In the United States, the spread of energy-intensive artificial intelligence (AI) applications is increasing potential demand for natural gas. This is because Kinder Morgan Co., Ltd. (KMI)suggests Elliot Goo,Editor Energy and income advisor.
In a recent earnings call, KMI Chairman Richard Kinder projected that if just 40% of projected AI demand were met by gas, demand could increase by 7 to 10 billion cubic feet per day. And these numbers may turn out to be fairly conservative, as regulated utilities and regional grid managers continue to expect rapid increases in real-time demand.
Kinder Morgan Corporation (KMI)
As Kinder puts it, the need for natural gas “is not going to hurt renewables.” Installed solar, wind, and battery storage capacity in the US continues to grow rapidly, and BNEF reports that corporate renewable power purchase agreements in 2024 will be more than 20% higher than 2023's record level.
But surging AI demand, combined with the drive to electrify buildings and transportation and the ongoing retirement of aging, costly coal-fired power plants, makes it clear that the U.S. power sector has only one choice: use more natural gas. And that doesn't include expanding gas's role as “shadow capacity” for renewables, which, while storable, are still too intermittent to be a truly “dispatchable” resource.
Bottom line: No matter who's president next year, the world will still be racing to develop enough new energy supplies to meet potential demand. That means using more gas. And that's good news for best-in-class energy stocks.
Recommended action: Purchase KMI.
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