Fossil fuel companies argue that rising demand for electricity to power data centres and the ‘artificial intelligence revolution’ will usher in a ‘golden age’ for gas.
According to the Financial Times (FT), executives argue that AI’s growing energy needs will far outstrip what renewables and batteries can provide, making fossil fuels more important even as governments pledge to reduce their use.
“It’s not going to happen without gas,” Toby Rice, CEO of EQT, the largest US gas producer, said of the coming AI boom. Rice said the tech sector would provide a boom for shale gas producers similar to the US liquefied natural gas (LNG) industry, which has boomed in recent years, giving drillers new customers for their products.
“We have a really great emerging market in LNG. But there’s another emerging market that people are just as excited about, and that’s the demand for electricity,” Rice said.
Gas essential to big tech’s AI push
The US government has offered huge incentives to clean energy developers in a bid to rapidly decarbonise the power grid. But fossil fuel executives argue that renewables alone cannot be a reliable supplier for energy-hungry data centres.
Energy Capital Partners (ECP), a large private investor with green and fossil fuel energy assets, says the expansion of gas-fired power generation will be critical in supporting renewable supplies to data centres.
“Gas is the only cost-effective generation that can provide the kind of reliable, 24/7 power that big tech companies need to support the explosion in artificial intelligence,” said Doug Kimmelman, founder and partner at ECP.
“Intermittent renewables won’t cut it,” says Colin Gruending, vice-president of pipeline group Enbridge, adding that this bodes well for gas consumption.
Data centres add to energy hunger
As cloud storage, crypto mining and artificial intelligence take over the grid, the energy needs of data centres will increase. Microsoft alone opens a new data centre every three days around the world.
According to S&P Global Commodity Insights, these energy-intensive operations will consume more than 480 terawatt-hours of electricity by 2035, almost a tenth of the total electricity demand in the US.
The International Energy Agency estimates that global data centre electricity demand could reach 1,000 TWh by 2026. This is double the 2022 level and an increase equivalent to the total electricity demand of Germany.
Dominion Energy, which serves Virginia’s fast-growing data centre sector, said in a recent strategic plan that natural gas plants will be the “most affordable and reliable” option until zero-carbon energy provides continuous power.
Gas-fired generation accounts for more than 40 per cent of US electricity demand, far more than any other fuel, and cheap shale resources have eliminated dirtier coal’s share of generation over the past decade. According to federal projections, 20 more natural gas-fired power plants are expected to come online in 2024 and 2025 to meet demand.
The manufacturers’ plan to capitalise on Big Tech’s energy needs comes at a time when companies such as Google and Microsoft have set ambitious goals to power their operations entirely with certified green electricity in the coming years.
