Artificial intelligence could fuel natural gas boom as utilities face growing power demand | Wilnesh News

Natural gas producers are planning to significantly increase demand over the next decade as artificial intelligence drives a surge in electricity consumption that renewable energy may struggle to meet alone.

According to an analysis report released by Wells Fargo in April, U.S. electricity demand is expected to increase by 20% by 2030 after ten years of flat electricity growth. With the rise of artificial intelligence, the expansion of domestic semiconductor and battery manufacturing, and the electrification of the nation’s fleet, electric utilities are moving quickly to ensure energy security.

According to Wells Fargo, AI data centers alone are expected to add approximately 323 terawatt hours of electricity demand in the United States by 2030. The predicted electricity demand from artificial intelligence alone is seven times higher than New York City’s current annual electricity consumption of 48 terawatt hours. Goldman Sachs predicts that data centers will account for 8% of total U.S. electricity consumption by the end of this decade.

Surge in electricity demand poses challenges to power industry Amazon, Google, Microsoft and Yuan. These technology companies have committed to using renewable energy to power their data centers to reduce carbon emissions. But solar and wind alone may not be enough to meet electricity loads because they rely on variable weather, according to an April report from consultant Rystad Energy.

Rystad said surging electricity loads will require a source of energy that can fill the gap when renewable energy generation is insufficient and meet the surge in demand. The natural gas industry is betting that natural gas will become the first choice.

“This demand demonstrates that the emphasis on renewables as the sole source of electricity is fatally flawed in meeting the actual needs of the market,” said Richard Kind, executive chairman of the pipeline operator. children morgantold analysts during the company’s first-quarter earnings report in April.

“The primary use of these data centers is big tech, and I believe they are starting to realize the role that natural gas and nuclear power have to play,” Kinder said on the call. Kinder Morgan is the largest natural gas pipeline operator in the United States, with 40% of market share.

A report released by Goldman Sachs in April showed that natural gas is expected to meet 60% of the growth in power demand for artificial intelligence and data centers, while renewable energy will provide the remaining 40%.

According to Wells Fargo, natural gas demand could increase by 10 billion cubic feet per day by 2030. This would be a 28% increase over the current U.S. power generation consumption of 35 bcf/d and a 10% increase over the nation’s total natural gas consumption of 100 bcf/d.

“That’s why people are becoming increasingly bullish on natural gas,” Roger Reed, an equity analyst and co-author of the Wells Fargo analysis, said in an interview. “That’s a pretty high growth rate for a commodity.”

Demand forecasts vary, however, as analysts are just beginning to piece together what data centers mean for natural gas. Goldman Sachs expects natural gas demand to increase by 3.3 bcf/d, while Houston-based investment bank Tudor, Pickering, Holt & Co. projects a base case of 2.7 bcf/d and a top case of 8.5 bcf/d.

Power utility chief executive Toby Rice said power companies will need energy that is reliable, affordable and quickly deployable to meet growing power demand. EQT Group., the largest natural gas producer in the United States

The Southeast is the hottest data center market in the world, and Northern Virginia is in the midst of a boom with more data centers than the next five largest U.S. markets combined.Some Accounts for 70% of global Internet traffic Pass through this area every day.

electricity company Dominion Energy Forecast demand for data centers in Northern Virginia will more than twice to increase from 3.3 GW in 2023 to 7 GW in 2030.

Further south, Georgia Power’s retail electricity sales will grow 9% by 2028, with 80% of demand coming from data centers, said Christopher Womack, CEO of Georgia Power’s parent company. southern companyduring the utility’s fourth-quarter earnings call in February.

“Economic growth, electrification, and accelerated data center expansion are driving the most significant demand growth in our company’s history, and it shows no signs of abating,” Dominion CEO Robert Blue said at the company’s March investor conference.

Rice said on the earnings call that growing power demand in the Southeast is the gateway to EQT’s asset base in the Appalachian Basin. The CEO said the retirement of coal-fired power plants and data centers could increase natural gas demand in EQT’s backyard by 6 bcf/d by 2030.

EQT recently acquired the owner of the Valley Pipeline, which connects the vast natural gas reserves EQT operates and develops in the Appalachian Basin to southern Virginia. EQT Chief Financial Officer Jeremy Knop said that EQT is the only manufacturer with pipeline access to the growing data center market.

“I think we’re very uniquely positioned in that sense,” Knopp said on the call. Rice said the Southeast will become a more attractive natural gas market than the Gulf Coast later this decade. EQT plans to expand the Mountain Valley pipeline’s capacity from 2 bcf/d to 2.5 bcf/d. The pipeline is expected to be operational in June.

Electricity demand levels could help lift natural gas prices out of the doldrums.

Prices plunged more than 30% in the first quarter of 2024 due to strong production, lower demand due to a mild winter, and historic inventory levels in the United States. According to Wells Fargo, the average price in 2024 will be $2.39.

Dominion laid out scenarios in its 2023 resource plan that would add 0.9 to 9.3 gigawatts of power New natural gas production capacity the next 25 years. The utility said gas turbines are critical to filling power gaps when production from renewable resources such as solar declines. The turbines will serve a dual purpose and be able to absorb clean hydrogen at some point.

“We’re building a lot of renewable energy, which is what all of our customers are looking for, but we need to make sure we can operate the system reliably,” Blue told analysts on Dominion’s earnings call Thursday.

Wells Fargo analyst Read told CNBC that renewables will play an important role in meeting demand, but they face challenges that make natural gas look attractive at least through 2030.

Many renewable energy sources will be installed in areas not immediately adjacent to data centers, he said. The analyst said it will take time to build power lines to deliver resources to high-demand areas.

Zack Van Everen, research director at investment firm Tudor, Pickering, Holt & Co, said another current limitation of renewable energy is that currently available battery technology is not efficient enough to power data centers 24 hours a day.

Wells Fargo said nuclear power is a potential alternative to natural gas and has the advantage of providing carbon-free energy, but advanced technologies that shorten typically lengthy project timelines could take a decade to have a meaningful impact.

Robert Kinder, chief executive of pipeline operator Kinder Morgan, said significant new nuclear power capacity will not be connected to the grid in the foreseeable future, and building transmission lines to connect distant renewable energy sources to the grid will take years. That means natural gas must play a significant role in the coming years, Kinder said on the company’s April earnings call.

“I think as electricity demand increases in the coming months and years, the acceptance of this assumption will become clearer and it will become a more important driver of natural gas demand growth, which will Benefiting all of our midstream industries.

Any move to expand natural gas to meet U.S. energy needs is likely to face opposition from environmental groups who want to phase out fossil fuels as quickly as possible.

Goldman Sachs predicts that, assuming natural gas provides most of the electricity, data center carbon emissions could more than double to about 220 million tons by 2030, accounting for 0.6% of global energy emissions.

Virginia has stipulated that all carbon-emitting factories will be phased out by 2045.

Duke Energy Chief Executive Lynn Good said natural gas “can be a touchy subject” but the fossil fuel accounted for 45% of the utility’s emissions reductions since 2005 as polluting coal-fired plants were replaced. Good said demand for electricity in North Carolina is growing at a rate not seen since the 1980s or 1990s.