AI will be a blessing for natural gas, producers say – 04/02/2024 – Market

A surge in demand for electricity to power data centers and drive a revolution in artificial intelligence will usher in a golden age for natural gas, producers say.

AI’s growing energy needs will far outpace what renewables and batteries can provide, executives argue, making supplies of more planet-damaging fossil fuels crucial even as governments pledge to reduce their use.

“It won’t be done without gas,” Toby Rice, CEO of EQT, the largest gas producer in the United States, said of the impending AI boom.

Rice said the technology sector will offer prosperity for shale producers comparable to the U.S. liquefied natural gas sector, whose rapid emergence in recent years has offered drillers new customers.

“We have a really incredible emerging market with LNG. But there’s a new emerging market that people are getting equally excited about — and that’s energy demand,” Rice said.

The US government has offered comprehensive incentives to clean energy developers in an attempt to quickly decarbonize the electrical grid. But fossil fuel executives said renewables would not be a reliable supplier on their own for energy-hungry data centers.

Energy Capital Partners, a large private investor with green energy and fossil fuel assets, said expanding gas-fired generation will be key to complementing renewable supplies for data centers.

“Gas is the only cost-efficient power generation capable of providing the kind of constant, reliable power required by big technology companies to power the AI ​​boom,” said Doug Kimmelman, founder and partner at ECP.

That “shows promise” for gas consumption, said Colin Gruending, executive vice president of pipeline group Enbridge. “Intermittent renewables won’t cut it.”

The upbeat outlook from U.S. fossil fuel producers comes at a time of weak natural gas prices, which has forced consolidation among shale producers — and an effort to find new sources of demand.

It also marks a contrast with Big Tech’s promises to reduce greenhouse gas emissions and power the AI ​​revolution with green energy rather than fossil fuels.

Climate scientists have warned that expanding gas infrastructure risks undermining global efforts to curb global warming.

But the voracious power needs of data centers are about to skyrocket as cloud storage facilities, cryptocurrency mining and AI add pressure to networks. Only Microsoft is opening a new global data center every three days.

These energy-hungry operations will collectively consume more than 480 terawatt-hours of electricity, or nearly a tenth of total U.S. energy demand, by 2035. That’s more than double what it will have in 2025, according to S&P Global Commodity Insights.

The International Energy Agency estimates that data center power demand globally could surpass 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 center sector, said in a recent strategic plan that until zero-carbon energy can offer constant power, gas units would be the “most affordable and reliable” option.

Gas-fired generation accounts for more than 40% of U.S. power demand, far more than other fuels, and cheap shale supplies have reduced the share of more polluting coal in generation over the past decade.

Another 20 gas-fired power plants are expected to come online in 2024 and 2025 to meet demand, according to federal projections.

Producers plan to capitalize on Big Tech’s energy needs, even as companies like Google and Microsoft have set ambitious goals to use only certified green electricity to power their operations in the coming years.

If they comply, it could pose a threat to fossil fuel producers’ rosy prospects for their gas, analysts said.

“Most of the demand growth will be met by carbon-free power generation resources,” said Xizhou Zhou, head of energy and renewables at S&P.

The group estimates that gas power generation will decline by the end of the decade, while green power generation will soar.

Peter Herweck, head of Schneider Electric’s energy management group, also doubted that gas would benefit as much as people selling the fossil fuel claim.

“If you talk to oil people, they will tell you that the only way to meet this energy demand is to use fossil fuels, but many of the customers of these data centers have made net-zero CO₂ commitments, so they will say that energy has must be renewable.”

The speed of the revolution is creating uncertainty in predictions.

“We think that at some point in the next few years, we would start to see a decline [no uso de gás]. I think that decline has been getting further and further away over time,” said Rich Voorberg, president of Siemens Energy North America, an energy technology group.