Natural Gas Demand Growth from Data Centers and the Impact on Pipeline Capacity

The rise of AI and data centers is set to create significant demand for energy, particularly natural gas. As data centers expand their operations to support advanced computing tasks, such as machine learning and data processing, natural gas is becoming a primary energy source due to its cost-effectiveness and reliability. Here’s a breakdown of how this trend is shaping natural gas demand and the infrastructure needed to meet it.

1. Natural Gas Demand Growth from Data Centers: A Decade of Steady Increase

By 2030, incremental power demand from data centers is projected to drive an additional 3.3 billion cubic feet per day (bcf/d) of natural gas demand. This is a roughly 10% increase in gas consumption for the power market and a 50% jump from previous growth projections. For the natural gas industry, this steady demand increase presents both opportunities and challenges, especially as the need for reliable energy sources intensifies.

Key factors contributing to this demand growth include:

• Increased reliance on natural gas for data center power generation: The sources estimate that natural gas will supply 60% of the power required for the expected 28.7 gigawatts (GW) of data center demand through 2030. The relatively low cost and reliability of natural gas make it an attractive option for power generation.
• Capacity mix favoring gas-fired plants: The sources expect 40% of data center gas demand to be met by efficient combined cycle gas turbine (CCGT) plants, while 20% will come from less efficient peaker plants. CCGT plants offer higher efficiency due to their lower heat rates, which helps meet data center power needs sustainably.
• Consistent growth throughout the decade: Data center demand for natural gas is anticipated to grow at an average rate of 0.47 bcf/d per year through 2030. Though steady, this pace could fluctuate based on variables such as price changes, regional power infrastructure developments, and any delays in transmission capacity expansions.

Although notable, this growth in natural gas demand from data centers remains relatively modest when compared to the broader US gas market, which stands around 100 bcf/d. Additionally, growth in liquefied natural gas (LNG) exports is expected to nearly double, far outpacing the data center sector’s demand growth and underscoring LNG’s broader impact on the US natural gas landscape.

2. Pipeline Capacity Needs: Expanding Infrastructure to Support Growth

To support the projected increase in natural gas demand, the construction of approximately 6.1 bcf/d of new pipeline capacity will likely be necessary. This estimate assumes that roughly half of the projected data center power demand will require new generation capacity, which in turn will drive the need for new pipelines. Based on the capacity factors for CCGT and peaker plants, meeting peak load demand would necessitate this added pipeline capacity.

Several important caveats apply to these estimates:

• Direct connectivity of data centers to gas transmission systems: Emerging trends show some data centers directly connecting to gas transmission systems. This could lead to higher utilization rates for these facilities compared to traditional gas-fired plants, potentially reducing the need for additional pipeline capacity.
• Variations in existing pipeline utilization: Existing pipelines might be utilized more intensively than anticipated. If this trend continues, there may be a need for more extensive new pipeline construction than initially expected.

3. Bull Case Scenarios: Exploring the High-End Potential for Gas Demand and Pipeline Needs

To better understand the potential high-end outcomes, the sources provide two “bull case” scenarios:

• Bull Case 1: In this scenario, new pipeline capacity would be required for all incremental gas-fired power generation demand (representing 60% of the projected 28.7 GW of data center demand, rather than just new generation capacity). This case could result in pipeline capacity needs of 12.3 bcf/d.
• Bull Case 2: Here, natural gas would serve 100% of the incremental data center power generation demand, rather than the 60% share assumed in the base case. This would increase incremental physical gas demand to 5.5 bcf/d and create pipeline capacity requirements reaching as high as 20.5 bcf/d.

The Future Outlook: Balancing Demand with Infrastructure Development

The growth of natural gas demand from data centers is creating substantial opportunities and challenges for both the natural gas and data center sectors. As power demand accelerates, utilities and gas companies are tasked with expanding infrastructure to keep up with the evolving energy needs of a digital, data-driven economy.

While the projected increase in gas demand from data centers is significant, it remains only a fraction of the larger US gas market. However, ensuring adequate pipeline capacity to meet this demand is critical, as the right infrastructure investments will ensure a smooth, reliable transition for the data center industry as it continues to expand.

As AI and data centers shape a new era of energy use, meeting the demand for natural gas will require strategic planning and forward-thinking investments. Utilities, gas providers, and infrastructure developers will play a central role in navigating these changes, supporting the growth of AI and data centers while also aligning with broader goals for energy reliability and sustainability.

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