Energy Transfer’s 2025 Pivot: How Natural Gas is Powering the AI Data Center Boom

Industry Adoption: Energy Transfer’s Shift From Prospecting to Dominance in Data Center Power

Between 2021 and 2024, Energy Transfer laid the groundwork for a strategic pivot, recognizing that the exponential power demands of the AI and data center boom were outstripping the capacity of the U.S. electrical grid. The company’s strategy was largely prospective, centered on leveraging its vast pipeline network as a potential “private power grid” for on-site, gas-fired generation. This period was characterized by market soundings and building a pipeline of interest. By November 2024, Energy Transfer reported receiving connection requests from over 90 power plants and data centers, which sharpened to requests for over 40 specific data centers across 10 states by December 2024. This early phase confirmed the market’s urgent need for a reliable, grid-independent power solution, but the strategy remained unproven without firm, large-scale commercial agreements.

The year 2025 marked a dramatic inflection point, transforming Energy Transfer’s strategy from a promising concept into a validated, high-growth business line. The shift from prospecting to execution began in February with the landmark 10-year deal to supply gas for CloudBurst Data Centers’ 1.2 GW AI campus. This was not a pilot project but a full-scale commercial commitment that opened the floodgates. The strategy rapidly gained momentum with a series of major agreements in October 2025: a partnership with VoltaGrid to fuel 2.3 GW of power for Oracle’s AI data centers and a deal to supply the initial 2 GW for Fermi America’s Hypergrid campus. These contracts, totaling over 5.5 GW of new gas-powered capacity, validated natural gas as the indispensable bridging fuel for the AI revolution. The variety of deals—direct to a developer (CloudBurst), through a power infrastructure partner (VoltaGrid), and with utilities supporting data center load (Entergy, Arizona Public Service)—demonstrates a multi-pronged, sophisticated market approach that signals the broad and rapid adoption of this power solution.

Table: Global Data Center Investment and Market Size Forecasts

Table: Energy Transfer’s Data Center Power Agreements and Key Competitor Moves

Geography: Texas Emerges as the Epicenter for Energy Transfer’s Strategy

In the 2021-2024 period, Energy Transfer’s geographic focus was broad and exploratory. The company fielded inquiries from potential data center clients across ten different states, reflecting a nationwide opportunity. The strategy was to leverage its coast-to-coast pipeline network to serve demand wherever it might arise. While there were no concrete projects, the sheer geographic scope of the inquiries confirmed that grid constraints were a national problem, setting the stage for a wide-scale deployment.

Beginning in 2025, the map of activity became highly concentrated, with Texas emerging as the clear epicenter of execution for Energy Transfer’s data center strategy. The first three major behind-the-meter (BTM) deals—CloudBurst (1.2 GW), Fermi America (2 GW), and the Oracle/VoltaGrid collaboration (2.3 GW)—are all centered in Texas, from Central Texas to the Panhandle. This regional focus is no coincidence; it is driven by the state’s massive existing natural gas infrastructure, including ET’s own Oasis Pipeline, a favorable regulatory environment, and its status as a primary hub for data center development. While deals in Arizona and Louisiana demonstrate the strategy’s reach, the scale of the Texas projects confirms it as the primary battleground and proving ground. The geographic concentration reveals a strategic pattern: targeting regions where pipeline assets, power demand, and developer interest align perfectly to enable rapid, large-scale execution.

Technology Maturity: Energy Transfer’s Business Model Shifts from Concept to Commercial Scale

From 2021 to 2024, the application of direct natural gas pipelines for behind-the-meter (BTM) data center power was in a conceptual and market validation phase. The core technology—pipelines and gas-fired turbines—was mature, but the business model was novel. Energy Transfer’s own Tier III data center in Houston provided operational insights, acting as an internal pilot. The primary activity during this period was gauging market demand, evidenced by the surge in connection requests from over 40 data centers. This phase successfully validated intense market interest but had not yet produced a commercially scaled project, leaving the business model’s viability in a pilot or pre-commercial stage.

The year 2025 marks the transition of this business model to full commercialization and rapid scaling. The signings of multi-gigawatt, long-term (10+ year) contracts with CloudBurst, Fermi America, and Oracle are definitive commercial validation points, moving the strategy far beyond the pilot stage. These are not small-scale demonstrations but massive, bankable projects that establish a new, stable revenue stream for Energy Transfer. The Co-CEO’s “gold rush” comment perfectly captures this shift from cautious exploration to aggressive commercial expansion. The model has proven to be a practical, scalable, and immediate solution to the data center industry’s most critical bottleneck, confirming the maturity of BTM gas-fired generation as a mainstream technology for powering the AI era.

Table: SWOT Analysis of Energy Transfer’s Data Center Strategy

Forward-Looking Insights: Execution and Competition Will Define 2026

The flurry of activity in 2025 signals that Energy Transfer’s data center strategy is just beginning to accelerate. The key signal for the year ahead is the company’s disclosure of exclusivity agreements representing over 1 billion cubic feet per day of potential demand, indicating a deep pipeline of deals poised for announcement. The market should expect a continued cadence of new, long-term supply agreements as more data center developers lock in power solutions to de-risk their multi-billion-dollar projects.

Looking forward, the most critical signal to watch will be execution. The successful and timely construction of power generation facilities for the CloudBurst, Oracle, and Fermi America projects will be paramount to cementing Energy Transfer’s reputation as a reliable partner. Concurrently, investors should monitor for specific capital expenditure announcements related to new pipeline laterals, as these will be the leading indicators of future growth. While the behind-the-meter natural gas model is clearly gaining traction, the competitive landscape is intensifying. The Talen Energy-Amazon nuclear deal is a clear sign that natural gas is not the only solution for firm power. The key question for 2026 will be how quickly competitors can convert their expressed interest into firm contracts and whether emerging technologies like small modular reactors can move fast enough to challenge natural gas’s current dominance as the indispensable fuel for the AI boom. For energy strategists and investors, tracking these commercial milestones provides a clear roadmap to understanding the future of energy infrastructure.

Frequently Asked Questions

Why are data centers turning to natural gas for power instead of just using the electrical grid?
According to the article, the exponential power demands of the AI and data center boom are “outstripping the capacity of the U.S. electrical grid.” Data centers require a reliable, grid-independent power solution, and on-site, gas-fired generation fed directly by pipelines provides an immediate and scalable way to meet this urgent need for firm power.

What is the key evidence that Energy Transfer’s strategy is succeeding?
The strategy’s success was validated in 2025 when the company moved from prospecting to execution. It secured over 5.5 GW of long-term contracts, including a 1.2 GW deal with CloudBurst Data Centers, a partnership with VoltaGrid to power 2.3 GW for Oracle, and an agreement to supply an initial 2 GW for Fermi America’s campus. These large-scale commercial commitments transformed the concept into a proven business line.

Who are Energy Transfer’s main competitors in powering data centers?
The article identifies two main types of competitors. First are other midstream companies like Williams Cos., which also reported being “overwhelmed” with interest from data centers. The second is competition from alternative firm power technologies, specifically nuclear power, as demonstrated by the competitor move where Talen Energy agreed to sell up to 1.92 GW of nuclear power to an Amazon data center.

Why has Texas become the epicenter for Energy Transfer’s data center strategy?
Texas emerged as the epicenter in 2025 because it is where key factors align perfectly. The state has massive existing natural gas infrastructure, including Energy Transfer’s own pipelines, a favorable regulatory environment, and is a primary hub for data center development. The first three major behind-the-meter deals (CloudBurst, Fermi America, and Oracle/VoltaGrid) are all centered in Texas, making it the strategy’s primary proving ground.

What are the primary risks or weaknesses associated with this new strategy?
The SWOT analysis highlights two key weaknesses. First, the strategy’s reliance on fossil fuels creates “public perception challenges and tension with tech’s green goals,” which could lead to regulatory pressure. Second, the success has led to an “increasing reliance on the tech sector for growth,” introducing new market concentration risk for Energy Transfer.