Two new “sector in detail” reports from Moody’s Ratings look into how the growing demand for energy to power artificial intelligence will affect different energy producers and so-called “midstream” companies that transport natural gas to end-users.
“The first, ‘Race to power AI will boost US producers of natural gas and coal, at chemicals’ expense,’ finds that while technology companies favor renewable energy for their net-zero emissions commitments, the rapid increase in power demand outpaces the ability of power generation companies to build enough wind, solar and nuclear generation capacity in the next several years,” according to a Moody’s release. The full “Race to power” report is available to Moody’s subscribers.
“New natural gas-fired baseload capacity will be needed to both balance intermittent renewables supply and to meet this unexpected demand from new data centers and general electrification,” the release says.
The Moody’s release says the second report, “LNG and AI offer growth tailwinds, subject to regulatory and social hurdles,” also available to Moody’s subscribers, “finds that midstream companies are gearing up for a significant increase in demand for their services to supply natural gas -- at first from liquefied natural gas (LNG) facilities, and later from new data-center energy requirements for handling AI demand.”
It says, “Estimates vary for exactly when and how much natural gas demand will pick up from LNG liquefaction facilities and for AI-driven data centers, but medium-term demand growth from both types of users will likely dwarf other sources of demand.”
This report notes, “Regulatory and social-license challenges risk limiting these growth opportunities. Emission regulations will likely tighten over time and approval processes will likely become costlier and potentially stricter for new projects, and in some regions environmental and other social-license factors will impede development. Intrastate infrastructure projects in major energy producing states such as Texas and Louisiana should still get approved, but other locations around the US have become extremely difficult, including the US Northeast.”