Why data centers powered by off-grid gas flunk a new climate investor test

A new scoring tool aims to help investors judge whether money going into data centers actually speeds up the shift away from fossil fuels. Built by the Rhodium Group with the California pension fund CalSTRS and clean energy investor Generate Capital, the framework grades data center power setups by how much climate impact they deliver for the capital spent. Data centers were picked as the first test case because they are drawing huge amounts of investment right now, and some big funds want to know if that money is helping or just business as usual.

The highest scores went to data centers connected to the regular power grid but backed by contracts for new nuclear or enhanced geothermal power, technologies that are still expensive and hard to finance on their own. Grid-connected centers running on 100% renewable power contracts also scored well, followed by off-grid facilities that rely mainly on renewables and batteries with gas only as backup. Setups built around standalone gas turbines, or gas-heavy power mixes meant to bridge years until a grid connection is ready, scored poorly. A standard grid hookup with no special clean power deal was ranked neutral.

None of this changes anything for homeowners directly. It is a tool for large investors deciding where to put money into the data centers powering things like cloud computing and AI. But it points to how the industry is choosing between gas, renewables, nuclear, and geothermal to power its rapid growth, at a time when the energy use of data centers keeps climbing.