The financial advisory firm's annual reading on generation costs shows fuel, construction, and operations are driving the record. Data centers are a separate, forward demand story.
The U.S. cost of generating electricity from natural gas-fired plants just hit its highest level in at least 17 years, according to Lazard's June 2025 Levelized Cost of Energy+ analysis. The financial-advisory firm attributes the record to higher fuel prices, more expensive plant construction, and rising operations and maintenance bills. None of those drivers is the AI boom.
The data-center buildout is a separate story. Lazard's report identifies surging electricity demand from AI infrastructure and large-scale data centers as a primary forward driver of projected cost increases, according to coverage by International Business Times. Wire coverage can collapse the two stories. That is how readers end up believing AI caused today's higher gas-fired power bills.
The levelized cost of energy is a standardized, lifetime number: total costs to build, fuel, and run a power plant, divided by the electricity it produces over its life, expressed in dollars per megawatt-hour. Lazard publishes a version of this analysis annually, and the June 2025 update (Version 18.0) is the source to cite when a story says "17-year high." The 17-year baseline matters because it spans two full gas-price cycles and a decade of cheap shale gas. Today's reading clears both.
The cost-side drivers. Natural gas wellhead prices have firmed as producers have shifted capital to liquids-rich basins and as LNG export demand has pulled molecules off the domestic market. Combined-cycle gas turbine construction has gotten more expensive, in line with broader inflation in heavy industrial equipment, steel, and skilled labor. Operations and maintenance have risen with insurance, environmental compliance, and the cost of running an aging U.S. fleet that is, on average, older than it was a decade ago. None of these inputs is unique to data centers. They are the cost of building any large industrial facility in 2025.
The demand-side driver. AI training and inference clusters are pulling grid electricity at a pace U.S. utilities have not seen since the early-2000s buildout. The same Lazard report frames this demand as the reason new gas-fired capacity is still being ordered despite the higher levelized cost. Gas remains the dominant source of U.S. electricity generation, and it is uniquely useful as a flexible resource. When the wind drops or a heat wave hits, gas-fired plants ramp up. Renewables are cheaper on a levelized basis in many regions, but they are intermittent. A grid running on intermittent generation needs something that can run on command, and gas still does that job at scale.
Even at a record high levelized cost, gas-fired generation is being contracted because flexible capacity is the missing piece for grids trying to absorb more variable renewable supply while serving data-center load. The criticism embedded in the Lazard data still applies: gas economics are deteriorating, fuel prices stay volatile, and the levelized cost gap with renewables is widening in many regions. None of that changes the math for the operator who needs dispatchable megawatts tonight.
The report does not pass a price tag through to consumer electricity bills. Lazard's metric measures what it costs to produce electricity from a specific plant type. Retail rates reflect a longer list: transmission, distribution, capacity market payments, fuel adjustment clauses, state regulation, and the contractual structure between utilities and large industrial customers. Data-center customers typically negotiate bespoke tariffs directly with utilities or co-locate behind-the-meter generation. Whether today's higher levelized cost shows up on a residential bill depends on geography, regulator, and contract terms that Lazard does not analyze.
The June 2025 reading captures cost trends through mid-2025. If wellhead gas prices stay firm, if turbine and construction costs keep rising, and if data-center demand continues to scale, the next Lazard update will likely show the levelized cost moving higher again, or at least not retreating. If turbine supply chains ease or LNG buildout absorbs more gas molecule pressure, the cost line could flatten. Either way, the demand story is not going away. The data-center buildout is a multi-year capital cycle, and it is contracting gas-fired capacity that, by Lazard's own reading, is the most expensive gas-fired capacity in nearly two decades.