The emergence of AI is fueling a rapid expansion of data center capacity, which will significantly increase future energy demand. Enverus Intelligence® Research (EIR) forecasts data center power demand will grow by 14 GW from 2023 to 2030 in a base case scenario, amounting to 2 Bcf/d of natural gas power if fully serviced by gas-fired generation. Through 2050, growth in data center demand will require an additional 153 GW of capacity, according to the latest EIR projections.
Data center developers in the past have shown keen interest in utilizing renewable energy sources, but renewables do not provide 24/7 reliability, and their buildout is not expedient. Developers—especially those building hyperscale data centers to efficiently support robust, scalable applications—are starting to prioritize speed and reliability, providing growth opportunities to midstream gas transmission companies with large existing pipeline networks.
Data center developers having to prioritize reliability over emissions.
“What we’re seeing is a shift, because I think that the big developers are realizing that they’re kind of up against a brick wall right now in terms of extracting more generation off the grid,” Williams Cos. CEO Alan Armstrong said on an Aug. 6 earnings call. “They realized that that’s pretty well exhausted. And so they’re going to look to areas where both natural gas resource is available, the capacity for it is available, as well as the permitting environment allows them to go build out some very significant power generation behind the meter.”
Data center siting preferences are shifting “from regions where big telecom infrastructure is in place to regions where energy and supply infrastructure is in place,” TC Energy natural gas pipelines COO Stanley Chapman III said on a Aug. 1 earnings call. Rather than siting data centers behind local gas distributors, Chapman said, “we’re now seeing a much greater potential for data center operators to seek laterals off of our mainline and to use that gas supply to fuel onsite power generation that they would build and/or own themselves.”
Access to producing basins showing appeal compared to proximity to telecom.
For Williams, owner of the 10,000-mile Transco system stretching from the Northeast to the Gulf Coast, the backlog of potential projects to serve growing data center demand is substantial. The company said its Transco Southeast Supply Enhancement project is only the first of several expected data center-driven projects.
“In terms of the data center load, we are right in the throes of that. We have a very long backlog of projects,” Armstrong said. “And I will tell you that particularly in the Southeast, in the Mid-Atlantic, those expansion opportunities that we have, we frankly are kind of overwhelmed with the number of requests that we’re dealing with, and we are trying to make sense of those projects.”
Southeast, Mid-Atlantic and Western regions drawing new data center projects.
Williams is also seeing growth opportunities in Western markets, especially eastern Washington and the Salt Lake City area, for its Northwest, MountainWest and Overthrust pipeline systems. To sift through its data center-related opportunities, the company has redeployed engineers and project development teams to focus on these opportunities in the last several months.
Kinder Morgan CEO Kim Dang said on a July 17 earnings call the company is having commercial discussions totaling over 5 Bcf/d in opportunities related to growing power demand, of which 1.5 Bcf/d is related to data centers. These figures do not include capacity commitments for the $3 billion, 1.2 Bcf/d South System 4 expansion on its Southern Natural gas system in the Southeast.
While opportunities are numerous, Dang pointed out Kinder Morgan isn’t the only transmission company around and outsized return on these projects is unlikely. “I think we are confident that we’ll be able to meet our return hurdles on these projects, but what exactly we’re going to get on these projects at this point, I think it’s too early to say,” Dang said.
Enbridge is excited about data center opportunities and has seen substantial routes for growth in its Utah regulated gas utility, where it added 50 MW under contract in Q2 and had additional inquiries to provide up to 1.5 GW of capacity. “Throughout our utility footprint, we are engaged in additional early-stage discussions with data centers that we expect to translate into future growth,” CEO Gregory Ebel said on an Aug. 2 earnings call.
Enbridge says it can help with renewable commitments and gas capacity.
Enbridge’s renewable power portfolio also gives it a competitive advantage compared to its peers. “In renewable power, our scale, financial and execution capabilities are differentiators,” Ebel said. “Data centers need baseload power solutions, such as natural gas, to support the 24/7 energy demands of hyperscalers, but many customers are balancing that reliability requirement with their renewable energy commitments. It’s not always possible to co-locate or develop behind-the-meter power solutions to support new data centers. So, we are having discussions with large blue chip customers to provide traditional and virtual long-term PPAs.”
Ebel noted that a number of customers under long-term power purchase agreements could be interested in backing clean energy projects to offset their emissions. Enbridge is currently developing 2 GW of wind and solar that could serve new data center load starting in 2026.
Not to be left out, Energy Transfer is in talks to supply gas to multiple data centers of different sizes in four or five states, co-CEO Marshall McCrea on a Aug. 7 earnings. Many of these projects are considering on-site gas-fired generation using up to 200-300 MMcf/d each, he added. McCrea said ET is “very advantaged in many of these areas to capture a lot of this business.”
TC Energy said there are about 300 data centers in development in the U.S., of which 60% are within 15 miles of its pipeline systems. On an Aug. 1 earnings call, CEO Francis Poirier noted that 9 GW of coal-fired generation is retiring by 2031 near those systems, leaving a large void for generation that could be filled by gas. He estimates there are 5 Bcf/d of growth opportunities for the company.
Find more great content on the gathering and processing, pipeline transport, LNG and downstream sectors in the latest issue of Midstream Pulse.
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