Over the first five months of this year, 15 GW in new power generation capacity was added in the United States. Of that, 11.5% GW was solar, and just 1.3% was gas. However, things are about to change. There are 114 GW of new gas-fired generation capacity under construction and in pre-construction—a more than twofold increase from a year ago.
The last four years saw a veritable boom in wind and solar capacity growth in the United States as the Biden administration pursued a net-zero agenda that involved a clampdown on new gas capacity in all but name. Now, it seems, the boom continues—only this perception is misleading. Under the One Big Beautiful Act, solar developers are now racing against a deadline – whatever they can build before the subsidies end. So they are building whatever they can. Yet it’s the gas capacity pipeline that’s jumped double from last year.
The trend quite likely has a lot to do with expectations of a surge in electricity demand driven by the IT industry and its artificial intelligence ambitions. The information about the generation capacity pipeline comes from Global Energy Monitor, a net-zero outlet, and was reported by Reuters’ Gavin Maguire, who noted that new gas capacity represented “the single largest power source among all planned capacity additions at the construction and pre-construction stages.”
According to the Energy Information Administration, natural gas generation capacity currently accounts for some 42% of the national total. Gas plus coal make up 58%, with the rest coming from hydro, nuclear, biomass, and wind and solar. Solar power output last year broke a record, surging by 25% on the year, as did wind. And yet power developers are betting on gas. Besides the obvious reason for the loss of appetite for wind, namely, President Trump’s open animosity towards the technology, solar should be doing fine. Only it isn’t.
The reason for this is as simple as the one for wind’s fall out of grace. The U.S. needs more electricity supply. But it does not just need the fastest supply that can be connected to the grid. It needs reliable, meaning dispatchable capacity that is available at all times and not over certain periods lasting several hours a day, which is what solar and wind do. The resurgence of natural gas demonstrates that energy reliability has returned to the list of top priorities for electricity consumers.
In fact, warnings are multiplying that the AI race could undermine net-zero efforts globally and, according to the Washington Post, create “an energy monster” that feeds on hydrocarbons, compromising attempts to consign these to history and usher in a new era of non-hydrocarbon energy generation. It appears, however, that the people involved in that AI race suddenly care more about their electricity supply reliability than their carbon footprint. So they are looking for new gas-fired generation capacity—as are energy suppliers to all other consumers, because that demand is going nowhere while new demand from AI data center operators flourishes.
There is currently some 16.3 GW of new natural gas generation capacity under construction in the U.S., according to the Global Energy Monitor data. Another 98 GW is in pre-construction. That amount of new generation capacity, however, is not sufficient on its own—because developers are also building new hydro and nuclear capacity. There is some 36 GW of new hydro capacity in the pipeline, along with around 8 GW of new nuclear. That makes for a total of 159 GW in new dispatchable power generation capacity. Interestingly, the number is not much larger than the total for wind and solar, which stands at 155 GW in the pipeline.
Of course, chances are that not all of that capacity—dispatchable and intermittent—will get built. These chances are especially high for the latter category. The fact remains that the U.S. is on a mission to boost its generation capacity considerably in response to electricity demand trends and forecasts. There are, however, challenges that have nothing to do with federal energy policies.
One immediate problem is the tight supply of essential equipment such as gas turbines. Wood Mackenzie warned earlier this year that gas turbine manufacturing constraints may slow down the addition of new gas-fired generation capacity, along with higher capital costs and unfavorable market prices for electricity. However, turbine developers are already responding to the trend: Mitsubishi Heavy Industries, one of the largest gas turbine manufacturers in the world, said the company would boost its production capacity twofold over the next two years in response to the surge in orders.
Another potential problem is higher gas prices for American households due to the additional—and substantial, per forecasts—demand from data centers. Some commentators have pointed this out as a major problem, while others dismiss it as cause for concern, pointing to the natural gas industry’s flexibility in ramping production up in response to changes in demand.
The fact remains, however, that gas is very much back (though it had not really gone anywhere), and it is about to grow if all those data center operators want reliable electricity for their large language models.
By Irina Slav for Oilprice.com
