AI load growth might be the biggest demand story we've seen in a generation. Does this shift natural gas from a reliability backstop story to a growth industry in the policy conversation?
What we're seeing is that natural gas and its underlying infrastructure are enabling the economy of the future. You can't have a conversation about energy today without talking about data centers and AI, but let's not forget that on the residential side we're still growing too. We're adding one new customer every minute of every day and 60 businesses a day, because natural gas remains the most affordable way to power your business, heat your home, and cook your food. You're seeing investment in the infrastructure align with where the data centers are proposing to go.
So it's really a triple engine of growth: business, residential, and the new industries and economies of the future. There's an interplay between them, because to an extent a competition of molecules is going to start developing, not only between the regular electricity consumer and the AI infrastructure, but with exports as well. All three of those demand sources are pulling on the same system at once.
How do you see that interplay evolving over the next few years, given that AI behind the meter is paying such high rates? Is there a risk to the regular consumer on price?
Interestingly, we don't see supply as the constraint. We're not going to run out of molecules. Every two years we take a deep dive into the reserves available to us in the United States, and every year for the past decade they've gone up. And with places that have not yet been explored, those reserves will continue to go up, so the molecule won't be the constraint. Deliverability is the constraint, which is why if you talk to me or any other leader in the industry, permitting reform that will allow the buildout of energy infrastructure to deliver molecules where they need to be is our highest priority.
That's also a high priority in Congress, because whether you're a Republican or a Democrat, you stand to benefit from permitting reform to attract economic activity into your state. On the distribution side we're still building. Last year and the year before, we built 20,000 miles of new pipe, and we expect that number to be bigger this year because it's easier to build within state borders. But moving natural gas to different markets is harder, as seen in the Northeast right now, which is very infrastructure constrained, where even governors who haven’t historically supported natural gas have had to approve pipelines because affordability is top of mind for their constituents. The Northeast Supply Enhancement (NESE) pipeline is going to be built, maybe Constitution, maybe Beacon, and we’re seeing progress towards more infrastructure in Alaska as well.
From the LNG side, do you think there will be pressure to reduce exports if domestic prices rise?
Here we are, ten years into the United States being an LNG exporter, and now we're the biggest. Prices this morning at Henry Hub were just under $3. In Europe they're at $16 or $17, and in Asia they're hovering around $19. Even with the growth in LNG exports, the export facilities that have already reached FID or are under construction are going to double our export capacity, and according to the EIA that won't really impact the price of natural gas here in the States. It's expected to hover around $3.30, more or less where we are today.
If you forecast that out and double it again, prices go up to about four dollars inflation-adjusted, so we're still far better off than other parts of the global gas market. To use DOE Secretary Wright's phrase, natural gas is America's energy superpower. With that price comparative advantage, building out more infrastructure and expanding export capacity is good news, not just for our economy and national security, but for global stability, particularly in Europe as it finally puts Russian natural gas into its coffin.
Distribution emissions are down around 70 percent since 1990, and methane remains the core environmental challenge. With EPA rules in flux, what does a responsible regulatory framework look like, and where do RNG and hydrogen blending fit?
Utilities have never strayed from their commitment to reduce emissions, both because it's in their interest and because they've committed to their customers. While we've achieved a 70 percent reduction in emissions since 1990, they're committed to continued progress. Technology is getting better, the pipes are getting tighter, and our detection technology is improving. We're using satellites now to detect leaks in real time, and if you layer in AI and predictive analytics, we can now predict where a leak might occur and prevent it. The opportunities for continued emission reductions are real.
Then you layer on renewable natural gas. Six or seven years ago we had very small pilot projects, and today we have almost one thousand RNG projects between here and Canada. China is no longer taking America's trash, which means our landfills are filling up faster, and with that comes a lot of methane, making the fastest-growing segment of the RNG sector landfill gas, followed by wastewater. There's still a cost differential, but as the denominator gets bigger, the cost comes down. Regarding hydrogen, a bill just came out of the U.S. House of Representatives Committee on Appropriations with funding intact for hydrogen. Are we as far ahead as Europe? No. Will we be soon? No. But it's still an option, and
the name of the game for the energy system here is more options, not fewer.
Mountain Valley took nearly a decade to develop. Is the post-2024 environment unlocking new pipeline capacity in tight markets like the Northeast and Mid-Atlantic, or is the bottleneck still binding?
If you think about Mountain Valley, it took an act of Congress to get built, and the Atlantic Coast Pipeline went all the way to the Supreme Court, got approved, and then was too expensive to build. If it takes longer to permit a pipeline than to build it, that signals a clear problem, which everyone now recognizes. It's not just pipelines, it's transmission lines too, so the electric sector also supports permitting reform because they need to string more lines. Whether it's solar, wind, or geothermal, all of which are based on geology or weather, they need it as well.
We often call the infrastructure bottleneck a consumer tax, because deliverability is becoming more expensive when compared to the production or distribution of energy. The permitting reform legislation that will come out of the Senate will look different than what came out of the House, but Republicans and Democrats are coming together, which is a positive step. Whether they can get it over the transom in an election year is yet to be seen, but everybody is appropriately motivated, because whether you're from California or Oklahoma, you stand to benefit from unlocking the molecules and electrons needed for data centers, AI, or advanced manufacturing.
With this gas-electric interdependence, where do you see the system being most fragile right now, and where would the next reliability crisis come from?
We just came through the biggest challenge to the energy system in many years with winter storm Fern, and it’s storms like that where you stress test the system in real time. It wasn't how cold it got, but the duration - ten days of freezing temperatures, and we did not lose a customer. That took a lot of coordination between the natural gas and the electric sectors, which we've worked hard on for the last two years. We've stood up the Natural Gas Readiness Forum at the direction of our state regulatory association, NARUC, bringing together the entire supply system: production, midstream, downstream, the electrics, IPPs, and state and national regulators.
We've broken these forums out regionally, with two this past spring in Providence and Albuquerque, where we put scenarios in front of industry and regulators to practice and prepare. The seasonal planning horizon has changed rapidly to account for three events: the coldest day, the hottest day, and the intermittent day. Natural gas makes up 43 percent of power generation today, and we'll break 50 percent this calendar year, so summer events are becoming more challenging. Additionally, you can forecast the cold and the heat, but you can't forecast intermittency, when wind and solar don't show up and where natural gas is the natural backstop. The goal in these exercises, including one we did with my board last week, is to identify and address any blind spots before they become challenges.
Data center CEOs have told us gas turbines are taking five or six years to arrive, with manufacturers booked out to 2032 or 2033. Do you see a particular weak link in this supply chain?
Certainly the market signal is there. Siemens and others are expanding their US labor force by 25 percent this year, so the supply chain is one constraint, but the workforce is another. We're going to need the people not only to build the turbines but to install them, and those frontline workers to service the growing load. We're sending a clear market signal to labor unions and manufacturers that the demand is real and they should respond with additional capacity.
Interestingly, according to some turbine manufacturers, supply is available for immediate needs - if you want a turbine tomorrow you can get it. If you want it in five years, that’s where the production line lag shows up, and every manufacturer has a slightly different story. If you haven't broken ground on a project or received permits,, you don't want to buy a turbine today, you want to wait until you have a demonstrated project. That creates a bit of a mismatch between current and future the supply. But let's not forget it's not just turbines. There are needs forcompressor stations, copper, and all kinds of components. We now have a copper mine on the fast track for permitting, so it's a multi-dimensional challenge to manage the supply chain.
On a 2030 and longer horizon, what does the industry need to be to operate from strength?
Energy has always been a pocketbook issue for our country. Right now natural gas is three and a half times more affordable than electricity across the board, and the price differential between electricity and natural gas is expected to keep growing. Looking at the forecast out to 2030, natural gas is expected to be four times more affordable than electricity. Forecast to 2050 and it continues to widen at a slower rate, but even 25 years from now we're still considered the most affordable way to fuel the economy in this country.
Affordability matters. You can't have a discussion about the energy system today without affordability coming in at sentence two. We've been able to protect our customers against the volatility of inflation, geopolitics, and new load growth, and plan accordingly, the way we did for winter storm Fern, while continuing to reduce emissions. It's a win, win, win.
What would you say to those, especially in Europe, who argue solar is the cheapest source and push policy away from natural gas?
In the United States our energy demands are growing and we're going to need it all, so we don't discriminate. I happen to be in the natural gas industry, but I don't discriminate against wind and solar. To achieve the kind of economic comparative advantage we need against China, we're going to need every source. In Europe, though, I do think there have been some unfortunate policy decisions over the last decade and a half. With the price of energy in a place like Germany, we're seeing the deindustrialization of Europe, and a lot of the petrochemical industry has moved to the United States, particularly the Gulf, for access to affordable natural gas.
The approach of heavily subsidizing renewables and then, in an economic pinch, having to unwind them, has left the price of energy in Europe much higher, and it didn't need to be that way. We only have to look across the pond to see some of the decisions we don't want to make and the lessons we need to learn.
