Industry Exec: Data Centers Will Drive Demand for Natural Gas

SEATTLE (Oil Monster):  An executive with the TC Energy, a group that is among the largest operators of natural gas pipelines in North America, said electricity demand from energy-intensive data centers will support an increased need for the fuel in the coming years.

Stanley Chapman, executive vice president and COO of Calgary, Alberta-based TC Energy, in a May 3 company earnings call said he expects demand for natural gas tied to data center operations will rise by as much as 8 billion cubic feet a day (Bcf/d) by 2030. That level is equal to about 21% of the current demand for the fuel at U.S. gas-fired power plants.

Said Chapman, “We do see a meaningful load-in growth opportunity and increased demand in coming years due to data centers.” Chapman said his company is upgrading its pipeline network across some states, and increasing connections to local distribution networks, as part of its strategy to support the demand growth for natural gas.

A Wells Fargo analysis of the electricity sector, published in April, said data centers and technology related to artificial intelligence (AI) alone are expected to add about 323 TWh of power demand in the U.S. by 2030. Goldman Sachs has said data centers will account for 8% of total U.S. electricity consumption by the end of the decade.

Global Power Demand

Data centers are driving increased demand for electricity worldwide, in part because they support technology related to AI and computing networks. The power demand is so great that many analysts say growth in the use of renewable energy resources will not be enough to satisfy increased electricity consumption, including from electrification of transportation.

That’s why Chapman and others in the natural gas industry say demand for their fuel will increase as a cost-effective way to produce power. Richard Kinder, executive chairman of pipeline operator Kinder Morgan, during the company’s earnings call in April said, “This type of need demonstrates that the emphasis on renewables as the only source of power is fatally flawed in terms of meeting the real demands of the market. The primary use of these data centers is big tech and I believe they’re beginning to recognize the role that natural gas and nuclear must play.”

Amazon Web Services is among the groups looking at nuclear power to electrify data centers. Other data center operators also are looking at nuclear power, including from small modular reactors, to supply their needed electricity.

Some data center operations are being planned as part of hydrogen hubs. Microsoft last year gained approval to use its own private natural gas-fired power plant to supply electricity for the company’s data centers at its Grange Castle Business Park in Dublin, Ireland.

Carson Kearl, an analyst with Enverus Intelligence Research (EIR), in a May 1 report shared with POWER wrote that “data center capacity growth will not translate one-to-one into net new load growth, [and] operators will be on the hunt for cheap interties from current industrial consumers. Furthermore, installed data center capacity will grow by approximately 14 GW from 2023 to 2030 as artificial intelligence accelerates data center capacity demand. This equates to 2 Bcf/d of incremental natural gas demand if fully served by gas-fired generation.”

Kearl wrote that “Data centers are among the least price sensitive consumers of power … in our view, due to the robust economics of the underlying businesses [Big Tech], the ability to pass on costs to consumers and the intense competition among participants to win the AI race.”

Courtesy:  www.powermag.com