Natural Gas Plants Are Being Bought Up to Power AI Centers As the Latter Demand Efficiency and Reliability

The importance of AI’s contribution to energy demand is illustrated by a story getting lots of attention recently. BOE Report captures it here:

The unit of Blackstone dedicated to investments in the energy industry has agreed to acquire Potomac Energy Center, the asset manager told Reuters on Thursday, in a deal symbolizing the allure to investors of power plants sited near data centers.

Blackstone Energy Transition Partners has agreed to buy the 774-megawatt natural gas-fired power plant in Loudoun County in northern Virginia, according to a statement.

The statement gave no financial details, but sources familiar with the matter said Blackstone is paying around $1 billion for the facility. Fellow investment firm Ares Management has owned the plant since 2021.

Potomac Energy Center is situated in the area of northern Virginia outside of Washington D.C. which is estimated to have around a quarter of the current U.S. data center capacity.

Potomac Energy Center

This proximity was one of the reasons why Potomac Energy Center was so attractive, according to Blackstone Energy Transition Partners’ Senior Managing Director Bilal Khan.

“This opportunity is unique,” Khan told Reuters. “Not only for its location and its unparalleled access to data centers in Virginia, but also for the efficiency of the plant and the young age of the facility.”

The plant was built in 2017.

The boom in artificial intelligence and data centers is driving power demand to record levels, with growth expected to persist for the rest of the decade. This is making generation assets increasingly attractive to buyers, especially so for gas-fired power plants which can provide the consistent power output that data centers require.

Earlier this month, Constellation Energy agreed [to] the $16.4 billion purchase of Calpine. The largest U.S. power deal in nearly two decades is aimed at adding Calpine’s predominantly gas-fired fleet to Constellation’s existing generation mix which is majority nuclear power.

Blackstone has been investing, across a number of strategies, into both data centers and the energy infrastructure powering them. In September, it agreed a $16 billion deal to buy Australian data center operator AirTrunk, while AI cloud platform CoreWeave said in May it raised a $7.5 billion debt facility from investment firms including Blackstone.

Notice two things.

First, Blackstone is the same company that is buying up tens of thousands of single-family homes in the United States at the same time it is buying computing power in Australia. It is globalism defined. It wants to own everything and rent it to the rest of us. That includes our housing, our sources of information, and our energy. I’m seeing red flags here, but that’s a story for another day.

Secondly, note what Blackstone and Constellation Energy are buying in the way of energy to support AI centers. They’re acquiring natural gas-fueled power plants. That’s because natural gas, especially in the form of combined-cycle operations such as the Potomac Energy Center units, is both dispatchable and inexpensive. Nuclear is dispatchable, too, and can be stored on-site but is still expensive.

Coal is not mentioned in the above story but it is also dispatchable and inexpensive, plus it can be stored on site. It is politically incorrect at the moment, though, so it will take a little time for AI developers to turn to it, but that will happen. So, what we have, in the way of the AI energy solution, is natural gas first, coal next and nuclear in the near future; a tri-fuel foundation. That’s where AI is taking us and no one is looking at solar or wind for anything other pretty pictures and green fantasies.

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