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A surge in demand for electricity to feed data centres and to power an artificial intelligence revolution will usher in a golden era for natural gas, producers say.
AI’s soaring energy needs will rise well beyond what renewable energy and batteries can deliver, executives argue, making more planet-warming fossil fuel supplies crucial even as governments vow to slash their use.
“It will not be done without gas,” said Toby Rice, chief executive of EQT, the country’s biggest gas producer, of the coming AI boom.
Rice said the tech sector would offer a bonanza for shale producers comparable to the US’s liquefied natural gas industry, whose rapid emergence in recent years offered drillers new customers for their product.
“We’ve got a really amazing emerging market with LNG. But there’s a new emerging market that people are getting equally as excited about — and it’s power demand,” Rice said.
The US government has offered sweeping incentives to clean energy developers in a bid to rapidly decarbonise the electricity grid. But fossil fuel executives said renewables would not be reliable suppliers on their own for energy-hungry data centres.
Energy Capital Partners, a large private investor with green and fossil fuel power assets, said expanding gas-fired generation would be critical in supplementing renewable supplies to data centres.
“Gas is the only cost-efficient energy generation capable of providing the type of 24/7 reliable power required by the big technology companies to power the AI boom,” said Doug Kimmelman, ECP founder and senior partner.
It “bodes well” for gas consumption, said Colin Gruending, an executive vice-president at pipeline group Enbridge. “Intermittent renewables is not going to cut it.”
The bullish outlook from the US fossil fuel producers comes amid a period of weak natural gas prices, which has forced a consolidation among shale producers — and an effort to find new sources of demand.
It also marks a contrast with pledges by Big Tech to slash greenhouse gas emissions and fuel the AI revolution with green energy, rather than fossil fuels. Climate scientists have warned that expanding gas infrastructure risks undermining the global efforts to contain global warming.
But data centres’ voracious power needs are set to rocket, as cloud storage facilities, crypto mining and AI all add strain to grids. Microsoft alone is opening a new data centre globally every three days.
These power hungry operations will together consume more than 480 terawatt hours of electricity, or almost a tenth of total US power demand, by 2035, up from 4.5 per cent in 2025, according to S&P Global Commodity Insights.
The International Energy Agency estimates power demand from data centres globally could top 1,000 TWh by 2026 — double 2022 levels and an increase equivalent to Germany’s total power demand.
Dominion Energy, which supplies Virginia’s fast-growing data centre sector, said in a recent strategic plan that until zero-carbon energy could offer constant power, gas units would be the “most affordable and reliable” option.
Gas-fired generation accounts for more than 40 per cent of US power demand, far more than other fuels, and cheap shale supplies have eaten into dirtier coal’s share of generation in the past decade. Another 20 new gas-fired power plants are due online in 2024 and 2025 to meet demand, according to federal projections.
Producers’ plan to capitalise on Big Tech’s energy needs comes even as companies such as Google and Microsoft have set ambitious goals to use only certified green electricity to power their operations in the coming years.
If they follow through, it could pose a threat to fossil fuel producers’ rosy outlooks for their gas, analysts said.
“Most of the new demand growth will be met by carbon-free generation resources,” said Xizhou Zhou, head of power and renewables at S&P. The group estimates that gas-fired power generation will fall by the end of the decade, while green energy generation soars.
Peter Herweck, head of energy management group Schneider Electric, also doubted that gas would benefit as much as people selling the fossil fuel claimed.
“If you talk to the oil people they are going to say the only way we can meet this energy demand is to use fossil fuels, but many of the customers of these data centres have made net zero CO₂ commitments so they will say the power has to be renewables.”
The speed of the revolution is breeding uncertainty in forecasts.
“We figured at some point over the next few years, we’d start to see a downturn [in gas use]. I think that downturn has gone further and further [away] in time,” said Rich Voorberg, president of Siemens Energy North America, an energy technology group.
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