Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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By Tsvetana Paraskova – Apr 25, 2024, 5:00 PM CDT
- Electricity demand to power the data centers is soaring and so is demand for grid connections.
- As electricity demand from data centers is set to jump to as much as 42 GW by 2030, from 11 GW now, the U.S. would need an additional 8.5 billion cubic feet per day of natural gas.
- Natural gas demand for power generation is set to jump in the second half of this decade, and U.S. benchmark natural gas prices could average as much as $4 per million British thermal units.
U.S. natural gas producers and shippers could be one of the big winners of the latest advances in Artificial Intelligence.
The surge in data centers amid the booming AI technology development is set to lead to higher U.S. natural demand and prices by the end of the decade, according to investment bank Tudor, Pickering, Holt & Co.
Natural Gas To Meet Some of Power Demand Spike
Electricity demand to power the data centers is soaring and so is demand for grid connections. While many tech companies prefer to power their AI development centers with solar and wind, the need to get these data centers built and powered fast would boost demand for natural gas, too.
This could raise further doubts about the current U.S. Administration’s plans to have the U.S. grid increasingly greener and generate 100% carbon pollution-free electricity by 2035. Considering that natural gas is currently the single-biggest source of power generation in America, this target of the Biden Administration has been questioned and viewed as unattainable even before the surge in power demand, which has reversed years of falling or flat electricity consumption.
As electricity demand from data centers is set to jump to as much as 42 gigawatts (GW) by 2030, from 11 GW now, the U.S. would need an additional 8.5 billion cubic feet per day of natural gas (Bcf/d) to meet the rise in consumption, according to a report from Tudor, Pickering, Holt & Co cited by Reuters.
Therefore, natural gas demand for power generation is set to jump in the second half of this decade, and U.S. benchmark natural gas prices could average as much as $4 per million British thermal units (MMBtu), the report notes.
That’s more than double the current Henry Hub natural gas price, which has lingered below $2 per MMBtu for most of this year amid milder winter weather and lower demand for heating and power.
Gas Producers and Shippers to Benefit from Soaring Power Demand
Natural gas producers are currently curtailing some output amid the market glut but are prepared to boost production later in the year and expect rising domestic power demand and LNG exports to raise consumption and prices.