Growing Electricity Demand from Data Centers to Drive Natural Gas Usage
Electricity Demand Soars as Data Centers Expand Across the U.S.
By Wall Street Journal Staff
WASHINGTON—The rapidly growing demand for electricity driven by data centers and artificial intelligence (AI) is set to reshape the energy landscape in the U.S. over the next decade, according to a new report from Wells Fargo.
AI data centers alone are projected to add approximately 323 terawatt hours of electricity demand by 2030, a figure that is seven times greater than New York City’s current annual consumption. As a result, data centers are expected to represent 8% of the total electricity consumption in the U.S. by the end of the decade, according to Goldman Sachs.
Tech giants such as Amazon, Google, Microsoft, and Meta have committed to powering their data centers with renewable energy sources to reduce carbon emissions. However, the intermittent nature of solar and wind power may not be sufficient to meet the surging electricity loads, Rystad Energy warned in an April report.
“The most significant demand growth in our company’s history is being driven by economic growth, electrification, and the expansion of data centers, and these trends show no signs of slowing down,” said Robert Blue, CEO of Dominion Energy.
To address the growing electricity demand, experts are looking toward natural gas as a flexible and reliable source of energy. Natural gas is expected to supply 60% of the power demand growth from AI and data centers, with renewables accounting for the remaining 40%, according to Goldman Sachs.
“We need a source of energy that can quickly meet spiking demand when renewables are not generating enough power,” said Richard Kinder, executive chairman of Kinder Morgan, the largest natural gas pipeline operator in the U.S.
The Southeastern region of the U.S., particularly Northern Virginia, has emerged as a hotbed for data center expansion. Dominion Energy projects that demand from data centers in Northern Virginia will double from 3.3 gigawatts in 2023 to 7 gigawatts by 2030.
Georgia Power also anticipates a significant increase in electricity sales driven by data centers, with 80% of the demand coming from this sector, according to Southern Company CEO Christopher Womack.
As natural gas emerges as a key player in meeting the growing electricity demand, companies like EQT Corp., the largest natural gas producer in the U.S., are positioning themselves to capitalize on the market opportunity. EQT recently acquired the Mountain Valley Pipeline, which is expected to play a crucial role in transporting natural gas to the Southeastern region.
While renewables will continue to play a vital role in meeting the demand for electricity, challenges such as limited battery storage capacity and insufficient power transmission infrastructure pose obstacles to their widespread adoption. As a result, natural gas is expected to bridge the gap until more advanced technologies become available.
An “all of the above” strategy that includes natural gas, renewables, and potentially nuclear power is likely to be the path forward to ensure a reliable and affordable energy supply, industry experts say.
Despite the growing demand for natural gas, environmental groups are likely to oppose its expansion due to concerns about carbon emissions. However, energy companies stress the role of natural gas as a transitional fuel until cleaner alternatives become more viable.
As the energy landscape continues to evolve, balancing the need for reliable power supply with environmental considerations will be a key challenge facing policymakers and industry stakeholders in the years to come.
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The image of a chimney from the Linden Cogeneration Plant in Linden, New Jersey, symbolizes the increasing demand for electricity by AI data centers in the US. As projected by Wells Fargo, these data centers are estimated to require 323 terawatt hours of electricity by 2030, significantly surpassing New York City’s current consumption. To tackle this demand while focusing on reducing carbon emissions, tech giants like Amazon, Google, Microsoft, and Meta are shifting towards renewables. However, the intermittency of solar and wind power necessitates the continued use of natural gas, proving it to be vital in meeting the surging electricity needs of the future.