Coal’s Resurgence: Powering the Future of US Datacenters Amid Rising Energy Demands

US datacenters are shifting towards coal energy. This change comes as natural gas prices rise and electricity demand soars.

A recent note from Jefferies, a financial services company, highlights the rush to connect new datacenter capacity to the grid. Between 2026 and 2028, demand is expected to spike. This has led to a nearly 20% increase in coal generation this year. Jefferies revised its coal generation estimates up by about 11%, predicting higher outputs through 2027 due to favorable fuel pricing.

Warnings about energy demand have circulated for a while now. With more datacenters in operation, there are concerns that demand will exceed available energy supplies. For instance, Omaha’s power company recently reversed its plans to quit coal. They realized that shutting down coal plants could lead to power shortages for nearby datacenters.

Environmental impacts are a concern. Burning coal can harm local air quality and slow efforts to reduce greenhouse gas emissions. Greenpeace has labeled coal “the dirtiest, most polluting way of producing energy.” A 2024 Morgan Stanley report predicts that datacenters may emit 2.5 billion tonnes of greenhouse gases globally by 2030, largely due to the rise of AI technologies.

Initially, natural gas was the go-to for powering datacenters. These turbines are often built on-site, making them convenient. However, the current high prices for natural gas make coal a more attractive option.

According to the Financial Times, developers often choose easily accessible energy sources to get their facilities online quickly. If renewable energy sources aren’t immediately available, they will likely rely on coal or natural gas instead.

The political landscape also poses challenges. Recent policies from the previous administration have affected renewable energy development, slowing down approvals for wind and solar projects. Reports indicate that renewable energy could provide cheaper solutions for datacenters in the long run, yet current policies haven’t prioritized this shift.

Officials highlight the urgency of securing enough power for the growing tech industry. As Secretary of Energy Chris Wright stated, climate change is viewed as a side effect of modernization, rather than a pressing issue compared to energy needs.

This growing reliance on coal raises questions about the future of energy and the climate. As we continue to increase our digital footprint, finding a sustainable energy solution will be critical.

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