Booming demand for AI data centers in the US will bring big benefits to energy companies providing natural gas, according to analysts at Wells Fargo.
The bank’s Investment Institute (WFII) believes such providers are well-positioned to service the power needs of the new facilities being constructed across the country to run AI workloads.
Though most data center operators seek to source power from renewable sources for new developments as they strive to meet their net zero targets, natural gas still accounts for 43 percent of US energy demand, according to the government's Energy Information Administration (EIA).
A strategy note from the WFII, first reported by Seeking Alpha, says that this means companies providing natural gas will be key to helping more facilities come to fruition.
“We believe that US natural gas production capacity and reserves are sufficient to meet growing demand, with infrastructure being the key constraint in balancing supply with this demand growth over time,” said Ian Mikkelsen, equity sector analyst at WFII.
“We expect this to provide midstream companies with incremental growth opportunities and higher utilization of existing assets, ultimately extending the terminal value of natural gas infrastructure.”
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WFII expects natural gas’s share of the energy mix to remain stable in the immediate future, despite more renewable sources becoming available.
“We believe these trends are secular in nature and, in our view, large companies in the midstream energy sub-sector that are focused on natural gas and have broad interstate operations are well positioned to benefit,” Mikkelsen added.
Electricity produced using natural gas is a cleaner alternative to fossil fuels, producing 430g of CO2 per kWh according to the EIA. This compares 1kg of CO2 per kWh from coal-fired power stations, while electricity from oil produces about 1.1kg.
However, the emissions for gas remain much higher than those from solar (48g/kWh), wind (12g/kWh), and nuclear (12g/kWh), per figures from the World Nuclear Association.
Last month, DCD reported that Amazon had shelved plans to pump natural gas into Oregon to power its data centers, a move that would have increased the carbon footprint of the facilities, which currently run mainly on hydropower drawn from the state’s grid.
