In a shift from earlier predictions, natural gas is seeing a resurgence in the US energy sector as companies move swiftly to meet the increasing electricity demand.
Driven by the rise of AI data centers, EVs, and manufacturing facilities, the push for new gas-fired power plants is gaining momentum at the fastest pace in years. Utilities, which had previously embraced solar and wind energy, are now finding that natural gas remains a critical component of the energy mix.
“A few years ago, there was the expectation that solar and wind would be able to solve our additional generation needs,” explained Jed Dorsheimer, head of energy and sustainability at William Blair Investment Bank. Now, Dorsheimer projects that gas could account for as much as 60% of new power generation.
“There’s been a call for peak oil and peak gas, and eventually those calls will be right. But not anytime soon,” he noted.
Natural gas, which overtook coal as the largest US electricity source in 2016, is also seen as a bridge fuel, helping to phase out dirtier fossil fuels like coal while supporting renewable energy integration. “Natural gas is an essential partner for maintaining grid reliability and deploying more renewables,” said Dan Brouillette, president of Edison Electric Institute. Gas plants are often used to back up intermittent power from wind and solar energy, ensuring stability in the grid.
However, the environmental consequences of extending natural gas’s reign are hotly debated. On one hand, its abundance has accelerated the decline of coal, reducing the carbon footprint of electricity generation. On the other hand, the infrastructure for gas is prone to leaking methane, a potent greenhouse gas that can trap heat at 80 times the rate of carbon dioxide over 20 years. The long operational life of gas plants—typically around 40 years—also raises concerns about locking in high emissions well beyond President Joe Biden’s goal of a zero-emission electricity sector by 2035.
“We were poised to shift away from the energy system of the past, from costly and polluting infrastructure like coal and gas plants. But now we’re going in the opposite direction,” said Kendl Kobbervig, advocacy director at Clean Virginia, an organization that promotes renewable energy. “A lot of people are feeling whiplash,” she added.
Indeed, the numbers reflect this shift. In just the first half of this year, more new gas power plants were announced in the US than in all of 2020, according to data from the Sierra Club. Texas leads the way in new gas generation capacity, while the US Southeast has the highest number of gas projects in the pipeline, with over 200 units expected to be operational between now and 2032. Analytics firm Yes Energy estimates this could amount to 86 gigawatts of power, while Enverus puts the figure at over 100 gigawatts, enough to power nearly 80 million homes.
The shift has also led some utilities to revise their decarbonization targets. PacifiCorp, a utility owned by Berkshire Hathaway, recently announced plans to add more than five gigawatts of new gas generation while canceling roughly seven gigawatts of planned renewable projects. The company cited increased demand and relaxed regulations as reasons for delaying its emission reduction timeline. A spokesperson from PacifiCorp confirmed that the utility still plans to reduce carbon emissions by 80% by 2035 and achieve net-zero emissions by 2050, despite the current increase in natural gas reliance.
The wider power industry is grappling with this back-and-forth. “This flip-flopping where utilities had thought they could get rid of new gas and now they are committed to it, that’s troubling,” remarked Cara Fogler, deputy director of research at Sierra Club. Some analysts predict that US power-sector demand for natural gas could rise by as much as 30% by 2030.
Not all proposed gas plants will make it through the lengthy construction process, with some projects potentially scrapped due to concerns over rising electricity prices. Jigar Shah, director of the loan programs office at the US Department of Energy, warned that the costs of new gas generation could inflate power bills by about 10% annually. He suggested alternatives like expanding home solar and battery systems or upgrading power lines to handle more electricity. “What DOE has been saying is that we have the tools necessary to meet this moment, but we have to find a way to do things in a smarter, not harder, way,” Shah emphasized.
Nonetheless, the electricity demand continues to surge. Patrick Finn, a power market analyst at Wood Mackenzie, noted that data center electricity usage could increase tenfold by 2030, adding pressure on utilities to delay the retirement of older gas plants.
“It makes clean energy goals that much more difficult to attain,” Finn said.
