Below is text from a letter sent by Williams on May 21, 2024, to the U.S. Senate Committee on Energy & Natural Resources in support of a full committee hearing to examine the opportunities, risks, and challenges associated with growth in demand for electric power in the United States.
Dear Chairman Manchin and Ranking Member Barrasso:
We commend you for holding a Full Committee Hearing to “Examine the Opportunities, Risks, and Challenges Associated with Growth in Demand for Electric Power in the United States.” As a trusted energy industry leader, Williams is committed to safely, reliably, and responsibly meeting the nation’s growing energy demand. We use our 33,000-mile pipeline infrastructure to move a third of the nation’s natural gas, each day, to where it is needed most, supplying the energy used to heat our homes, cook our food, and generate low-carbon electricity.
As you know, electricity demand is experiencing three times faster growth per year this decade than what we have seen in prior decades, driven by increasing electrification, the emergence of new, large-load data centers, and a growth in manufacturing. Data centers alone present a challenge, which is projected to add nearly 30 gigawatts (GW) of electric demand by 2030.i This increase in growth reflects a major opportunity for our country and underscores the need for more natural gas infrastructure to keep up with this growing demand. A comprehensive solution that includes holistic reforms to all federal infrastructure permitting will help America realize a lower-carbon future while still satisfying the country’s energy needs.
Natural Gas = Reliable, Affordable, and Clean
As a country, we can proudly say that the United States is the leader in emissions reductions and clean energy innovations. Between 2005 and 2023, the technological advancements occurring as part of the “Shale Revolution” resulted in significant increases in natural gas production and significant decreases in carbon dioxide emissions. In fact, the shift to natural gas generated electricity reduced energy-related carbon dioxide emissions nationally by unprecedented levels. There were 860 million metric tons of emissions reductions in the U.S. electric power sector from 2005-2021. Sixty percent, or ~500 million metric tons, of this reduction was from coal-to-gas switching, a reduction equivalent to ~111 million gasoline-powered passenger vehicles taken off the road for one year.
U.S. energy-related carbon dioxide emissions decreased another 3 percent in 2023, with over 80 percent of those emissions reductions coming from the electric power sector’s increased use of natural gas and solar.ii
When power grid regulators assign capacity factors to natural gas, they assign nearly 100 percent of nameplate capacity to dispatchable natural gas but only 10-30 percent to variable solar and wind.iii And power grid regulators rely on natural gas capacity up to 3.5 times more, on average, than wind and solar capacity when planning for future demand needs.
To state the obvious, it will not be possible to increase reliance on intermittent wind and solar power without a solid foundation of dispatchable natural gas power.iv
When looking at carbon neutrality goals, especially those set by states, it is important to understand what it would take to reach 100 percent electrification through wind and solar generation only – and how much such an electrification pathway would cost citizens.
For example, The Climate Act requires New York to reduce economy wide GHG emissions 40 percent by 2030 and 85 percent by 2050 from 1990 levels.v To replace the energy supplied by natural gas to New York’s homes and businesses in February 2023 alone, New York would need 285 times more utility scale solar installations than the state had in 2022 and enough solar panels to cover 549,000 football fields – and it would require $1 trillion in solar construction costs.
John Howard, long-time state employee who served in the Cuomo Administration and as the energy advisor for then-Assembly Energy Committee Chair, Paul Tonko, recently questioned New York Governor Kathy Hochul’s Climate Plan due to its “near total lack of transparency on how much each of us will have to pay to finance [climate] mandates.”vi
While wind and solar and other low-carbon sources have an important place in our energy mix, they are intermittent and cannot be implemented or accelerated, nor can electrification occur, without natural gas as a reliable complement. And natural gas cannot play this vital complementing role without supporting infrastructure.
Natural Gas Can Meet Soaring Energy Demands from Data Centers, AI
The electrification of heating, transport, data centers, and an AI-driven future will create growth in power demand not seen in the past two decades – three times faster growth per year this decade than the previous one. According to The Wall Street Journal, projections in power growth “come after efficiency gains kept electricity demand roughly flat over the past 15 years…”vii The Washington Post notes that a major factor behind the skyrocketing demand is the rapid innovation in artificial intelligence (AI), which is driving the construction of large warehouses of computing infrastructure that require exponentially more power than traditional data centers.viii
These data centers will drive strong regional growth in baseload and peak power demand, as they tend to operate around-the-clock, a tailwind for natural gas, wind, and solar demand. Energy expert Robert Bryce notes that “Microsoft’s electricity use has tripled since 2018…now using more electricity than Iceland, a country that’s renowned for its carbon-free power grid.”
While there are already numerous data centers operating across the country, more are being planned, especially in Texas, on the East Coast, and the Northwest. These centers’ power demand needs are projected to approach 46 GW by 2030, 2.3 times higher than in 2023 alone, requiring as much as 4 Bcf/d of incremental natural gas demand. To put that in context, Williams’ Transco pipeline that extends along the East Coast from Texas to New York currently has 19.5 Bcf/d of delivery capacity.ix The pipeline system is fully subscribed by our firm transportation customers, which is notable, particularly for a system of this size.
Expansion of infrastructure along our Transco system provides the ability to continue to meet peak demand of our customers and serve growth to fill the large power generation resource need with natural gas. We are currently progressing seven growth projects along this system to bring delivery capacity to over 21.2 Bcf/d, representing approximately 20 percent of Lower 48 natural gas demand in 2022.
While there is a push to meet this growing demand with wind and solar, natural gas plays a crucial role in creating resilient data centers by providing a reliable source of baseload power and quick response backup power when needed, compared to solar and wind, which provide intermittent power.
Read more about reliability and natural gas
Onshoring Manufacturing Requires Affordable, Reliable, Baseload Power
In recent years, there has been a significant shift for manufacturers to “onshore” or “reshore” plants, factories, and jobs back to the United States. The COVID-19 pandemic exposed our over-dependence on foreign supply chains and significant legislation urged companies to invest in onshoring their operations. Federal incentives to boost funding for onshoring manufacturing projects include $15 billion from the Inflation Reduction Act (IRA), $50 billion from the CHIPS and Science Act, and $370 billion from the Infrastructure Investment and Jobs Act. A recent article in Construction Dive cites TSMC’s $40 billion plan in Arizona, Micron’s $100 billion investment in New York, and Texas Instruments’ $11 billion semiconductor plant in Utah as “megaprojects” being built here in the U.S. to take advantage of tax incentives from these new laws.x The fastest growing manufacturing markets are in the Sun Belt, near large ports of entry or distribution – largely to accommodate growth in the electric vehicle industry and the semiconductor industry.xi
American-produced natural gas that can be safely and reliably transported from the wellhead to the manufacturing floor supports our competitiveness. As The Natural Gas Solution explains, “the price of energy – from the electricity needed to run a factory to the [gasoline] powering the delivery truck – impacts the final cost of every item you purchase.”xii
Our country’s plentiful supply of natural gas supports jobs and gives U.S. energy-intensive manufacturers an advantage over foreign competitors. In 2016, the National Association of Manufacturers (NAM) estimated that total natural gas demand is expected to increase by 40 percent over the next decade, with the manufacturing and power generations sectors driving that need.xiii That was before passage of the IRA, CHIPS and Science Act, and the Infrastructure Investment and Jobs Act – and well before recent talks about growing needs for data centers to support AI and technological growth.
Natural gas is also used for petrochemical manufacturing, which is necessary for plastics, fertilizers, synthetic fibers, cosmetics, and medicines. Last year, the American Chemistry Council reported that U.S. chemical industry investment linked to natural gas is over $200 billion, due to the natural gas and its plentiful supplies and ability to support chemical manufacturers’ emissions reductions efforts.xiv
Natural Gas Pipeline Capacity is Required for Power Needs
U.S. power demand expectations are repeatedly underestimated by forecasters. For example, since 2015, forecasts such as the U.S. Energy Information Administration (EIA) have repeatedly underestimated the year-ahead gas demand in the power sector by about 3 Bcf/d, on average. In 2022, forecasters dramatically missed annual demand by a whopping 24 percent.
Some of Williams’ largest customers have made the following predictions about the continued and
increased need for electricity:xv
- Georgia Power says its current load growth projections are 17 times higher than what was forecasted in 2022. This will require a mix of energy sources, including additional gas-powered generation.
- A report from Duke Energy indicates that North Carolina and South Carolina together are experiencing eight times the load growth they projected just two years ago. Said another way, for every power plant built over the last 60 years, Duke would need to build half of that again in the next decade to meet expected demand.
- Dominion Energy also is forecasting power load needs from new data centers to grow 2.5 times over the next ten years in Virginia, already home to more than 35 percent of all hyperscale data centers worldwide, including facilities owned by Amazon, Alphabet, and Microsoft.
When building out energy infrastructure, plans consider peak volumes, not averages. And peak natural gas infrastructure providers and customers must plan for increasing peak demand needs for those extreme weather days or seasonal demand peaks, rather than for annual average volumes. Peak natural gas demand is increasing due to AI- and EV-driven electricity demand and intermittent wind and solar capacity, which tends to increase the variability and peaks for natural gas demand. Demand for natural gas has steadily grown, with a 6 percent increase in annual natural gas demand and peak day demand from 2022 to 2023. In July 2023, a new peak day record was set at 53 Bcf/d.
Lack of Adequate Pipeline Capacity Creates Price and Emissions Spikes During Peak Demand
There is a need for incremental gas capacity, or volume above technically available capacity at existing interconnection points between two market areas. In other words, there is a need to create new interconnection points to meet growing demands for natural gas. As prices in pipeline-constrained markets, such as New England and Chicago, continue to spike each winter with high demand, Southwest Pennsylvania prices tend to be more moderate, due to better pipeline access to abundant natural gas supplies from Appalachian natural gas basins.xvi
Additionally, the lack of adequate natural gas infrastructure leads to the use of more carbon-intensive fuels on peak days of demand. For example, during Winter Storm Elliott, when natural gas was infrastructure constrained and wind and solar could not keep up, significantly more carbon-intensive fuels were added to meet power generation needs, which corresponded to a 42 percent increase in carbon dioxide emissions, due to the burning of fuels that are 2.5 times more carbon-intensive than natural gas.xvii
There is a growing need for reliable natural gas infrastructure investment, as demand for gas continues to grow, but the infrastructure being built to deliver that gas has not grown as quickly.
Specifically, natural gas demand has grown 43 percent since 2013, while infrastructure to deliver natural gas has only increased 25 percent. And notably, storage delivery capacity has only grown 2 percent. A streamlined permitting process would allow for faster and more cost-effective development of infrastructure.
The Need to Modernize our Nation’s Permitting System
Williams is encouraged by your leadership, as Chairman and Ranking Member, to further bipartisan interest in reforming permitting processes for our nation’s energy infrastructure.
Permitting reform is vitally needed for natural gas pipelines. Although it only takes six-to-nine months to build a pipeline across multiple states, the regulatory process that precedes such a project currently takes about four years. Virtually every pipeline project encounters costly and time-consuming delays due to duplicative permitting processes, a lack of cooperation between agencies, and inadequate judicial review standards.
We appreciate that this Committee’s leadership remains committed to pressing forward with more comprehensive reforms. To that end, Williams strongly supports the Spur Permitting of Underdeveloped Resources (SPUR) Act, introduced by Ranking Member Barrasso.
Targeted improvements to the Natural Gas Act were included in H.R. 1, the Lower Energy Costs Act, introduced by Rep. Steve Scalise (R-LA), which passed the House on March 30, 2023, and the SPUR Act S. 1456 (SEC. 3004 and SEC. 3011) which was introduced in the Senate and referred to the ENR Committee. Under these changes:
- No longer can a state use the Clean Water Act Section 401 process to wield a one-state veto of a critical interstate infrastructure project. Instead, a state can raise concerns about a project’s water quality impacts as a participating agency under the FERC-led NEPA process: the proper forum to address potential concerns.
- FERC is authorized, based on state and EPA input, to include, in any order or certificate for a project, those terms and conditions that FERC finds necessary to ensure the project’s compliance with applicable water quality requirements – provided the finding is supported by clear and convincing evidence. This includes the ability to remedy a state’s water quality concerns.
- Long-standing NEPA case law is preserved whereby the NEPA lead agency must give due consideration to input from states and other participating agencies (the “hard-look” requirement).
- To address the problem of endless and often frivolous lawsuits, Section 3011 of the SPUR Act (“Judicial Review”) requires a reviewing court to remand any federal or state agency denial of a permit for an interstate pipeline project if the permit denial is not supported by clear and convincing evidence.
The SPUR Act will unlock the Nation’s full energy potential by eliminating inefficient bottlenecks in federal permitting and approval procedures.
Williams is a Committed Partner in Our Nation’s Leadership Toward a Lower-Carbon Future
With its abundant natural gas supplies, the United States is perfectly positioned to move to a lower-carbon future that meets growing energy demands from electrification, data centers, AI, and onshoring manufacturing. Reforms to federal permitting and review processes will help us realize this future.
Williams appreciates the bipartisan and committed efforts of this Committee to further these issues for the benefit of the American people. We stand ready to be a resource and constructive, solutions-oriented partner.
Sincerely,
THE WILLIAMS COMPANIES, INC.
T. Lane Wilson
Sr. Vice President and General Counsel
i https://www.williams.com/2024/03/05/natural-gas-is-powering-ai-and-ev-innovation/
ii https://www.eia.gov/todayinenergy/detail.php?id=61928&src
iii Data source: IHS North America wind and utility-scale solar PV fundamental REC values, June 2022
iv S&P Global Commodity Insights © 2024. Based on estimated U.S. annual average capacity values through 2040 for PV solar
and onshore wind assigned by power grid regulators to assess reliability for future demand needs. Natural gas reliability based
on PJM’s assigned capacity credit for combined cycle for 2025/2026.
v https://www.nyserda.ny.gov/Impact-Greenhouse-Gas-Emissions-Reduction
vi https://www.timesunion.com/opinion/article/commentary-what-exactly-energy-transition-19448746.php
viihttps://www.wsj.com/business/energy-oil/data-centers-energy-georgia-development-7a5352e9?mod=Searchresults_pos1&page=1
viii https://www.washingtonpost.com/business/2024/03/07/ai-data-centers-power/
ix https://etfdb.com/energy-infrastructure-channel/williams-wmb-golden-age-natural-gas/
x https://www.constructiondive.com/news/manufacturing-construction-onshoring-ancillary-projects/699500/
xi https://www.cbre.com/insights/briefs/us-industrial-market-benefits-from-rise-in-onshore-manufacturing
xii https://naturalgassolution.org/natural-gas-makes-u-s-manufacturing-competitive/
xiii https://nam.org/wp-content/uploads/2019/05/NAM_NG_Report_042816.pdf
xiv US Chemical Industry Investment Linked to Shale Gas Tops $200 Billion – American Chemistry Council
xv https://www.williams.com/2024/03/05/natural-gas-is-powering-ai-and-ev-innovation/
xvi Source: S&P Global Commodity Insights © 2024 Algonquin city-gates was used as the proxy for New England. Chicago city-gates as the proxy for Chicago. EGT South was used as the proxy for SW PA
xvii Williams Winter Storm Elliott Case Study