The Impact of AI on Electric Power Demand
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Advances in AI computing capability are creating opportunities for both productivity enhancement and cost efficiency across the global marketplace. To explore the impact on energy demand, Ben Cook, CFA , Portfolio Manager of the Hennessy Energy Transition Fund and the Hennessy Midstream Fund, sat down with Jay Coulter, CFP?, CIMA? on Viewpoints by Hennessy.
Data Centers Fueling Power Demand
Cook highlights the demand for AI computing power driving the construction of data centers to house this infrastructure. The AI graphics processing units (GPUs) in these centers are “computational monsters,” requiring multiple power needs relative to conventional central processing units.??
The pace of data center buildout will continue to drive meaningful growth in electric power demand. And Cook believes this trend will accelerate expansion in power generation capacity, both here and abroad.?
Quantifying the Impact
According to Cook, the potential rise in power demand is evident in conversations with utilities supplying power to AI data centers. Information from Constellation Energy suggests that data center electricity consumption accounted for 2% of total US demand in 2020, with projections that it will reach 7.5% by 2030—a 1.5-2% growth rate. This, said Cook, is a significant increase considering stagnant electric power demand over the past 15 years.
Powering the Future
In the near term, power needs will be met by a mix of existing fuels used in power generation—natural gas, nuclear, coal, wind, and solar. However, Cook anticipates renewables and natural gas will gain market share as coal retirements continue.?
He emphasizes the critical role of natural gas until utility-scale battery technology improves, projecting its market share to hold strong through the end of the decade. Cook also pointed out that data centers require constant, uninterrupted power and cooling, further solidifying the need for reliable natural gas fuel sources.
Investment Opportunities
Using some basic assumptions, increased power needs fueled by natural gas could add 5-10 BCF a day of natural gas fuel demand associated with AI by 2030.?
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Current US supply is about 100 BCF a day, so an additional 5-10%. With liquified natural gas export volumes set to increase by almost double the current rate of 13 BCF a day through 2030, incremental AI demand could conservatively add another 30% to incremental natural gas needs by the end of the decade.
Cook believes this underscores a significant growth opportunity for energy investors, particularly in companies positioned to benefit from rising natural gas usage. He highlights potential in both upstream producers—Antero Resources, EQT Corp, Comstock Resources—and in the midstream space—Williams, Kinder Morgan, Cheniere Energy.?
These companies are all holdings within the? Hennessy Energy Transition Fund and the Hennessy Midstream Fund, respectively. Visit hennessyfunds.com to learn more.?
Current and future holdings are subject to risk. To obtain fund holdings, visit www.hennessyfunds.com.?
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