Coal to the Rescue: Natural Gas Prices Set to Rise

Analysts from Wood Mackenzie and Bloomberg New Energy Finance have found that the era of cheap natural gas is coming to an end. A recent study by Wood Mackenzie forecasts Henry Hub natural gas prices, which fell as low as $2 per million BTU over the past decade, will rise to around $5 per million BTU in the next decade.

The low natural gas prices were driven by rapid pay development and year-on-year productivity gains. However, these factors have largely run their course, leading to a need for prices to rise to grow supply from here.

As natural gas prices increase, it will be particularly challenging for AI data centers, which are expected to see a substantial increase in demand over the next decade. According to Bloomberg's forecast, demand will increase by 52% by 2030 and 83% by 2035.

To mitigate the effects of rising natural gas prices, the coal fleet can serve as an energy price shock absorber. The Interior Department recently released a report showing that there is enough coal in federally managed public lands to last at least 600 years. In fact, during a recent surge in natural gas prices, the coal fleet helped keep energy prices low by increasing production and decreasing reliance on natural gas.

The cost of powering AI data centers is a contentious issue, but it's clear that access to affordable energy sources is crucial for economic growth. The ability of utility companies to use coal to mitigate the effects of higher natural gas prices is vital to keeping energy costs low.