One of the biggest winners of the most recent advances in artificial intelligence may become U.S. producers and shippers.
By the end of the decade, the rise in data centers in response to the boom in AI systems development, according to purchase banks Tudor, Pickering, Holt & Co.
Power Desire Spikes Can Be Reported With Natural Gas
The demand for electricity for the data locations is rising, as is the need for network connections. While many tech companies prefer to power their AI development centers with solar and wind, the need to get these data centers built and powered fast would boost demand for natural gas, too.
This may increase more doubts about the latest U.S. Administration’s plans to have the U.S. grid extremely greener and generate 100% carbon pollution- completely electricity by 2035. This goal of the Biden Administration has been questioned and viewed as impossible even before the surge in energy demand, which has reversal years of declining or flat energy consumption, given that natural oil is now the single-largest source of power technology in America.
As electricity demand from data centers is set to jump to as much as 42 gigawatts (GW) by 2030, from 11 GW now, the U.S. would need an additional 8.5 billion cubic feet per day of natural gas (Bcf/d) to meet the rise in consumption, according to a report from Tudor, Pickering, Holt & Co cited by Reuters. Related: Gas Prices Likely to Keep Falling Ahead of Peak Driving Season
In response, the second half of this decade’s increase in natural gas demand for power generation is expected, and the report estimates that average prices for benchmark U.S. natural gas could be as high as $4 per million British thermal units (MMBtu).
In light of the milder winter weather and lower heating and power demand, the price of Henry Hub natural gas has remained below $2 per MMBtu for the majority of the year.
Gas producers and shippers can take advantage of the escalating power demand.
Natural gas producers are currently reducing output because of the market glut, but they are prepared to increase production later in the year. They anticipate that rising domestic power demand and LNG exports will cause prices and consumption to rise.
Top natural gas producers EQT Corporation and Chesapeake Energy, as well as pipeline giants such as Energy Transfer, Williams Companies, and Kinder Morgan, are expected to benefit from the soaring power demand and rising natural gas prices as a result, Tudor, Pickering, Holt & Co said.
Despite the current low prices, Kinder Morgan last week gave a positive outlook for its natural gas transportation business in the medium to long term.
“Notwithstanding the current low natural gas price environment, the future looks very bright for our Natural Gas Pipelines business segment”, the pipeline giant said in its Q1 earnings release.
By 2030, Kinder Morgan anticipates a significant increase in U.S. natural gas demand, which will be fueled by a more than 50% increase in exports to Mexico and a doubling of demand for LNG exports.
“We are also anticipating significant new natural gas demand for electric generation in connection with operations involving artificial intelligence, cryptocurrency mining, and data centers, which would be complementary to the growth discussed above,” CEO Kim Dang said.
U.S. producers of natural gas also consider themselves to be responsible for providing gas for the growing power demand from data centers and AI technologies.
Natural gas, which currently meets 43.1% of U.S. utility-scale electricity generation, will continue to meet a large part of American power demand as new renewables capacity installations will need backup power generation, according to gas industry executives.
“We’ve got a really amazing emerging market with LNG”, Toby Rice, chief executive at the top U.S. natural gas producer, EQT, told the Financial Times earlier this year.
However, there is a brand-new emerging market that is piquing people’s interest, and that’s power demand.
U.S. utilities and regulators have significantly raised their forecasts for peak power demand in the upcoming decade because of how high the electricity consumption from data centers is.
The rise in U.S. electricity demand is attributed to the AI boom and the development of chip and other tech industries, which have been causing the country’s power consumption to decline by more than a decade.
Currently, nearly 2,600 gigawatts (GW) of generation and storage capacity are actively seeking grid interconnection, according to research from Lawrence Berkeley National Laboratory published earlier this month. According to Berkeley Lab, the queues indicate particularly strong interest in solar and battery storage, but they also note that the growing backlog of grid connections has become a major bottleneck for project development.
The most recent queue data also confirm that grid interconnection continues to be a persistent bottleneck, according to Joseph Rand, an Energy Policy Researcher at Berkeley Lab and lead author of the study.” It is promising to see the unprecedented interest and investment in new energy and storage development across the U.S., but the latest queue data also confirm that grid interconnection continues to be a persistent bottleneck,” said the study’s lead author.
Many tech companies want clean energy to power their new data centers, but utilities are having a hard time keeping up with this demand. In order to support the growth in electricity consumption coming from data centers, some utilities in the eastern and southern parts of the United States are proposing building outs of new natural gas-fired capacity alongside renewables.
