Energy
Monday, July 22nd, 2024 2:37 pm EDT
Key Points
- The U.S. risks falling behind in the AI race if it doesn’t use natural gas to meet the increasing electricity demands from data centers, according to Alan Armstrong, CEO of Williams Companies. This is due to the significant power needs driven by AI and electric vehicle adoption, which are projected to add 290 terawatt hours of electricity demand by the end of the decade.
- Williams Companies, managing about one-third of the U.S. natural gas supply through an extensive pipeline network, is crucial in addressing this demand. The company’s capacity is currently maxed out, prompting plans to expand, including a 3.1 billion cubic feet per day increase in the Transco pipeline. The underinvestment in natural gas infrastructure over the years is a concern highlighted by Armstrong.
- The debate over energy sources involves balancing between natural gas and renewables. While some industry leaders advocate for renewables to achieve climate goals, Armstrong and others argue that natural gas and nuclear power are necessary to ensure reliable backup for renewable energy, especially during peak AI and data center operations. This is seen as both an economic growth issue and a national security concern.
The U.S. risks falling behind in the global artificial intelligence (AI) race if it does not leverage natural gas to meet the growing electricity demand from data centers, according to Alan Armstrong, CEO of Williams Companies, one of the largest pipeline operators in the nation. Armstrong emphasized the critical role of natural gas in supporting the expanding tech sector and the surge in electric vehicle adoption, which is projected to add 290 terawatt hours of electricity demand in the U.S. by the end of the decade—equivalent to the entire electricity demand of Turkey. This demand surge poses a significant challenge, and failure to address it could hinder not only the AI revolution but also overall economic growth in the U.S.
Williams Companies, which manages about one-third of the U.S. natural gas supply through a 30,000-mile pipeline network, including the crucial Transcontinental Pipeline (Transco), is integral to meeting this demand. Transco serves the entire eastern seaboard, including Virginia, the world’s largest data center hub, and rapidly growing markets in the Southeast such as Georgia. Despite the push towards renewable energy, Armstrong and other industry leaders argue that natural gas and nuclear power are essential to back up renewable sources when weather conditions are not optimal.
Armstrong highlighted the urgency of the situation, describing it as a national security issue. He noted that several large independent data center developers, who initially aimed for all-green solutions, have approached Williams for natural gas capacity due to the insufficiency of alternatives. Williams projects an 18% growth in natural gas demand across all consumption sources, including power generation and liquid natural gas, from 2023 through the end of the decade. However, the company’s pipeline capacity, including the vital Transco pipeline, is already sold out, necessitating expansions.
Williams is currently expanding Transco’s capacity by 3.1 billion cubic feet per day, a 15% increase, set to come online in the coming years. Armstrong pointed out that while demand for natural gas has increased by 56% since 2005, interstate capacity has only increased by 26%, and storage by 4%, indicating a significant underinvestment in natural gas infrastructure. Goldman Sachs estimates that $7.4 billion in pipeline investments are needed to meet data center demand growth through 2030, with Williams and Kinder Morgan poised to benefit.
Williams’ stock has seen significant gains, hitting 52-week highs, with shares up 17% over the past three months and 26% since the start of the year. Research firm Argus recently upgraded the stock to buy, citing Williams’ strategic advantage with its pipeline network connected to key demand centers. Armstrong expressed confidence in the company’s competitive advantages, especially in heavily populated areas like Virginia, Maryland, Washington D.C., and North Carolina, which are prime locations for data centers due to their access to communication systems, including Transatlantic fiber systems.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/19/us-will-fall-behind-in-the-ai-race-without-natural-gas-williams-companies-ceo-says.html
