4 min. read
Last updated Aug 14, 2025
Key takeaways
Natural gas-fired generation with carbon capture, utilization, and storage (CCUS) offers a reliable and dispatchable low-carbon power source to meet rapidly growing data center electricity demand.
Carbon Direct’s latest research indicates that retrofitting 61 natural gas facilities could supply ~63% of future data center power demand in the US by leveraging existing transmission, natural gas, and CO2 infrastructure.
Natural gas with CCUS is cost-competitive with other clean firm power options, and is supported by policy, including the 45Q tax credit in the US and Canada's CCUS Investment Tax Credit.
Regional opportunities are concentrated and actionable. Illinois, Georgia, Texas, Virginia, Quebec, and Alberta appear to offer the best alignment of infrastructure, storage potential, and data center expansion.
An economic and regional roadmap for powering AI
Data center electricity demand is projected to surge by approximately 200 terawatt-hours (TWh) by 2030, a significant shift in the US power demand landscape. While renewables will meet a significant portion of this future demand, constraints on interconnection capacity and siting have slowed deployment timelines. As a result, some regions will rely on natural gas-fired generation to fill the gap in the near term. Existing natural gas plants will run more, and new natural gas plants are planned, trends that will significantly increase power sector emissions without intervention.
How can we meet AI’s escalating demand for reliable power while simultaneously achieving decarbonization goals? We can deploy carbon capture, utilization, and storage (CCUS) on the power plants we have today, enabling them to run harder and more frequently while reducing their climate impact by 70-80%.
Carbon Direct’s research finds that retrofitting 61 existing natural gas plants with CCUS could economically supply ~63% of projected future US data center electricity demand, leveraging existing infrastructure in key growth regions. This blog presents high-level findings from our new white paper, Meeting Data Center Electricity Demand: Mapping carbon capture potential for natural gas-fired generators in the US and Canada, which includes detailed economic modeling, geospatial analysis, and policy scenario evaluation.
Natural gas and CCUS: Unrivaled potential for data centers
Our analysis reveals that natural gas with CCUS offers unparalleled potential to deliver reliable, low-carbon power to meet the needs of the data center sector. We assessed its suitability based on four key factors: timing, reliability, emissions, and cost.
Timing: Existing natural gas plants can be decarbonized with CCUS retrofits, leveraging existing grid infrastructure and often bypassing interconnection queue delays faced by new power projects.
Reliability: Data centers demand uninterrupted power. Natural gas-fired generation is dispatchable, has high availability, and typically receives a higher Effective Load Carrying Capacity (ELCC) rating than traditional renewables.
Emissions: In certain conditions, natural gas and CCUS can have lower effective CO2 equivalent emissions than renewable power, especially when renewable power (or renewable power paired with limited storage) relies on natural gas or other dispatchable sources for firm power demand. Our latest research describes the ELCC methodology used to calculate effective CO2 emissions and the conditions that favor natural gas with CCUS.
Cost: While power markets are competitive, recent corporate procurement deals show hyperscalers are willing to pay a “green premium” for low-carbon, dispatchable power. Our market analysis identified several natural gas and CCUS opportunities with cost structures consistent with these premiums, making them competitive with other high availability, baseload, dispatchable low-carbon options when supported by policy.
Unlocking economic viability through policy and planning
Achieving large-scale CCUS deployment in power generation, especially for AI data centers, requires end-users willing to pay a green premium for lower carbon intensity electricity and robust policy support to make projects bankable. We modeled a target commercial green premium of up to US$30/MWh, based on recent market transactions where low-carbon power was purchased above current market power rates.
United States
The 45Q tax credit for carbon sequestration, enhanced by the Inflation Reduction Act (IRA), provides substantial incentives for carbon capture and sequestration or utilization. The IRA extended construction deadlines, lowered minimum capture amounts, and increased credit values (to $85/tonne and ~$30/MWh), making CCUS projects more accessible and financially attractive. The removal of CO2 utilization restrictions under the Reconciliation Bill has further broadened eligibility and flexibility for project developers.
Canada
Canada supports decarbonization through carbon pricing schemes, such as the Output-Based Pricing System (OBPS), and an investment tax credit (ITC) for CCUS. The CCUS ITC, valued at CAD $3.1 billion in the first five years and ~CAD $7.6 billion by 2030, covers costs for qualifying natural gas and CCUS projects, improving their competitiveness in the power market.
Our analysis shows that approximately 63% of future US data center power demand can be decarbonized through CCUS deployments at existing facilities, which likely qualify for the 45Q tax credit and can target buyers who are willing to pay a green premium for firm, low-carbon power. These sites solve existing concerns around total cost, existing natural gas capacity infrastructure, electrical transmission constraints, social impact, and CO2 sequestration availability.
Strategic deployment opportunities across North America
Our research identifies key regions where natural gas with CCUS can most effectively align with projected data center power demands:
Illinois: Offers significant potential for large-scale CCUS deployment, supported by favorable geology for CO2 storage and proximity to major data loads, although CO2 transport infrastructure and community acceptance are key considerations.
Georgia (Atlanta area): Forecasted demand can be met by various facilities, with large-scale power facilities offering economies of scale. However, the regulated market structure might require engagement through utilities.
Texas (Dallas-Fort Worth and Houston): Despite numerous data center announcements, a limited number are scheduled for construction by 2030, creating an opportunity for strategic alignment with low-carbon power solutions. This coordination would ensure that sources like natural gas with CCUS are ready to supply power when the data centers come online. Houston's increased electrical demand and transmission constraints make CCUS economics slightly more favorable. Both regions benefit from the prevalence of Class II injection wells that align with Class VI well requirements.
Virginia: While a preeminent location for data center deployment, it faces challenges with constrained electrical generation and transmission capacity, as well as natural gas pipeline infrastructure limitations. However, its geological characteristics suggest low-cost, high-quality CO2 storage potential, highlighting a clear opportunity to unlock significant decarbonization.
Canada (Quebec and Alberta): Current data center development in Canada is limited until 2030. However, a promising opportunity exists in Quebec, where the lone natural gas combined cycle (NGCC) cogeneration facility is situated atop a saline aquifer, representing a promising early deployment site. Alberta, with low natural gas costs, existing CO2 infrastructure, and a favorable political environment, has announced significant data center capacity post-2030.
The path forward
The rapid expansion of AI and data center infrastructure necessitates reliable, low-carbon power solutions that can be deployed quickly and at scale. Natural gas with CCUS offers a unique combination of speed, reliability, emissions reduction, and cost-effectiveness, making it a viable path forward to meet future demand while supporting decarbonization goals. Natural gas with CCUS provides dispatchable, reliable power that aligns with the high-density and high-reliability requirements of data centers, while simultaneously lowering emissions and supporting geographic clustering needs.
Want to dive deeper into our analysis and discover the full potential of natural gas with CCUS? Download our white paper, Meeting Data Center Electricity Demand: Mapping carbon capture potential for natural gas-fired generators in the US and Canada, for detailed insights, methodologies, and findings.
