Anthropic has made it clear that its data centers will operate on natural gas, a reliance that poses significant challenges to the company.
As the company prepares to go public, its S-1 filing brings the methane dependency of generative AI into sharp focus.
“Competition for access to electrical supply and data center locations with adequate power availability is intense.”
In documents filed with the US Securities and Exchange Commission on Monday, Anthropic acknowledged that data centers are becoming increasingly reliant on “natural gas”—the fossil fuel industry's marketing term for primarily methane. This leaves the company's AI data center buildout vulnerable to rising fuel costs and supply chain constraints. Furthermore, Anthropic admitted that rising global temperatures, a symptom of burning fossil fuels, will likely increase the company's operating costs.
“Competition for access to electrical supply and data center locations with adequate power availability is intense,” Anthropic stated, noting that some planned data centers rely on electricity generated by on-site natural gas turbines. Although Anthropic leases capacity from hyperscalers, it announced a $50 billion plan last year to expand data centers in Texas and New York.
The US, the epicenter for data centers globally, is planning to build more fossil fuel generation capacity than it has in a decade as data centers demand more electricity. Donald Trump's administration has sought to kill renewable energy projects while tilting the regulatory landscape in favor of fossil fuels, which the administration claims is a more critical energy source for powering data centers around the clock compared to the intermittent generation of solar and wind farms.
Currently, a shortage of gas turbines is slowing data center construction. Some developers are installing gas engines on-site to avoid long wait times for grid connections. Additionally, developers are turning to simpler turbine technology due to backlogs from manufacturers, which makes on-site power generation less efficient and more polluting.
A recent Texas-based study found that data center electricity demand could wipe out decades of gains in air quality over the next five years, raising levels of soot, smog-forming pollutants, and carbon dioxide. Even as data centers contribute to greenhouse gas pollution, Anthropic's S-1 identifies climate change as a financial risk, noting the company will face higher costs for electricity and water to cool servers as temperatures rise.
Nevertheless, Anthropic anticipates increased competition for natural gas and pipeline capacity from hyperscalers and cloud service providers expanding their own data centers. “This competition could drive up the price of natural gas,” the company noted.
Gas accounts for the largest portion of the US electricity mix, comprising 40 percent of the nation's power generation. Americans are already feeling the impact of rising costs as utilities scramble to upgrade energy infrastructure to meet increasing power demands.
Frustrated residents have successfully blocked dozens of proposed data centers across the US. Anthropic acknowledges that the threat of ballooning utility bills can interfere with data center projects. “If our efforts to secure electrical power are perceived to affect other utility customers and the broader grid, regulators may impose conditions, standby charges, or other requirements intended to address such impacts,” the company stated.
If regulators require data center developers to shoulder more costs for new energy infrastructure, Anthropic warns that this could increase its operating expenses. Furthermore, without a secure gas supply and transport pipelines, the company may be forced to delay or abandon planned data center projects.
Ultimately, these challenges could stifle Anthropic's growth:
Any failure to secure access to adequate electrical power, any legal, regulatory, or administrative action limiting electricity availability, or any significant increase in energy or compliance costs could adversely affect our cost structure and limit our ability to scale compute infrastructure, develop and deploy models, and serve customers.
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