'Electricity-Eating Hippo' AI Demand Surge Boosts Natural Gas Boom

As demand for artificial intelligence (AI) surges, forecasts suggest the 'golden age' of fossil fuels such as natural gas is arriving.

On the 1st (local time), major foreign media reported that energy industry executives argue that as AI energy demand increases, it exceeds what renewable energy and batteries can supply, thereby raising the importance of fossil fuels.

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Toby Rice, CEO of EQT, the largest natural gas producer in the United States, said, "The AI boom would be impossible without gas," adding that the technology sector, including AI, presents a significant opportunity for the U.S. shale gas industry.

Although the U.S. government provides substantial incentives for clean energy development to decarbonize the power grid, renewable energy alone struggles to reliably supply power to data centers with massive energy consumption.

Doug Kimmelman, founder of Energy Capital Partners, a major private investor owning both green and fossil fuel power assets, said, "Gas is the only cost-effective energy that can provide the stable, 24/7 power that giant tech companies require to drive the AI boom."

Colin Grooding, Vice President of Enbridge, said, "(AI is) a good sign for gas consumption," adding, "Intermittent renewable energy is not sufficient."

Climate scientists have warned that expanding gas infrastructure weakens global efforts to curb global warming. However, power demand from data centers is rapidly increasing due to cloud storage facilities, cryptocurrency mining, AI, and more. For example, Microsoft (MS) is known to open a new data center every three days worldwide.

According to S&P Global Commodity Insights, such operations will consume over 480 terawatt-hours (TWh) of electricity by 2035, equivalent to one-tenth of the entire U.S. power demand. The International Energy Agency estimates that global data center power demand will exceed 1000 TWh by 2026. This is double the 2022 consumption and comparable to the total power demand of Germany.

Gas-fired power generation accounts for more than 40% of U.S. electricity demand. Twenty new gas-fired power plants are scheduled to come online by next year.

Rich Buberger, President of Siemens Energy North America, said, "We thought gas usage would start to decline at some point in the coming years," but added, "However, the downturn seems to be getting further away as time goes on."

Some argue that the positive outlook of fossil fuel companies is clouded by big tech companies like Google and MS setting goals to use only green energy in the future. Zhou Xizhou, head of S&P’s Power and Renewables division, said, "Most of the increase in new demand will be met by zero-carbon generation resources."

Peter Herbeck, CEO of Schneider Electric, said, "Many data center customers have made net-zero (carbon neutral) commitments, so their power will be replaced by renewable energy."

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