AI's Power Hunger Is Now a Gas Story, and Europe's Storage Targets Are in the Way

AI's Power Hunger Is Now a Gas Story, and Europe's Storage Targets Are in the Way Data centre electricity demand is growing fast enough to keep fossil fuels running longer than planned, complicating Europe's LNG supply outlook. Babcock & Wilcox landed a $2.4 billion design-build contract with Base Electron for 1.2 GW of natural gas-fired power generation last week, driving its backlog up 470 percent to $2.8 billion. The company is evaluating another 1.2 GW option, and its global pipeline exceeds $12 billion. Shares closed at $14.54, up 129 percent year to date.¹ That a legacy boiler manufacturer is now riding the AI trade tells you where the electricity demand is coming from. Data centres already account for more than 1 percent of global electricity use, according to the IEA. In the United States, 10 to 20 percent of data centre energy is currently consumed by AI, and that share will "increase significantly," according to TIME.⁵ The numbers are getting large enough to reshape capital flows. McKinsey forecast $5.2 trillion in worldwide spending on chips, data centres and energy for AI this spring, a figure The Economist described as "extraordinarily bullish." OpenAI, Oracle and SoftBank have begun the first phase of Stargate, a $500 billion AI infrastructure project in Texas. In the AI era, appetites are measured in gigawatts, and costs can run to $50 billion per GW.⁸ BloombergNEF found that the data centre expansion required to support AI is expected to keep fossil fuels in use for longer than previously anticipated. That is the finding that should concern gas traders. If natural gas becomes the bridge fuel for AI baseload power, incremental demand for LNG tightens a market that is already strained.⁴ The IEA projects global power demand will grow at a 3.6 percent compound annual rate between 2026 and 2030, driven by industry, electric vehicles, air conditioning and data centres. Meeting that growth would require boosting annual grid investment by about 50 percent from $400 billion. Wood Mackenzie sees compound growth rates above 5 percent in China, India and Southeast Asia.^7,6 Montel's Huangluolun Zhou, a senior analyst, examined how AI is driving rapid, localised growth in data centre demand and what this means for European grids and policy. The problem is that data centres cluster near fibre and cheap power, creating concentrated loads that strain local grids even when national capacity looks adequate.³ The catch for European gas is that this demand growth lands at an awkward moment. Entso-G warned that EU gas storage may only reach 76 percent of capacity by 1 October if global LNG supplies remain tight this summer due to geopolitical risks in the Middle East. An unprecedented 86 billion cubic metres of LNG would be needed to hit the mandatory 90 percent target. Any unplanned maintenance or unexpected disruption in the global LNG market could put that target further out of reach.² The AI energy thesis also has sceptics. McKinsey found that the success rate of AI pilot projects in firms it has canvassed is less than 15 percent, according to partner Pankaj Sachdeva. If enterprise AI adoption disappoints, the power demand forecasts that justify multibillion-dollar generation buildouts could prove overstated. The Economist drew parallels to the 1990s telecoms bubble, noting the "murky economics" of the current investment boom.⁸ But the generation contracts are already being signed. Babcock & Wilcox's gas-fired buildout for Base Electron is not speculative capacity. Management guided 2026 adjusted EBITDA to $70 million to $85 million, roughly 80 percent year-on-year growth, excluding any data centre upside. The risk is the legacy balance sheet, including negative stockholders' equity of $131.5 million and a 6.50 percent note refinancing due this year.¹ For gas traders, the signal is directional. Every gigawatt of AI baseload that runs on natural gas is incremental demand on a global LNG market already facing a storage crunch in Europe. The next thing to watch is whether summer cooling demand and data centre load growth collide to push European storage fill rates below the 76 percent scenario that Entso-G flagged as the stress case.^2,4