NEW YORK — As much as half of the data centers planned across the United States are at risk of delays or outright cancellation, according to investment firm Kimmeridge Energy Management Co., a warning that could dampen expectations for a natural gas demand surge tied to the artificial intelligence boom.
Ben Dell, managing partner and co-founder of Kimmeridge, said the obstacles facing data center developers go beyond simple permitting delays and reflect a deeper mismatch between the pace of Silicon Valley’s ambitions and the realities of large-scale infrastructure construction. “The sort of Silicon Valley model is running into a real-world infrastructure constraint,” Dell said in an interview Wednesday at Bloomberg News headquarters in New York.
Political backlash and physical constraints
Dell attributed the risk of delays to two main forces: growing political backlash against data center construction in communities across the country, and the sheer complexity of building large physical infrastructure projects on tight timelines. Together, those pressures are creating headwinds for a construction boom that technology companies have been counting on to support the enormous computing demands of artificial intelligence.
Public opposition to data centers has intensified in numerous communities, driven by concerns over water usage, noise, land use and rising local electricity costs. That resistance, combined with the practical challenges of securing permits, materials, labor and power connections fast enough to meet the industry’s aggressive buildout schedules, is now colliding with what had been treated as a near-certain wave of new construction.
A hit to natural gas demand forecasts
Kimmeridge holds financial stakes in natural gas producers as well as in Commonwealth LNG, a planned liquefied natural gas export terminal under development in Louisiana, giving the firm a direct financial interest in the pace of gas demand growth. Dell said that while overall U.S. gas demand is still expected to rise as new power plants come online to supply electricity for AI operations, delays to data center projects would likely force downward revisions to current demand forecasts.
U.S. natural gas producers have been counting on the AI boom to drive a meaningful increase in consumption of a fuel that has traded at relatively low domestic prices for most of the past decade, a legacy of oversupply from the fracking boom. Investor skepticism over the scale of Big Tech’s capital spending, combined with mounting public opposition to data center construction, is now creating additional headwinds for that thesis, according to Kimmeridge’s assessment.
Breaking down the numbers
Of the roughly 30 billion cubic feet per day of expected growth in U.S. natural gas demand, the majority is projected to come from liquefied natural gas exports rather than domestic data centers. Dell estimated that data centers themselves could drive somewhere between 5 billion and 10 billion cubic feet per day of additional gas consumption — but cautioned that widespread project delays could push actual AI-related demand toward the lower end of that range rather than the higher one.
A broader industry shift toward off-grid power
Kimmeridge’s warning arrives as data center developers increasingly look to bypass the traditional electric grid altogether, opting instead for so-called “behind-the-meter” power generation built directly on-site. That shift has been driven largely by multiyear delays in securing permission to connect new facilities to existing grid infrastructure, pushing technology companies toward building their own natural gas-fired power plants rather than waiting years for utility interconnection approval.
Energy research firm Enverus has projected that roughly 40% of new U.S. data center capacity additions through 2030 will be powered off-grid, a shift that would require an estimated $5 trillion in investment and add roughly 62 gigawatts of natural gas-fired generation capacity. That growth is expected to concentrate heavily in Texas, the PJM grid region covering states including Pennsylvania and Ohio, and parts of the Western United States, with off-grid natural gas demand from data centers potentially reaching 1.3 billion cubic feet per day by 2030.
Executives in the natural gas pipeline industry have echoed the rationale behind that shift. Chad Zamarin, chief executive of pipeline operator Williams Companies, said at a recent industry conference that his company is focused on directly powering data center facilities so they don’t have to wait for grid expansions that can take years to complete in the United States. Zamarin also argued that natural gas plays an essential role in supporting regions with significant renewable energy capacity, providing backup power when solar and wind output declines.
Deals already taking shape
Some of that shift toward direct, off-grid power arrangements is already visible in signed contracts. Natural gas producer Energy Transfer signed an agreement earlier this year with data center operator CloudBurst to supply 1.2 gigawatts of off-grid power for a facility outside San Marcos, Texas. Separately, asset manager Blackstone purchased a natural gas plant in Pennsylvania for more than $1 billion, a bet on continued demand growth from data center customers. Meta has also been developing a data center site spanning more than 2,000 acres in Richland Parish, Louisiana, tied to a reported $10 billion investment.
Grid strain adds urgency
The pressure on traditional grid infrastructure has already produced visible reliability concerns. In one widely cited episode in northern Virginia, a voltage fluctuation triggered the simultaneous disconnection of 60 data centers, prompting a 1,500-megawatt swing in grid conditions — an incident that underscored how concentrated data center demand can strain regional power systems even before accounting for future growth.
The Lawrence Berkeley National Laboratory has projected that data center electricity demand nationwide could grow from about 176 terawatt-hours in 2023, roughly 4.4% of total U.S. electricity consumption, to somewhere between 325 and 580 terawatt-hours by 2028, representing as much as 12% of total consumption.
What it means going forward
Kimmeridge’s assessment suggests that even as natural gas producers and pipeline operators race to build out infrastructure to meet anticipated AI-driven demand, the underlying growth in data center construction itself may prove less certain than widely assumed. With political resistance mounting in local communities and the logistical challenges of large-scale construction projects becoming more apparent, the gap between projected data center buildout and what actually gets built could shape not only the natural gas sector’s demand outlook, but the broader trajectory of the AI infrastructure race in the years ahead.
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