Artificial intelligence could lead to a boom in demand for natural gas as power companies already face growing demand.
Natural gas producers anticipate a sharp increase in demand over the next decade. Artificial intelligence actually leads to an increase in electricity consumption that renewable energies could have difficulty meeting.
After a decade of moderate growth in U.S. electricity demand, it is expected to increase by up to 20% by 2030, according to a recent Wells Fargo analysis reported by CNBC. AI-powered data centers alone are expected to increase U.S. electricity demand by about 323 terawatt hours by 2030, according to the report. Projected electricity demand due to AI is seven times greater than New York City’s current annual electricity consumption of 48 terawatt hours. Goldman Sachs estimates that data centers will account for 8% of total electricity consumption in the United States by the end of the decade. Against this backdrop, energy companies are scrambling to rapidly secure energy as the rise of AI coincides with the expansion of domestic semiconductor and battery manufacturing as well as the electrification of the fleet of vehicles across the Atlantic.
A challenge for the tech giants
This explosion in electricity demand poses a major challenge for technology giants such as Amazon, Google, Microsoft and Meta. These companies have committed to powering their data centers with renewable energy to reduce carbon emissions. But solar and wind may not be enough to meet the electricity load due to their dependence on variable weather conditions, according to a recent note from consultancy Rystad Energy, cited by CNBC.
The surge in electricity demand will require an energy Source that can fill the gaps and meet growing demand during periods when renewable energy is not generating enough power. The natural gas industry is betting that it will be a preferred choice.
Gas prices on the rise
The expected expansion in electricity demand could help boost natural gas prices, which are currently at record lows. Prices fell more than 30% in the first quarter of 2024 due to strong production, lower demand due to a mild winter and historic inventory levels in the United States. By 2030, prices could increase by 46% compared to the average price of $2.39 in 2024, according to the Wells Fargo report.
Concerns about the reliability of the electricity grid, however, could pose another obstacle to the transition to renewable energy, notes CNBC. However, the expansion of natural gas to meet U.S. energy demand is likely to face opposition from environmental groups who want fossil fuels to be phased out.
