LNG Struggles to Deliver Stable Power for Asia’s Data Center Boom

The rapid expansion of data center power demand is emerging as a key theme for the energy sector in Asia and it’s on full display at Gastech 2026, the gas industry’s largest annual event. While LNG is promoted as a reliable source of round-the-clock electricity, the volatility in gas prices has many experts challenging that case.

Bangkok, where Gastech is being held, led the Asia-Pacific region for data center capacity under construction in 2026, ahead of Johor, Mumbai, Osaka and Shanghai, according to Cushman & Wakefield. The region’s electricity demand from data centers could rise more than fivefold over the next decade. Under a high digital adoption scenario that includes rapid AI uptake, Deloitte projects consumption to increase from under 200 TWh in 2025 to more than 1,000 TWh by the mid-2030s.

But the price volatility in gas markets, particularly during the last six months of disruption in the Strait of Hormuz, means that the cost of meeting the surging demand of hyperscalers has risen and remains uncertain in the longer-term. 

“LNG is currently the flavor,” said Arun Kumar, Strategic Advisor for Power Markets and Technology Innovation at Asia Research and Engagement. “But it won’t be the flavor in the next two years.”

Hormuz Exposes the Reliability Risk

After the Russia-Ukraine war, LNG was sold to Asian buyers on three main arguments: energy security, rising data center demand and the broader electricity needs of rapidly urbanizing economies, Kumar said. Banks lent against those assumptions. Governments signed long-term offtake agreements. Regasification terminals were financed and built.

In his opening address at Gastech on Monday, Thai Prime Minister Anutin Charnvirakul reminded delegates that electricity demand growth is being driven not only by industry but increasingly by artificial intelligence, cloud computing and data centers. Natural gas “remains an important foundation of Thailand’s power system” and will continue to play “an essential role during the transition,” he said.

What six months of Hormuz disruption revealed is that none of the LNG industry assumptions had not properly accounted for chokepoint supply risk. More than 25 Gulf-based energy companies, including Qatar, have declared force majeure. Contracts are being reworked and prices renegotiated, Kumar said at a media briefing ahead of Gastech 2026 in Bangkok.

Asia-Pacific’s data center development pipeline expanded by 7,103 MW in the first half of 2026 to 26,455 MW, according to Cushman & Wakefield. Of that total, 4,764 MW is under construction, with the remainder still in planning.

For data center operators, however, the issue is not only whether enough power is available, but whether its cost and supply can remain predictable over a 10- to 20-year investment horizon. At current prices, LNG-fired generation costs around USD 212 per MWh, according to the Institute for Energy Economics and Financial Analysis (IEEFA). The past six months have shown how quickly both fuel costs and supply assumptions can change.

Renewables Become a More Viable Data Center Power Source

The standard objection to renewables for data centers is intermittency. Kumar argued that this framing no longer reflects the capabilities of modern hybrid systems. Combinations of solar, wind, battery storage and hydro can achieve 60% to 90% availability, approaching fossil-based supply in some configurations.

“Renewable is as reliable as any other source and also cheaper,” he said.

Analysis presented by Richard Katz, Special Correspondent at Weekly Toyo Keizai, showed new solar-plus-storage systems could fall below the operating cost of existing gas plants by 2030, at around USD 71 per MWh compared with USD 112 per MWh for gas.

Renewables also remove one of LNG’s main risks for data center operators: hard-currency fuel exposure. LNG is priced and settled in U.S. dollars, leaving power costs exposed to both commodity prices and local exchange rates, Kumar added.

Corporate buyers are already moving in this direction. Global technology companies in Southeast Asia have set 100% renewable electricity targets through initiatives such as RE100. They are increasingly signing power purchase agreements (PPA) with local developers.

In Malaysia, Google has signed a 29.99 MW PPA with a consortium including Shizen Energy and Solarvest under the Corporate Green Power Programme, illustrating how hyperscalers are securing renewable supply to meet Asia data center power needs alongside regional expansion.

Grid Connectivity Remains the Key Constraint

The biggest constraint on renewable power for data centers is no longer generation alone, but the infrastructure needed to move electricity across markets and balance supply over time. Jayant Menon, Visiting Senior Fellow at ISEAS-Yusof Ishak Institute and former Lead Economist at the Asian Development Bank, said the current price shock could provide fresh political momentum for the ASEAN Power Grid. Higher fossil fuel prices and surging data center demand may strengthen the case for cross-border renewable electricity trading, he said.

The region already has a working example of what cross-border power trade can look like. The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project, or LTMS-PIP, links four countries with different electricity market structures. These range from Singapore’s liberalised system to state-owned utilities elsewhere. Full regulatory harmonisation is not required. Execution, rather than capital or agreement, is now the binding constraint, noted energy think tank Ember.

At the same time, capital continues to flow into LNG infrastructure that may prove harder to justify if demand growth falls short of expectations. Kumar warned that heavy investment in regasification capacity has created a systemic risk that has yet to be fully priced in. This investment was driven in part by supplier pressure rather than realistic demand projections. “A huge amount of capital will get stranded,” he said.