Essential Utilities: Powering the AI Revolution Through Water and Gas Infrastructure

The artificial intelligence (AI) revolution is no longer a distant promise—it is a present-day economic force reshaping industries, from cloud computing to autonomous systems. Yet, the infrastructure underpinning this transformation remains underappreciated by mainstream investors. While tech giants dominate headlines, the unsung heroes of AI's growth are the utilities that provide the lifeblood of data centers: water for cooling and energy for operations. Essential Utilities (NYSE: WTRG), a $26 million Pennsylvania project, and its strategic alignment with AI-driven infrastructure demand, offer a compelling case study in how traditional utilities are becoming critical enablers of the digital age.

The Hidden Infrastructure of AI: Water and Gas as Critical Inputs

AI-driven data centers are energy-intensive, consuming up to 2% of global electricity demand. But their thirst for water is equally staggering. Cooling systems in hyperscale facilities require millions of gallons of water daily, often sourced from local rivers or groundwater. Pennsylvania's Greene County project, led by Essential Utilities and International Electric Power III, LLC (IEP), exemplifies this trend. The $26 million initiative includes an 18 million gallons per day (MGD) water treatment plant, drawing from the Monongahela River to support both a 944 MW natural gas-powered data center and a co-located power plant.

Natural gas, meanwhile, offers a bridge between fossil fuels and renewables. While critics decry its carbon footprint, gas turbines provide the reliability and scalability needed for AI workloads, which demand uninterrupted power. Essential's subsidiary, Peoples, the largest natural gas utility in Pennsylvania, is leveraging its expertise to manage energy flows for the project, combining gas combustion turbines with battery storage and grid interconnection. This hybrid model addresses both the immediate energy needs of AI infrastructure and the long-term transition to cleaner power.

Pennsylvania's Strategic Edge: Energy, Incentives, and Workforce

Pennsylvania's emergence as an AI hub is no accident. The state's energy mix—hydroelectric, natural gas, and emerging hydrogen initiatives—provides a competitive edge over regions plagued by interconnection delays or energy shortages. The $90 billion in data center and energy investments announced at the 2025 Pennsylvania Energy and Innovation Summit, including commitments from Google, AWS, and PowerHouse Data Centers, underscores this momentum. Essential's Greene County project aligns with these state-level efforts, tapping into Pennsylvania's abundant water resources and a workforce trained for digital infrastructure.

The state's policy environment further amplifies its appeal. Keystone Opportunity Zones (KOZs) offer tax exemptions for up to 10 years, while proposed legislation modeled after Virginia's data center incentives could exempt equipment and power from sales taxes. These measures reduce capital costs for developers like Essential, making Pennsylvania a magnet for hyperscale projects.

Why Essential's Project is a High-Conviction Play for 2029+

Essential's Greene County initiative is not just a single project—it is a blueprint for the future of utility-enabled AI infrastructure. The 1,400-acre campus, expected to be operational by Q1 2029, is already securing manufacturing slots for gas turbines (scheduled for 2028 delivery) and seeking additional investors. This forward-looking approach positions Essential to capitalize on the AI boom, which is projected to grow at a 37% CAGR through 2030.

Moreover, Essential's dual expertise in water and gas infrastructure creates a moat against competitors. While standalone energy providers or water utilities might struggle to meet the multifaceted demands of data centers, Essential's integrated model offers a one-stop solution. The company's existing discussions with developers representing over 5 gigawatts of power demand suggest a scalable business model, with Greene County serving as a replicable template.

Investment Thesis: Positioning for the AI-Driven Energy Transition

For investors, Essential's Pennsylvania project represents a high-conviction growth play with several catalysts:
1. Regulatory Tailwinds: Pennsylvania's tax incentives and workforce development programs reduce project risk and accelerate ROI.
2. Scalability: The project's modular design allows for incremental expansion as AI demand grows.
3. Energy Transition Synergies: Natural gas and hydrogen initiatives position Essential to benefit from both near-term and long-term energy trends.
4. Strategic Partnerships: Collaborations with IEP and alignment with state/federal AI summits ensure visibility and support.

While Essential's stock has historically traded in line with the broader utilities sector, its pivot toward AI infrastructure could unlock new valuation multiples. The company's EBITDA margins, currently in the mid-teens, could expand as it captures a share of the $50 billion annual data center construction market.

Conclusion: The Infrastructure Behind the AI Revolution

As AI reshapes the global economy, the companies that supply its foundational resources—water and energy—will reap outsized rewards. Essential Utilities' Greene County project is a masterclass in how traditional utilities can evolve into enablers of the digital age. By addressing the dual challenges of power and cooling, Essential is not just building a data center—it is constructing a bridge to the future of AI. For investors seeking exposure to the next phase of the energy transition, this is a high-conviction opportunity with a clear timeline and measurable outcomes.