AI + Power Boom Ignites Interest in Natural Gas and Copper

AI + Power Boom Ignites Interest in Natural Gas and Copper
Published on: Jun 5, 2024

Goldman Sachs’ latest report indicates that the rising demand for AI and the rapid expansion of data centers will lead to a significant increase in US electricity consumption for the first time in years. From 2022 to 2030, power demand is expected to grow by approximately 2.4%, with data centers contributing the largest increase of 0.9 percentage points, accounting for nearly a third of the new demand.

Furthermore, according to estimates by the Electric Power Research Institute (EPRI), by 2030, data centers could consume up to 9% of the US’s total electricity production, more than double the current level.

What you might not know is that ChatGPT’s electricity consumption is about ten times that of a Google search. Currently, this AI platform has over 180 million users, but the global internet user base is around 5.3 billion. Imagine how much electricity consumption would increase if all these people became ChatGPT users.

AI Will Fuel a Natural Gas Boom!

AI’s development relies heavily on data centers, which provide the robust computational power for AI. Another Goldman Sachs report indicates that of the electricity demand generated by the growth of AI and data centers, natural gas is expected to supply 60%, with the remaining 40% coming from renewable energy sources. Compared to renewable energies like solar and wind, natural gas offers more stability and continuity.

The resurgence in natural gas demand is already evident. For instance, analysts at Wood Mackenzie estimate that by the early 2040s, total US natural gas demand will grow by 30 billion cubic feet per day, a significant increase from previous estimates, largely driven by the AI boom and data center growth. Wells Fargo forecasts that daily natural gas demand could increase by 10 billion cubic feet by 2030.

This presents opportunities for investors. Due to high production but declining demand, natural gas prices have dropped by over 32% year-to-date. However, prices are expected to rebound. Wells Fargo anticipates that by 2030, the average natural gas price could rise to $3.50 per thousand cubic feet, a 46% increase from the 2024 average price of $2.39.

Copper: The New Oil

While natural gas will play a crucial role in meeting future electricity demands, copper, often referred to as the new oil, is equally indispensable, especially for energy transition. In addition to AI, most clean energy technologies, such as electric vehicles, solar PV, and wind power, require this metal.

To meet the current demand growth trend, the world will need to mine 115% more copper over the next 30 years than has been mined throughout human history. The International Energy Forum (IEF) warns that under current policy conditions, there will not be enough new mines to support achieving a 100% adoption rate for electric vehicles by 2035. At the same time, with the continued decline in ore quality, capital and operational costs are expected to increase.

The soaring demand for copper, combined with tight supply, has driven copper prices up nearly 25% year-to-date, recently hitting historic highs of over $11,000 per ton.

AI Clean Energy Copper Natural Gas