Natural gas producers are planning for a significant spike in demand over the next decade, as artificial intelligence drives a surge in electricity consumption that renewables may struggle to meet alone.
After a decade of flat power growth in the U.S., electricity demand is forecast to grow as much as 20% by 2030, according to a Wells Fargo analysis published in April. Power companies are moving to quickly secure energy as the rise of AI coincides with the expansion of domestic semiconductor and battery manufacturing as well as the electrification of the nation’s vehicle fleet.
AI data centers alone are expected to add about 323 terawatt hours of electricity demand in the U.S. by 2030, according to Wells Fargo. The forecast power demand from AI alone is seven times greater than New York City’s current annual electricity consumption of 48 terawatt hours. Goldman Sachs projects that data centers will represent 8% of total U.S. electricity consumption by the end of the decade.
The surge in power demand poses a challenge for Amazon, Google, Microsoft and Meta. The tech companies have committed to powering their data centers with renewables to slash carbon emissions. But solar and wind alone may be inadequate to meet the electricity load because they are dependent on variable weather, according to an April note from consulting firm Rystad Energy.
“Economic growth, electrification, accelerating data center expansion are driving the most significant demand growth in our company’s history and they show no signs of abating,”
Robert Blue
Dominion Energy, Chief Executive Officer
Surging electricity loads will require an energy source that can jump into the breach and meet spiking demand during conditions when renewables are not generating enough power, according to Rystad. The natural gas industry is betting gas will serve as the preferred choice.
Natural gas prices year to date
“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,” Richard Kinder, executive chairman of pipeline operator Kinder Morgan, told analysts during the company’s first-quarter earnings in April.
“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,” Kinder said during the call. Kinder Morgan is the largest natural gas pipeline operator in the U.S. with 40% market share.
Natural gas is expected to supply 60% of the power demand growth from AI and data centers, while renewables will provide the remaining 40%, according to Goldman Sachs’ report published in April.
Gas demand could increase by 10 billion cubic feet per day by 2030, according to Wells Fargo. This would represent a 28% increase over the 35 bcf/d that is currently consumed for electricity generation in the U.S, and a 10% increase over the nation’s total gas consumption of 100 bcf/d.
“That’s why people are getting more bullish on gas,” said Roger Read, an equity analyst and one of the authors of the Wells Fargo analysis, in an interview. “Those are some pretty high growth rates for a commodity.”
The demand forecasts, however, vary as analysts are just starting to piece together what data centers might mean for natural gas. Goldman expects a 3.3 bcf/d increase in gas demand, while Houston-based investment bank Tudor, Pickering, Holt & Co. sees a base case of 2.7 bcf/d and a high case of 8.5 bcf/d.
Powering the Southeast boom
Power companies will need energy that is reliable, affordable and can be deployed quickly to meet rising electricity demand, said Toby Rice, CEO of EQT Corp., the largest natural gas producer in the U.S.
“Speed to market matters,” Rice told CNBC’s “Money Movers” in late April. “This is going to be another differentiator for EQT and natural gas to take a very large amount of this market share.”
EQT is positioned to become a “key facilitator of the data center build-out” in the Southeast, Rice told analysts on the company’s earnings call in April.
The Southeast is the hottest data center market in the world with Northern Virginia in the thick of the boom, hosting more data centers than the next five largest markets in the U.S. combined. Some 70% of the world’s internet traffic passes through the region daily.
The power company Dominion Energy forecasts that demand from data centers in Northern Virginia will more than double from 3.3 gigawatts in 2023 to 7 gigawatts in 2030.
Further south, Georgia Power sees retail electricity sales growing 9% through 2028 with 80% of the demand coming from data centers, said Christopher Womack, CEO of Georgia Power’s parent Southern Company, during the utility’s fourt-quarter earnings call in February.
“Economic growth, electrification, accelerating data center expansion are driving the most significant demand growth in our company’s history and they show no signs of abating,” Dominion CEO Robert Blue said during the company’s March investor meeting.
EQT shares over the past year.
The surging power demand in the Southeast lies at the doorstep of EQT’s asset base in the Appalachian Basin, Rice said during the earnings call. Coal plant retirements and data centers could result in 6 bcf/d of new natural gas demand in EQT’s backyard by 2030, the CEO said.
EQT recently purchased the owner of the Mountain Valley Pipeline, which connects prolific natural gas reserves that EQT is operating and developing in the Appalachian Basin to southern Virginia. EQT is the only producer that can access the growing data center market through the pipeline, said Jeremy Knop, the company’s chief financial officer.
“I think we are very uniquely positioned in that sense,” Knop said during the call. Rice said the Southeast will become an even more attractive gas market than the Gulf Coast later in the decade. EQT is planning to expand capacity on the Mountain Valley Pipeline from 2 bcf/d to 2.5 bcf/d. The pipeline is expected to become operational in June.
The level of electricity demand could help lift natural gas prices out of the doldrums.
Prices plunged as much more than 30% in the first quarter of 2024 on strong production, lower demand due to a mild winter and historic inventory levels in the U.S. By 2030, prices could average $3.50 per thousand cubic feet, a 46% increase over the 2024 average price of $2.39, according to Wells Fargo.
Grid reliability worries
Dominion laid out scenarios in its 2023 resource plan that would add anywhere from 0.9 to 9.3 gigawatts of new natural gas capacity over the next 25 years. The power company said gas turbines will be critical to fill gaps when production drops from renewable resources such as solar. The turbines would be dual use and able to take clean hydrogen at some point.
“We’re building a lot of renewables, which all of our customers are looking for, but we need to make sure that we can operate the system reliably,” Blue told analysts during Dominion’s earnings call Thursday.
Renewables will play a major role in meeting the demand but they face challenges that make gas look attractive through at least 2030, Read, the Wells Fargo analyst, told CNBC.
An all of the above strategy is the only thing that we see as the way to maintain the reliability and the affordability that our customers count on.”
Lynn Good
Duke Energy, Chief Executive Officer
Many of the renewables will be installed in areas that are not immediately adjacent to data centers, he said. It will take time to build power lines to transport resources to areas of high demand, the analyst said.
Another constraint on renewables right now is the currently available battery technology is not efficient enough to power data centers 24 hours a day, said Zack Van Everen, director of research at investment Tudor, Pickering, Holt & Co.
Nuclear is a potential alternative to gas and has the advantage of providing carbon free energy, but new advanced technology that shortens typically long project timelines is likely a decade away from having a meaningful impact, according to Wells Fargo.
Robert Kinder, chief executive of pipeline operator Kinder Morgan, said significant amounts new nuclear capacity will not come online for the foreseeable future, and building power lines to connect distant renewables to the grid will take years. This means natural gas has to play an important role for years to come, Kinder said during the company’s earnings call in April.
“I think acceptance of this hypothesis will become even clearer as power demand increases over the coming months and years and it will be one more significant driver of growth in the demand for natural gas that will benefit all of us in the midstream sector,” Kinder said.
Environmental impact
Any expansion of natural gas in meeting U.S energy demand is likely to be met with opposition from environmental groups who want fossil fuels to be phased out as soon as possible.
Goldman Sachs forecast carbon emissions from data centers could more than double by 2030 to about 220 million tons, or 0.6% of global energy emissions, assuming natural gas provides the bulk of the power.
Virginia has mandated that all carbon-emitting plants be phased out by 2045. Dominion warned in its resource plan that the phase out date potentially raises system reliability and energy independence issues, with the company relying on purchasing capacity across state lines to meet demand.
Duke Energy CEO Lynn Good said natural gas “can be a difficult topic,” but the fossil fuel is responsible for 45% of the power company’s emissions reductions since 2005 as dirtier coal plants have been replaced. Good said electricity demand in North Carolina is growing at a pace not seen since the 1980s or 1990s.
“As we look at the next many years trying to find a way to expand a system to approach this growth, I think natural gas has a role to play,” Good said at the Columbia Global Energy Summit in New York City in April. The CEO said natural gas is needed as a “bridge fuel” until more advanced technology comes online.
“An all of the above strategy is the only thing that we see as the way to maintain the reliability and the affordability that our customers count on,” Good said.
Cummins has its eye on hybrid powertrains to help decarbonize the transport, construction, and mining spaces the operates in. To that end, the company has acquired the hybrid equipment experts First Mode, and plans to make the first commercially available retrofit hybrid system for mining equipment a reality not just soon – but now.
The Cummins brand is almost synonymous with diesel in the US, but they’re making big moves in the ZEV space, too, with their Accelera brand and, now, with their purchase of First Mode.
The acquisition includes the rights to all of First Mode’s tech in the mining and rail space, where the company has developed a full IP portfolio of “energy agnostic” (my words) electric drive powertrains that can draw power from internal combustion engines, hydrogen fuel cells, or batteries. And, because the First Mode Hybrid Electric Vehicle (HEV) retrofit is designed as a modular platform, it allows equipment fleets to either back out of the electric drive conversion or take them a step further, going to fully battery electric operation with same (relative) ease.
“This acquisition is an important step forward in our goal to lead our Power Systems customers through the energy transition,” explains Jenny Bush, President of Power Systems at Cummins. “With First Mode’s hybrid retrofit technology, we are accelerating our ability to provide decarbonization solutions that meet miners’ need to drive down operating costs today.”
We’ve seen this before
Massive excavator converted to BEV by Liebherr; via Fortescue.
If the notion of converting heavy equipment from diesel to electric sounds familiar, that means you’ve been paying attention. The heavy mining equipment experts at Liebherr recently converted a pair of their massive R 9400 excavators from diesel to battery electric power for use at a Fortescue mine.
“The modular design of Liebherr equipment makes it possible to repower existing diesel excavators to new zero emission configurations, such as electric powertrains,” explains Oliver Weiss, Executive Vice President of R&D, Engineering, and Manufacturing for Liebherr Mining. “This means that the diesel equipment customers buy today is also future-proofed for many years to come. The fact that we can ease the transition from traditional to decarbonized mining fleets for our customers is one of the key strategies of the Liebherr Zero Emission Mining Program.”
For their part, Cummins’ executives seem just as excited by the promise of offering electrified mining equipment that can utilize existing assets, dramatically extending their life while reducing the up-front costs usually associated with electrification.
“Cummins’ dedication to partnering with original equipment manufacturers (OEMs) and miners ensures that these technologies are developed and tested in real-world environments,” Jenny Bush adds. “With hybrid retrofit kits, modular component upgrades and scalable solutions, we are bringing miners the flexibility and confidence they need to decarbonize operations while adapting to evolving technologies and infrastructure.”
Grapes are sensitive – and when you’re depending on them to have a certain flavor, a certain acidity, and even a certain smell, the last thing you want is diesel particulate matter settling on them. That’s just one of the reasons electric equipment options like Volvo’s electric wheel loader offer unique advantages to companies like Ästad Vingård.
Located in Sweden’s beautiful Åkulla beech forest nature reserve, Ästad Vingård is one of Sweden’s largest commercial vineyards, growing organic Solaris grapes and producing its own award-winning wines. The vineyard also hosts tours ending at their own, onsite, Michelin-star Restaurang ÄNG.
As you can imagine, they’re very particular about the way everything feels, smells, and tastes – but the sound, too, is part of the experience Ästad wants to create. That was the sort of thinking that went into Ästad’s decision to deploy one of the new Volvo L25 Electric compact wheel loaders late last summer.
“We’re super satisfied (with the Volvo),” explaines Henrik Carlsson, Head of Projects and Operations at Ästad Vingård. “It’s exactly what we hoped for – versatile and able to work a full day!”
The Volvo L25 Electric packs a pair of electric motors. One to drive the loader and the other to power the hydraulic systems. Together, they give the L25 wheel loader a lifting capacity more than 12,300 lb. Volvo says the 40 kWh battery and 48V electrical system are good for up to eight hours of continuous operation.
As the electric agricultural equipment market evolves, the winners will be the manufacturers who deliver bulletproof, seamless operation from a dealer and support network that’s just as bulletproof and seamless. The organic and hobby farm market (which I’d include vineyards in) is ready for electrification – it’s just a matter of which brand will deliver the most capable, flexible machines to market first.
A view of the turbines at Orsted’s offshore wind farm near Nysted, Denmark, September 4, 2023.
Tom Little | Reuters
President Donald Trump promised to unleash U.S. energy dominance, but his sweeping executive order targeting wind power puts a pipeline of projects at risk that would generate enough electricity for millions of American homes.
The order Trump issued on his first day in office indefinitely paused new offshore wind leases in U.S. coastal waters and halted new permits pending the completion of a review. The order jeopardizes proposed projects on the East Coast that have not yet secured permits totaling 32 gigawatts of power, according to data from the consulting firm Aurora Energy Research.
“At the moment, it’s really hard to see how any of these projects will be able to move forward,” said Artem Abramov, head of new energies research at the consultancy Rystad. Like Aurora, Rystad estimates that around 30 gigawatts of projects on the U.S. East Coast are at risk.
Those projects, if realized, would provide enough combined power for more than 12 million homes in the U.S., according a CNBC analysis of data from the Energy Information Administration. The order is not expected to impact projects under construction totaling about 5 gigawatts, according to Aurora.
Trump has abandoned commitments made during the Biden administration to fight climate change, withdrawing the U.S. for a second time from the Paris agreement. He has focused on boosting fossil fuel production, opening U.S. coastal waters to oil and gas leasing on the same day he withdrew those waters for wind.
Trump’s order will jeopardize the efforts of states in the Mid-Atlantic and Northeast to transition away from fossil fuels and decarbonize their electric grid, Abramov said. New York, New Jersey and Virginia, for example, have ambitious clean energy goals adopted at the state level. But they are too far north to rely on solar with battery for power, Abramov said.
“If you want to achieve the future where the power generation in New York or New Jersey or Virginia is completely fossil free, if that’s the ultimate goal, there are not so many alternatives to offshore wind,” Abramov said.
The order could ultimately force states to rely more on carbon-emitting natural gas, according to Rystad and Aurora. But it is virtually impossible for a state like New York to meet its climate goals and ensure an adequate energy supply, particularly downstate in the New York City metro area, without offshore wind, said Julia Hoos, who heads Aurora’s U.S. East division.
Power projects waiting in line to connect to the electric grid in downstate New York through 2027 are almost entirely wind and transmission, Hoos said.
“There is virtually no possibility to bring online new gas in the next 18 to 24 months, unless there’s a significant reform or there’s some sort of fast track to bring online that gas, so you really can run into reliability issues,” Hoos said.
But more natural gas generation will likely be built later in the decade on the back of Trump’s policies, Hoos said. Investor sentiment was already shifting toward gas before the election results due in part to the need for reliable power to meet demand from artificial intelligence data centers, Abramov said.
Immediate impact
Two weeks after Trump’s order, New Jersey decided against moving forward for now with the Atlantic Shores project, which stood to become the first offshore wind development in the state. The state utilities board cited “uncertainty driven by federal actions and permitting” and European oil major Shell pulling out of the project.
“The offshore wind industry is currently facing significant challenges, and now is the time for patience and prudence,” Gov. Phil Murphy said in a statement backing the board’s decision.
Murphy, who has set a goal to achieve 100% clean energy in New Jersey by 2035, said he hoped “the Trump Administration will partner with New Jersey to lower costs for consumers, promote energy security, and create good-paying construction and manufacturing jobs.”
Offshore wind in the U.S. “has come to a stop, more or less with immediate effect” in the wake of Trump’s order, Vestas Wind Energy Systems CEO Henrik Andersen told investors on the company’s Feb. 5 earnings call. Denmark’s Vestas is one of the world’s leaders in manufacturing and servicing wind turbines.
Industry headwinds
Trump’s order deepens the challenges of an industry that was already facing an uncertain outlook after years growth.
Wind has surged as power source in the U.S. over the past 25 years from 2.4 gigawatts of installed generating capacity to 150 gigawatts by April 2024, according to data from the Energy Information Administration. Generation from wind hit a record that month, surpassing coal-fired power. Wind currently represents about 11% of total U.S. power generation.
But the industry has struggled against supply chain bottlenecks and high interest rates. Offshore wind was already the the most expensive form of renewable energy, Abramov said. Developers in the U.S. have faced a lot of cost certainty due to the challenges of building on water as opposed to land, Hoos said.
“The industry was hoping that the cost would come down,” Abramov said. “We haven’t seen any projects in the United States which was able to achieve lower levelized cost of energy.”
The world’s largest offshore wind developer, Denmark’s Orsted, decided on Feb. 5 to ditch its goal to install up to 38 gigawatts of renewable energy capacity by 2030. Orsted also slashed its investment program through the end of the decade by about 25% to range of 210 to 230 billion Danish crowns (about $29 billion to $32 billion), down from 270 billion crowns previously.
Orsted’s Sunrise Wind and Revolution wind projects that are under construction offshore New York and New England respectively should not be impacted by Trump’s order, CEO Rasmus Errboe told investors the company’s company’s Feb. 6 earnings call. Future developments, however, may be at risk.
“We are fully committed to moving them forward and deliver on our commitments,” Errboe said. “We do not expect that the executive order will have any implications on assets under construction, but of course for assets under development, it’s potentially a different situation.”
The order also should not impact Coastal Virginia Offshore Wind, the largest such project under construction in the U.S. at 2.6 gigawatts of power, Dominion Energy CEO Robert Blue told investors on the utility’s Feb. 12 earning call.
“Stopping it would be the most inflationary action that could be taken with respect to energy in Virginia,” Blue said. “It’s needed to power that growing data center market we’ve been talking about, critical to continuing U.S. superiority in AI and technology.”
Looking for clarity
The wind industry lobby group American Clean Power in a Jan. 20 statement described Trump’s order as a blanket measure that will jeopardize domestic energy development and harm American businesses and workers. The president’s order contradicts the administration’s goal to reduce bureaucracy and unleash energy production, ACP CEO Jason Grumet said in the statement.
The ACP is now trying to get clarity from the Trump administration on how the executive order will be implemented, said Frank Macchiarola, the group’s chief advocacy officer. It’s unclear, for example, when the review of permit and lease practices will be complete, Macchiarola said.
A spokesperson for the Interior Department simply said the department is implementing Trump’s executive order when asked for comment on a detailed list of questions. When asked when the review of permit and lease practices will be complete, the spokesperson said any estimate would be hypothetical.
The wind industry is committed to working with the Trump administration, supports the president’s push for energy dominance agenda and is making the case that renewables have a key role to play in that agenda as the largest new source of electricity in the U.S., Macchiarola said.
“When past administrations have chosen to stifle American energy development that has been almost universally viewed as a mistake,” Macchiarola said.
Onshore wind permitting has also been halted pending the review, but the part of the industry is unlikely to face a substantial impact, Rystad’s Abramov said. Wind farms onshore are almost entirely built on private rather than federal land, he said. The market is also already saturated and adding capacity is largely dependent on building out more energy storage first, the analyst said.
Offshore wind, however, is a much less mature market in the U.S. and was viewed as major growth opportunity for the industry, Abramov said. But that appears to changing rapidly.
“They don’t see the U.S. as a market for continuous offshore wind expansion as long as this order is in place,” the analyst said.
— CNBC’s Gabriel Cortes contributed to this report.