AI on gas: growth of the data center market will spur demand for natural gas in the United States

The rapid growth of the data center market in the United States, associated with the active implementation of AI, is also leading to an increase in demand for natural gas. According to a new report from S&P Global, based on data center electricity demand growth models, if 50% of the increase in facility capacity were provided by gas generators and power plants, the national grid would require an additional 50 GW.

As a result, demand for natural gas to support data center operations could increase to 85 million m3/day, although this may vary depending on facilities and the availability of other energy sources. Thus, if the share of natural gas in energy generation chains is greater than that of other energy sources, the demand for data centers alone could rise to 170 million m3/day by 2030.

This flies in the face of carbon reduction targets set by hyperscalers like Google, Microsoft and Amazon (AWS), which they are likely to fail to achieve anyway. Although burning natural gas is considered more environmentally friendly than other fossil fuels, there is still no escape from CO2. However, S&P believes that natural gas will serve more as a backup source in the context of the use of renewable energy, which is characterized by unstable supplies of electricity.

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The risks for such projects are low, says S&P – gas stations and generators can use existing gas pipeline infrastructure, which means problems with obtaining additional permits for connection will be minimal, as well as resistance from local residents. Most connections can be made within 12 months – much less than with other power generation projects. This is if there are no other problems such as a lack of power lines and a weak economy.

Northern Virginia and Texas (Dallas-Fort Worth) are likely to benefit most from increased use of natural gas because they are closest to natural gas production sites, the Marcellus and Permian Basin, respectively. The proximity makes it easier to supply fuel to new private plants that are independent of government-regulated utilities. However, the development of new generating capacities in these areas is still weak, although some projects already exist. It is also predicted that renewable energy will displace natural gas from the PJM Interconnection power grid, which includes Virginia, by 2035. In Texas, use of this fuel will remain steady.

The growth in demand for electricity from data centers should also contribute to the prosperity of the transportation, storage, processing, etc. sectors. The main beneficiaries will be companies like Enbridge, Kinder Morgan, TC Energy and Williams Cos. Data center operators are already in some places switching to natural gas to power their facilities. In the summer, Wells Fargo predicted that the AI ​​data center boom in the US would play into the hands of natural gas suppliers, and in March EQT Corp even announced that gas itself would become a driver of data center growth.