AI’s insatiable demand for energy has tech companies hunting for new energy sources — a search that has fueled competition and investment in mergers and acquisitions.
For many, natural gas is an easy answer to 24/7, baseload power. It’s tested, inexpensive, and widely available. But the Middle East war exposed its vulnerable supply chain after Iranian drone strikes took out much of the natural gas infrastructure in Qatar, a major exporter. At the same time, growing demand has created a waiting list for gas engines so long that today’s orders will likely not be fulfilled until the early 2030s.
That delay not only puts tech companies at risk, but the natural gas industry itself.
In the US, 40% of the natural gas used today goes to generate electricity. As the turbine shortage eases, the industry may have a new crop of competitors. Both small modular nuclear reactor (SMR) and fusion power startups plan to start connecting their commercial power plants to the grid in the next five to seven years, about how long it takes to get parts for a new natural gas power plant.
The nuclear threat
SMR startups may have the best shot at displacing natural gas power plants. In many cases, the technology modifies existing fission reactor designs, but the basic physics has been proven and widely used for decades.
Several SMR companies aim to have reactors up and running before the decade is out. Kairos Power, which counts Google as a future customer, is one of them. The company received approval for its Hermes 2 reactor in 2024, and construction is underway. Oklo, which merged with Sam Altman’s blank check company in 2024, is targeting 2028 for its first commercial operations, according to its annual report.
Others hope to follow in a few years. IX-energy, which counts Amazon as an investor, aims to start in the 2030s, while TerraPower, founded by Bill Gates, which has an agreement with Meta, plans to start commercial operations in 2030.
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In order to displace natural gas as the production source of choice, SMRs will need to scale quickly, realizing the economies of scale their business models depend on. That won’t be easy. But tech companies seem confident enough to invest in startups or sign deals with them to provide gigawatts of power.
Fusion timeline
Some tech companies are warming to the power of fusion. Although not as proven as fission, nuclear fusion promises to deliver greater energy using less than seawater as fuel.
Fusion startups are also targeting the early 2030s – or sooner – for their first reactors to be operational. Fusion Power
Another front-runner, Commonwealth Fusion Systems, is poised to flip the switch on its display device next year. Its first commercial reactor, the 400-megawatt Arc, is expected to begin generating power in Virginia in the early 2030s.
Another startup, a newcomer, hopes to start building a grid-scale power plant by 2030. Inertia Enterprises based its technology on the construction of the reactor operated by the National Ignition Facility, which was the first to prove that a controlled nuclear fusion reaction can produce more energy than it uses.
But Helion may have the most aggressive timeline of all. The Sam Altman-backed startup is racing to build Orion, its first commercial scale power plant, by 2028 to supply Microsoft with electricity. The company is reportedly in talks with OpenAI to provide up to 5 gigawatts by 2030 and 50 gigawatts by 2035. To reach those figures, Helion will have to build 800 reactors by the end of the decade and another 7,200 five years after that.
If startups can deliver energy with those figures, it could rewrite the energy market entirely. Last year, the US added 63 gigawatts of new generating capacity from all sources. If Helion can build close to 10 gigawatts of new capacity every year, the company alone could add more power than the entire natural gas industry did last year.
The price problem
The challenge for all those companies – including gas turbine manufacturers – is cost.
SMR startups rely on mass production to keep costs down, but that idea has yet to be proven. Today, nuclear power is one of the most expensive forms of power generation at about $170 per megawatt hour, according to Lazard. Fusion faces the same measurement challenge, albeit with more unknowns. Some experts predict that one megawatt hour from an integrated power plant can run about $150 initially.
New renewable natural gas power plants run about $107 per megawatt hour, according to Lazard, although prices have been rising in recent years, perhaps putting them at odds with both new fission and fusion reactors.
But they can all be reduced by renewables paired with batteries.
The cost of wind power and solar power has dropped significantly over the past decade. Wind energy appears to have reached a plateau in recent years, but solar prices continue to inch lower with no signs of stopping. Batteries, too, have grown cheaper over the years, until the grids are installing a large amount of them – 58 gigawatt hours last year. Even without subsidies, solar paired with batteries ranges from $50 to $130 per megawatt hour, including cogeneration, fracking, and natural gas.
Those figures all have current battery technology available in chemicals intended for electric vehicles. New designs aimed entirely at grid connection may further reduce prices. Form Energy, for example, recently signed a deal to supply Google with electricity from a 30 gigawatt metal wind battery. Another, the XL Battery, can reuse old oil tanks to store its inexpensive natural liquid – the size of the battery is limited only by the size and number of tanks.
Because those new batteries avoid the use of precious minerals like lithium, cobalt, or nickel, they promise to dramatically lower the cost of long-term energy storage to the point where it’s hard to make a case for anything else.
