NiSource's Strategic Move into Data Center Energy Services: A New Revenue Stream for Utilities?

The energy transition is reshaping utility business models, with companies like NiSource Inc. (NYSE: NI) exploring new revenue streams to offset declining demand in traditional sectors. While the company has not yet announced specific partnerships in data center energy-as-a-service (EaaS) for 2023–2025, its strategic investments in renewable natural gas (RNG) and infrastructure modernization position it to capitalize on the growing demand for sustainable, high-capacity energy solutions in data centers. This analysis evaluates the long-term growth potential and margin implications of such a pivot, contextualized within broader industry trends.

NiSource's Energy Transition Playbook

NiSource has positioned itself as a leader in the energy transition by prioritizing RNG, a cleaner alternative to conventional natural gas derived from organic waste streamsHome - NiSource^[1]. The company's RNG initiatives align with its goal to reduce carbon emissions by over 90% by 2028NiSource - Wikipedia^[2]. By injecting RNG into its distribution network, NiSource not only decarbonizes its operations but also creates a scalable platform for delivering low-carbon energy to energy-intensive sectors like data centers. This infrastructure advantage could enable the company to offer tailored EaaS solutions, leveraging its existing grid to provide reliable, sustainable power to data center operators.

The utility's focus on infrastructure modernization further strengthens its positioning. NiSource is retiring coal-fired units and accelerating investments in solar and wind energyNiSource - Wikipedia^[2]. These moves align with the energy demands of data centers, which require not only high reliability but also compliance with corporate sustainability goals. For instance, tech giants like Microsoft and Amazon have pledged to achieve net-zero operations, creating a market for utilities that can deliver green energy at scaleUsing sustainability to drive corporate growth and innovation^[3].

The Case for EaaS in Data Centers

Energy-as-a-service models are gaining traction as data centers seek to optimize costs and reduce environmental footprints. According to a 2025 World Economic Forum report, sustainability is emerging as a core growth enabler for businesses, with circular supply chain models unlocking $4.5 trillion in value by 2030Using sustainability to drive corporate growth and innovation^[3]. For utilities, EaaS represents an opportunity to monetize their infrastructure by offering flexible, performance-based energy solutions.

Data centers, which account for 2% of global electricity demandUsing sustainability to drive corporate growth and innovation^[3], are particularly well-suited for EaaS. By outsourcing energy management to utilities, operators can avoid capital expenditures on renewable infrastructure while benefiting from cost predictability and carbon neutrality. For NiSource, this could translate into recurring revenue streams with higher margins compared to traditional utility services. RNG, with its ability to offset emissions, could become a differentiator in this space, especially as data center operators face increasing pressure to meet ESG (Environmental, Social, Governance) targets.

Growth Potential and Margin Implications

While NiSource has not disclosed specific EaaS partnerships for data centers, its strategic alignment with industry trends suggests untapped potential. The global EaaS market is projected to grow at a compound annual rate of 12% through 2030, driven by digitalization and decarbonization demandsUsing sustainability to drive corporate growth and innovation^[3]. For NiSource, entering this market could diversify its revenue base beyond residential and commercial customers, reducing exposure to regulatory and pricing volatility.

Margin implications depend on the structure of EaaS contracts. Performance-based models, where utilities are paid for outcomes like carbon reduction or uptime, could yield higher margins than traditional energy sales. However, such models require upfront investments in grid modernization and digital monitoring tools. NiSource's current focus on infrastructure upgradesUsing sustainability to drive corporate growth and innovation^[3] suggests it is preparing for this shift, though the absence of disclosed data center projects indicates the market is still in its early stages.

Strategic Risks and Considerations

NiSource's success in this arena hinges on several factors. First, the scalability of RNG production remains a challenge. While the company partners with RNG producersHome - NiSource^[1], supply constraints could limit its ability to meet surging demand from data centers. Second, regulatory frameworks for EaaS are still evolving, requiring utilities to navigate complex permitting and pricing structures. Finally, competition from independent energy providers and vertically integrated tech companies could pressure margins.

Conclusion: A Strategic Bet on the Future

NiSource's investments in RNG and infrastructure modernization position it as a potential leader in the EaaS space for data centers. While the company has yet to announce specific partnerships, its alignment with sustainability trends and energy transition goals suggests it is well-positioned to capture this emerging market. For investors, the key question is whether NiSource can leverage its regulated utility model to secure long-term contracts with data center operators, thereby transforming its business into a high-margin, low-carbon energy provider.