AI’s power surge pushes UK datacentres towards gas, risking net zero goals.

Britain’s booming AI economy appears to have found an inconvenient truth: the cloud still needs fuel. Faced with grid bottlenecks and soaring electricity demand, more than 100 UK datacentres are seeking gas connections to guarantee reliable baseload power and avoid costly supply disruptions. Yet the economics come with sizeable negative externalities. Burning gas may lower short-run operational risk, but it raises environmental costs through higher carbon emissions, threatening net zero targets just as technological progress accelerates energy consumption. In effect, the digital revolution risks becoming a classic market failure — where private incentives clash rather noisily with social costs.

More than 100 UK datacentres plan to burn gas to generate electricity | Gas | The Guardian

1. Explain one benefit of giving data centres access to the gas supply. Use evidence from the article and your own economic knowledge in your answer.

2. Using an MSB/MSC diagram, discuss the likely impact of allowing data centres to use gas as a source of energy on the net welfare loss in the data centre market.

3. Discuss the arguments for and against allowing data centres to use fossil fuels to power them.