American natural gas producers and shippers could be among the big winners of the latest advances in artificial intelligence.
According to investment bank Tudor, Pickering, Holt & Company, the increase in data centers amid the rapid growth of AI technology will lead to US natural demand and price increases by the end of the decade.
Natural gas will meet the increase in electricity demand.
The demand for electricity to power data centers is increasing and so is the demand for grid connections. While many tech companies prefer to power their AI development centers with solar and wind, the need to rapidly build and operate these data centers will also increase demand for natural gas.
This could cast further doubt on the current US administration's plans to make the US grid greener and 100 percent carbon-free by 2035. The Biden administration has been questioned and seen as unattainable before the increase in electricity demand, which has reversed years of declining or flat electricity consumption.
As electricity demand from data centers is set to grow to 42 gigawatts (GW) by 2030, up from 11 GW now, the US will need more natural gas per day (BCF/d). According to a report by Tudor, Pickering, Holt & Co., quoted by Reuters, consumption growth. RELATED: Gas Prices Will Continue to Fall Ahead of Driving Season
Therefore, demand for natural gas for power generation is set to increase in the second half of this decade, and U.S. benchmark natural gas prices could average $4 per million British thermal units (MMBtu), the report notes.
That's more than double the current price of Henry Hub natural gas, which has remained below $2 per MMBtu for much of this year amid mild winter weather and low demand for heating and electricity.
Gas producers and shippers will benefit from increased electricity demand.
Natural gas producers are currently cutting some output amid a glut in the market but are poised to increase production later in the year and expect domestic electricity demand and LNG exports to boost consumption and prices. can
Top natural gas producers EQT Corporation and Chesapeake Energy, as well as pipeline companies such as Energy Transfer, Williams Companies, and Kinder Morgan, benefit from Tudor, Pickering, Holt as a result of rising electricity demand and rising natural gas prices. Expect to pick up. & Company said.
Last week, Kinder Morgan issued an upbeat outlook on its natural gas transportation business over the medium to long term despite current low prices.
“Despite 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.
Kinder Morgan sees substantial growth in U.S. natural gas demand through 2030, led by a doubling in demand for LNG exports and a more than 50 percent increase in exports to Mexico.
“We also expect significant natural gas demand for artificial intelligence operations, cryptocurrency mining and power generation associated with data centers, which will add to the above-mentioned growth,” said CEO Kim Dong.
U.S. natural gas producers also believe they have a role to play in providing gas for increased electricity demand from data centers and AI technologies.
Natural gas, which currently accounts for 43.1 percent of U.S. utility-scale electricity generation, will continue to meet a larger share of U.S. electricity demand as new installations of renewable capacity back up, according to gas industry executives. Power generation will be required.
“We have a really amazing emerging market with LNG,” Toby Rice, chief executive of US natural gas producer EQT, told the Financial Times earlier this year.
“But there's a new emerging market that people are getting just as excited about — and that's demand for electricity.”
Power consumption from data centers is so high that U.S. utilities and regulators have significantly increased their forecasts for higher power demand in the coming decade.
After more than a decade of reducing electricity consumption in the U.S., the AI boom and chip and other tech manufacturing are driving increased U.S. electricity demand.
Currently, about 2,600 gigawatts (GW) of generation and storage capacity are actively seeking grid interconnection, according to Lawrence Berkeley National Laboratory research published earlier this month. Berkeley Lab said the queues indicate particularly strong interest in solar, battery storage, but noted that a growing backlog of grid connections has become a major obstacle to project development.
“This promises to see unprecedented interest and investment in new energy and storage development across the U.S., but the latest row data also shows that this is not the case,” said Joseph Rand, an energy policy researcher at Berkeley Lab. confirming that grid interconnection is a permanent constraint.” lead author of the study.
Many tech companies want clean energy to power their new data centers, but utilities are struggling to meet the demand. As a result, some utilities in the eastern and southern parts of the United States are proposing to build new natural gas-fired capacity alongside renewable sources to support increased electricity consumption from data centers. .
By Tsvetana Paraskova for Oilprice.com
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