Natural gas demand growth appears to be a real phenomenon to power new data centers, with high potential for wider adoption of gas for the technology sector. We have raised our demand forecast in the latest Macro, though East Daley Analytics is on the lower side of industry estimates following our review of the emerging market.
EDA forecasts that through 2030, the US will see about 2.5 Bcf/d of new gas demand to generate power for data centers. As a result, consumption from the electric sector expands to 38 Bcf/d by 2030 in our latest Macro Supply & Demand Forecast (see figure). Our estimate includes direct service to data centers for onsite generation, plus wider load growth shouldered by gas units on regional power grids. Our view is on the low end of most industry estimates for data centers, which range between 2-10 Bcf/d of incremental gas-fired power demand through 2030. How did we arrive at that number?
EDA recently reviewed the hottest topic in gas circles. New technologies like Artificial Intelligence (AI) require large quantities of electricity to run, meaning rapid load growth as technology companies build out data centers. We highlighted power generation as a key constraint to these plans. The electric sector is also dealing with a second big hurdle: the interconnection tie-in queue.
In order to bring a new power project online, developers must apply for an interconnect to the power grid. According to data from the Lawrence Berkeley National Lab, the tie-in queue at regional grids stood at a staggering 2,600 GW at the beginning of 2024. The vast majority of projects waiting in line are solar and large-scale batteries. Natural gas projects in the tie-in queue accounted for just 79 GW of capacity (see map).
With so many projects in the tie-in queue, the wait for approval by independent system operators (ISOs) has also increased, from about two to four years. Assuming all these gas-fired projects make it through the line by the start of 2028, and that each is baseload generation to service data centers or displace other generation, these 79 GW of projects could provide 692,040 GWh of power over a year. This would require about 6.5 Bcf/d of new gas demand.
Historically (dating to 2007), developers only build about 20% of the power projects that enter the tie-in queue, according to the Berkeley Lab. Applying that same discount factor to the gas projects would equate to 1.3 Bcf/d of incremental demand. EDA recognizes the high need for data center power, and thus we have allowed for a slightly higher rate of success navigating the tie-in queue. We also assume more gas-fired projects are developed and enter the queue between now and 2026, adding to growth as in-service dates extend through 2030.
Additionally, the market could pick up more demand from older units if grid conditions are tight. In the Energy Information Administration’s most recent Form 860 report, there are nearly 17 GW of natural gas-fired retirements scheduled between now and 2030. These units could generate 148,920 GWh (if run as baseload) in support of data centers, assuming they are proximate to emerging site locations. Keeping these gas-fired units running could consume up to 1.4 Bcf/d of incremental gas through 2030.
To learn more about the long-term outlook for natural gas, check out our latest Macro Supply & Demand Forecast. – Jack Weixel.
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