Shifting market dynamics will make this cycle of development slower, costlier and more inflationary for power prices
DENVER, July 28, 2026 (GLOBE NEWSWIRE) — The U.S. energy sector is investing heavily in natural gas to meet soaring demand for around-the-clock power and ease reliability concerns as the generation mix becomes more diverse. Gas-fired generation capacity in development has more than tripled over the past two years, driven largely by the power needs of data centers, AI infrastructure and a resurgence in industrial activity. The revival in gas capacity development reflects a clear shift in the power industry’s planning priorities toward firm, scalable generation. However, mounting headwinds could make this development cycle slower, more costly and inflationary for power prices.
According to a new report from CoBank’s Knowledge Exchange, the hard pivot back to natural gas development will look very different from the merchant-driven boom of the late 1990s or even the post-shale expansion that followed. The current cycle faces tighter physical constraints and delivery limits that are pushing large load customers closer to power and fuel infrastructure.
“The natural gas power plant buildout underway will likely prove to be far more restrained for much of the market, keeping reserve margins tighter for longer and electricity costs high for consumers over much of the next decade,” said Teri Viswanath, lead energy economist with CoBank. “For their part, electric cooperatives can soften some of the price pressures through diversified procurement programs, tactical load-management strategies and large-load rate designs that allocate costs more effectively.”
While natural gas is regaining traction as the preferred dispatchable resource for meeting around-the-clock demand, today’s cycle of development is unfolding in a fundamentally different environment than previous eras of natural gas expansion. Equipment bottlenecks, congested interconnection queues and a more diverse sponsor mix will limit how much new gas-fired capacity can realistically be added to the grid over the next decade. Geographic constraints on generation, transmission and fuel infrastructure will also limit the ability to site new gas plants near load clusters.
Ownership of natural gas-fired generating plants is also widening beyond traditional utilities and independent power producers. Private developers backed by hyperscalers and large industrial firms are increasingly entering the market. These changing ownership patterns will influence where new plants are located, how materials and fuel are sourced and who ultimately benefits from new power supply.
S&P Global projects U.S. data center demand will rise from 76 gigawatts in 2026 to 134 gigawatts by 2030. Even at the upper end of projected gas additions, new capacity will meet only part of the emerging large-load demand while also needing to support broader reliability needs and replace retiring baseload resources. Viswanath said that shortfall is where project-level development risk becomes a broader market challenge.
“The result is a widening gap between how quickly firm supply can be built and how quickly large loads want to connect, which increases the likelihood of scarcity pricing, higher marginal costs for new supply and elevated consumer bills.”
When large-load demand grows faster than firm supply can be added, reserve margins remain tighter for longer and scarcity pricing becomes more likely during constrained hours. The gas units that do advance are also likely to carry higher capital costs because of equipment inflation and added financing costs tied to schedule risk. Those costs will eventually flow through to electricity customers through fuel clauses, purchased power costs and future base rates.
For electric cooperatives facing a tighter, more expensive power market, Viswanath said the key is not to avoid natural gas but avoid relying on any single resource or procurement path to solve a broader supply adequacy challenge.
“Co-ops that stage procurement decisions, preserve optionality and evaluate projects against realistic equipment, interconnection and fuel-deliverability timelines will be better positioned than those that assume announced capacity will arrive on schedule. The most likely outcome is that this new cycle of gas-fired development will be defined more by new plant announcements than by actual ribbon cuttings.”
Read the report, Dash to gas – Why this natural gas build cycle will be slower, costlier and more inflationary for power prices.
About CoBank
CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving almost 80,000 farmers, ranchers and other rural borrowers in 23 states around the country. CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
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