and takes aim at renewable development plans. And a June report from Carbon Direct, a carbon management firm, said natural gas with CCS could meet as much as 63 percent of projected U.S. data center power demand.
Natural gas paired with carbon capture is “going to be a very important source of energy for a lot of these data centers” said Sangeet Nepal, a technology specialist at the Carbon Capture Coalition, citing the ability to dispatch gas plants on demand.
To date, however, carbon capture hasn’t been deployed at a commercial-scale natural gas power plant in the United States. And electric industry trade groups previously pushed back against the Biden administration’s power plant climate rule, with some arguing that EPA’s rule relied on unworkable timelines. In June, EPA proposed a repeal of the Biden standard under President Donald Trump.
The Republican megalaw signed in July also axed federal tax incentives for wind and solar projects, but it maintained and expanded the 45Q credit — the top incentive for carbon capture. Trump has also touted the idea of letting data centers have their own dedicated power generation facilities. That would be especially important for large-scale tech companies known as hyperscalers that are seeking as much power as possible even as grid connections grow scarcer and more time consuming.
How many operators of natural gas plants ultimately install CCS remains to be seen. But some high-profile energy companies are taking initial steps toward the idea.
Exxon Mobil announced plans last year for a roughly 1.5-gigawatt gas plant that would generate “high-reliability electricity” for a data center, using CCS to trap an estimated 90 percent of the facility’s CO2 emissions.
“We’re interested in data centers, not from the power standpoint, but for our ability to decarbonize,” Exxon CEO Darren Woods said during the company’s second-quarter earnings call last month. “And to the extent that these hyperscalers want decarbonized power.”
Exxon did not answer questions from POLITICO’s E&E News about a cost estimate for the power plant and what data centers the plant could service.
Chevron, too, has unveiled plans to power data centers, but it left some wiggle room in a January new release as to whether CCS would be involved. The company said such projects “are expected to be designed with the flexibility to integrate lower carbon solutions, such as carbon capture and storage.”
Chevron spokesperson Allison Cook said sites across the United States are being evaluated for the company’s first “multi gigawatt-scale” co-located power plant and data center, which would be jointly developed with investment firm Engine No. 1.
Whether CCS will be added to a gas power plant “will be determined during the engineering design process and will vary per project site,” Cook said in an email.
In top energy-producing states like Wyoming and Louisiana, large data center projects are also being built with carbon capture in mind. And as tech companies look to balance their long-held emissions reduction goals with the need to get as much power as quickly as possible, some see the far-off promise of CCS as a way to bridge those priorities.
In July, DOE and the Electric Power Research Institute held a workshop about reducing the emissions footprint of data centers with CCS.
“Participants reviewed the needs of data centers, heard from power producers, explored advances in carbon capture, and considered solutions for transporting and storing CO2,” Jeffery Preece, vice president of energy supply, fleet development and fuels at EPRI, said in a statement. “Attendees left with practical insights on what it will take to deploy CCS to help data centers reduce emissions.”
DOE spokesperson Ben Dietderich didn’t directly say whether the agency supports powering data centers with CCS-equipped gas plants.
“The Department of Energy will continue to use all tools at its disposal to support projects that advance reliable, affordable, and secure energy sources, strengthen the grid and lower costs for the American people,” Dietderich said in an email.
CCS model
A 1.8-GW facility in Wyoming being developed by energy company Tallgrass and data center firm Crusoe could present a model for what’s possible.
The AI project will include a power generator built by Tallgrass — rather than one paid for by customers of the local utility — with access to the company’s Trailblazer carbon dioxide pipeline.
The data center will be able to draw from available wind and solar resources while also using “abundant low-carbon natural gas,” said Tallgrass spokesperson John Brown.
“The growth of data centers and their associated power demand, when paired with the option of carbon capture and storage, creates transformative opportunities to balance the power requirements of technical innovation with the desires of local communities and customers for emissions stewardship,” Brown said in an email.
Several major tech companies include carbon capture when evaluating their climate goals.
Google, for example, says that CCS “can contribute” to a carbon-free energy portfolio, alongside renewable energy and sustainable biomass. The company’s 2025 environmental report touts a biomass facility in Singapore that will include a pilot-scale carbon capture system scheduled to begin operations next year.
Microsoft similarly lists carbon capture as a tool for carbon-free energy in its own environmental sustainability report. In fiscal 2024, it signed long-term agreements to procure nearly 22 million metric tons of carbon removal. Much of that involved tree planting or soil sequestration, but also included direct air capture technology.
Meta and Amazon, the two other largest data center operators in the U.S., do not mention carbon capture in their sustainability plans.
Meta, however, could embrace the technology as part of its plans for a massive data center campus in Louisiana that could grow to more than 4 million square feet. Entergy Louisiana plans to build three new gas turbines to support the Franklin Farm site. The utility said in December that the generators will be able to incorporate CCS “through future upgrades.”
Entergy did not respond to a request for comment. State regulators approved the new gas plants last month.
Customers of data centers are asking for power with a lower carbon intensity, Nepal said, a reference to the amount of carbon released to produce electricity or another product.
The U.S. Energy Information Administration estimates that natural gas emits less than half the carbon dioxide emissions per kilowatt-hour of electricity produced than coal, while it considers wind, solar, hydropower and biomass to be carbon neutral.
Using combined-cycle power plants — which run on natural gas and waste heat — that have “high CO2 capture rates” and low-emissions gas production “would result in electricity generation with life cycle GHG emission intensity comparable to wind and photovoltaic power generation,” researchers with the Oxford Institute for Energy Studies said in a May article.
Data center emissions
The nation’s largest tech companies have all set goals to achieve net-zero carbon emissions in the coming decades, which analysts say can help drive their continued interest in carbon capture and other clean power.
“If you take the hyperscalers at their word on this, they have made and maintained their commitment to their net-zero goals, and for them, this is a critical issue” for their investors, customers and partners, said Alex Dewar, a managing director and partner at the Boston Consulting Group.
Delivering on those net-zero goals is challenged by the growth in power consumption that comes from data center development, said Dewar, who leads his firm’s work in carbon capture, use, storage and removal.
“That’s the real significant motivator in all of this, is to maintain that trajectory,” he said.
On top of climate goals, another factor is that employees at companies like Microsoft care strongly about climate as an issue, said Andrew Logan, a senior director at sustainability nonprofit Ceres.
While hyperscalers have a diverse set of customers with varying climate commitments, the emissions associated with AI are a “consistent focal point,” Dewar said. “There may be different motivators, but I think they’re generally feeling this common pressure to continue to show progress on reducing emissions.”
Wind and solar power, however, cannot offer the around-the-clock power that data centers say they need without accompanying battery storage. Despite supply chain difficulties and a lengthy timeline to build new fossil fuel plants, the Trump administration has been pressuring utilities, grid operators and data centers to rely on fossil fuels.
That’s where CCS could come in.
David Hill, executive vice president of energy at the Bipartisan Policy Center think tank, said natural gas with CCS can be a “really meaningful way” of meeting energy needs and reducing carbon emissions. That’s going to require cutting costs tied to carbon capture and making permitting more efficient, he said.
Environmental groups, however, say tech companies and government supporters may be looking past the opportunities of renewable energy.
Green America, a nonprofit focused on sustainable business practices, is organizing a “Dirty Data” campaign against four large tech companies to encourage more responsible data center development.
Todd Larsen, the group’s executive co-director for consumer and corporate engagement, said in an interview that the campaign is intended to highlight that data centers’ demand “could be met with the continuation of renewable energy with storage.”
A June report from investment bank Lazard found that renewables are the most cost-competitive form of generation, although low gas prices made existing gas plants comparable.
The promise of CCS on any new or existing fossil fuel plants, Larsen added, wasn’t enough.
“Even if it were technically possible, it’s prohibitively expensive,” he said. “We’d still be fracking for natural gas, we’d still be mining coal. Communities are still going to be impacted. This is not a direction we should be heading.”
Gauging interest
Ceres’ Logan said that, for now, gas and CCS projects tied to data centers are still in the early stages.
“If carbon capture is ever going to work, this is the environment in which it would work, right, because you’ve got generous tax credits, you have these hyperscalers for whom money is not really an issue,” Logan said.
One upside of near-term investment in carbon capture is that it could help drive down costs for future projects in sectors that are difficult to decarbonize, Logan added.
Cost estimates vary for natural gas plus carbon capture plans, but adding the technology is still more expensive than not using it.
“Adding CCS is estimated to increase the levelized cost of electricity by 50–100%,” according to a March white paper from Carbon Direct. That is a reference to the average cost of electricity generation over an energy asset’s life.
Retrofitting existing natural gas plants with CCS equipment or installing the technology on a “greenfield” facility each come with their own set of trade-offs, said Dewar of the Boston Consulting Group.
Putting carbon capture onto an existing facility means not investing in new gas turbines and a new plant, but that comes with challenges around integrating CCS onto the plant, he said. For new facilities, that means investing in new generation capacity.
“We don’t see it as a winner take all or one, single project development or commercial pathway to being successful in this space,” Dewar said.
Plant developers will likely be following trends shaped by the preferences of companies in the marketplace.
Developers of new power facilities will “build them with the attributes that the market demands and is willing to pay for,” said Hill of the Bipartisan Policy Center. “And so, if either as a part of the organized market or as a part of bilateral transactions with particular buyers — they want the reduced carbon attributes — then they’ll pay for them.”
The carbon itself also has a significant value, Hill said, like when it’s stored through enhanced oil recovery, where the gas is used to produce additional oil.
A report from the Business Council for Sustainable Energy — a coalition of companies and trade associations — and BloombergNEF showed that natural gas plus CCS has a lower levelized cost of energy than coal. That is something the Global CCS Institute noted in a March online post.
