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The growth of data centers is expected to propel a surge in natural gas consumption for power generation, thereby stimulating an increase in the demand for natural gas, as stated by TC Energy Corp（TSX:TRP）（NYSE:TRP）, the largest natural gas pipeline operator in North America.
Additionally, the company’s quarterly report released last Friday revealed record-breaking delivery for the first quarter, fueled by a sharp rise in North American electricity demand.
Specifically, the comparable earnings from the company’s natural gas businesses in Canada, the United States, and Mexico surged from CAD 2.18 billion in the same period of 2023 to CAD 2.37 billion in the first three months of 2024.The daily delivery of the NGTL system, transporting natural gas from Alberta and northeastern British Columbia to the Canadian and U.S. markets, soared by 700 million cubic feet to 15.3 billion cubic feet, establishing a record single-day delivery volume of 17.3 billion cubic feet.
In the U.S. market, TC Energy witnessed a year-over-year increase of over 5% in the daily natural gas transmission volume for the first quarter, reaching 30 billion cubic feet. The company’s U.S. natural gas assets, including Columbia Gas, Columbia Gulf, and Great Lakes Gas Transmission, all achieved historic delivery volumes. Additionally, the natural gas delivery to U.S. power plants surged by 11%, setting a quarterly record.
Stanley Chapman, executive vice president and chief operating officer of natural gas pipelines, expressed during the earnings conference call that by 2030, the natural gas demand for power generation required to operate data centers is anticipated to surge by up to 8 billion cubic feet per day, equivalent to 21% of the current natural gas demand for power generation in the United States. Chapman emphasized that over the upcoming years, as the demand for power in data centers grows, the demand for natural gas will also rise. McKinsey recently indicated that electricity consumption in U.S. data centers is projected to increase by 10% until 2030.
The development of artificial intelligence (AI) technology relies on data centers as fundamental infrastructure. As AI advances rapidly, energy consumption has become an increasingly prominent issue. Some have even suggested that “the end of AI is computing power, and the end of computing power is electricity.” Apart from AI, with the reshoring of manufacturing in the United States and the electrification trend in various industries such as electric vehicles, utility company electricity demand will see unprecedented growth in decades. To meet this surge in electricity demand, renewable energy sources such as solar and wind power alone are insufficient, and natural gas and other fossil fuels, owing to their reliability, will be used more for power generation.
TC Energy is well prepared for this, strengthening natural gas pipelines in various U.S. states such as Virginia and Wisconsin, and increasing connections to local utility companies.
Carson Kearl, the author of the report from Enverus Intelligence Research, stated that from 2023 to 2030, installed data center electricity capacity is expected to increase by approximately 14 gigawatts. If all of this capacity is powered by gas-fired generation, the corresponding incremental natural gas demand is estimated to be approximately equivalent to 2 billion cubic feet per day.
