Data Center Developers Adopt On-Site Gas Power to Bypass Grid

BloombergNEF found that data center developers are increasingly deploying on-site gas power to maintain operations while awaiting grid connections. While initially intended as bridge solutions, economic factors may lead developers to keep these assets permanently because the marginal cost of on-site generation is often lower than industrial electricity tariffs.

Analysis shows a wide range of operating costs among technologies. Fuel cells from Bloom Energy offer the lowest marginal operating cost at $21.5 per megawatt-hour. In contrast, gas engines from Wartsila and INNIO are the most expensive options, costing $43.2 per megawatt-hour.

These figures contrast sharply with forecasts from the United States Energy Information Administration, which predicts industrial electricity tariffs will average $88.6 per megawatt-hour by 2027. Because of this gap, developers facing high tariffs may shift to using on-site generation for primary power, relying on the electrical grid only for peak demand or reliability.