In this episode of the Pipeliners Podcast, host Russel Treat talks with Rob Jennings of the American Petroleum Institute about how the rapid growth in electricity demand is creating new opportunities for the natural gas and pipeline industries. The discussion explores the changing dynamics of U.S. power generation, including the resurgence of domestic manufacturing, the rise of energy-intensive data centers, and the policy and infrastructure challenges that come with meeting future energy needs. Together, they highlight why expanding natural gas infrastructure will be essential to supporting the nation’s growing demand for reliable electricity.

Growing Electricity Demand Show Notes, Links, and Insider Terms

• Rob Jennings is the Vice President of Natural Gas Markets at the American Petroleum Institute. Connect with Rob on LinkedIn.
  • API (American Petroleum Institute) represents all segments of America’s natural gas and oil industry. API has developed more than 800 standards to enhance operational and environmental safety, efficiency, and sustainability.
• Natural Gas Markets – The segment of the energy industry focused on the production, distribution, and consumption of natural gas for power generation, industrial use, and export.
• Upstream / Midstream / Downstream – Industry sectors describing different stages of oil and gas operations: production (upstream), transportation (midstream), and refining/distribution (downstream).
• LNG (Liquefied Natural Gas) – Natural gas that has been cooled to liquid form for ease of storage or transport, often exported to global markets.
• Shale Revolution – The rapid expansion of natural gas and oil production in the U.S. due to advances in hydraulic fracturing (fracking) and horizontal drilling.
• Power Generation Mix – The combination of different energy sources (e.g., natural gas, coal, nuclear, renewables) used to produce electricity in a region.
• Per Capita Consumption – The average amount of electricity consumed per person; used to measure changes in energy efficiency and demand intensity.
• Energy Efficiency Standards – Regulations or policies designed to reduce electricity usage by improving the performance of appliances, buildings, and industrial processes.
• Reshoring – The return of manufacturing operations to the U.S. from overseas, driven by industrial policy and economic incentives.
• Industrial Policy – Government actions (e.g., tariffs, tax incentives) aimed at influencing the development and competitiveness of specific industries.
• Infrastructure Bill – Refers to the 2021 Bipartisan Infrastructure Law, which funds U.S. infrastructure improvements, including energy and manufacturing projects.
• Inflation Reduction Act (IRA) – U.S. legislation providing incentives and tax credits to encourage domestic clean energy production and manufacturing.
• Tariffs – Taxes on imported goods used to incentivize domestic production by making foreign products more expensive.
• Critical Minerals – Essential raw materials (e.g., lithium, cobalt) used in energy storage, batteries, and high-tech manufacturing.
• Data Centers – Facilities housing computer servers that store and process digital data; increasingly energy-intensive due to artificial intelligence and cloud computing.
• Artificial Intelligence (AI) – Advanced computing technology driving new data center development and increasing electricity demand.
• Baseload Power – Continuous, reliable power generation required to meet consistent electricity demand, often provided by natural gas, coal, or nuclear plants.
• Bring Your Own Generation (BYOG) – A concept where data centers or large facilities build their own dedicated power generation to meet energy needs instead of relying solely on the electrical grid.
• Grid Reliability – The ability of the electrical grid to provide uninterrupted power supply despite fluctuating demand and generation sources.
• Department of Energy (DOE) – Federal agency responsible for national energy policy and oversight of energy production, efficiency, and research.
• FERC (Federal Energy Regulatory Commission) regulates, monitors, and investigates electricity, natural gas, hydropower, oil matters, natural gas pipelines, LNG terminals, hydroelectric dams, electric transmission, energy markets, and pricing.
• Transmission Lines – High-voltage infrastructure used to transport electricity from power generation sources to substations and consumers.
• Switchgear / Transformers – Electrical equipment essential to grid operations, controlling and converting voltage in power systems.
• Permitting – The regulatory approval process required to construct energy infrastructure such as pipelines, power plants, and transmission lines.
• Megawatt (MW) – A standard unit of power measurement equal to one million watts, used to quantify generation capacity or energy consumption.
• Peak Load / Demand Surge – The highest level of electrical demand during a specific period, often caused by simultaneous energy use (e.g., EV charging in the evening).
• Electric Vehicle (EV) – A vehicle powered by electricity rather than internal combustion, contributing to increased electrical grid demand.
• Battery Storage Duration – The length of time an energy storage system can discharge electricity; current market standard is around four hours.
• Combined Cycle Gas Plant – A highly efficient power generation facility that uses both gas and steam turbines to produce electricity from natural gas.
• Baseload vs. Intermittent Power – Baseload refers to continuous generation (e.g., natural gas, coal), while intermittent sources (e.g., wind, solar) depend on environmental conditions.
• Pipeline Takeaway Capacity – The total amount of natural gas that can be transported out of a producing region through existing pipeline infrastructure.
• Permitting Reform – Policy efforts to streamline federal approval processes for energy infrastructure projects like pipelines and transmission lines.
• Public Service Commission (PSC) – State-level regulatory agency that sets utility rates and oversees local energy providers.
• Pipeline Operations Excellence Management System (POEMS) – EnerSys software suite for managing safety programs, control room operations, and field compliance in pipeline systems.
• PJM / ERCOT – Major U.S. regional grid operators. PJM covers the Mid-Atlantic and parts of the Midwest; ERCOT manages most of Texas’s power grid.
• Wholesale Power Rates – Prices charged for large-scale electricity transactions between generators and utilities, regulated by FERC.
• Pipeline Opportunity – The emerging need for expanded natural gas infrastructure to meet growing electricity demand from manufacturing, AI, and electrification trends.

Growing Electricity Demand Full Episode Transcript

Russel Treat:

Welcome to the “Pipeliners Podcast, Episode 414,” sponsored by EnerSys Corporation, providers of POEMS, the Pipeline Operations Excellence Management System, operations and compliance software for the pipeline operator to address safety program management, control room management, and field operations. Find out more about POEMS at enersyscorp.com.

[background music]

Announcer: The Pipeliners Podcast, where professionals, bubba geeks, and industry insiders share their knowledge and experience about technology, projects, and pipeline operations. Now, your host, Russell Treat.

Russel:

Thanks for listening to the Pipeliners Podcast. I appreciate you taking the time. To show that appreciation, we give away a customized YETI tumbler to one listener every episode. This week, our winner is Jesse Watson with Eastman Texas Pipeline.

Congratulations, Jesse. You are this week’s winner, and your YETI is on its way. To learn how you can win this prize, stick around till the end of the episode.

This week, we’re going to talk with Rob Jennings of API about how growing demand for electricity is a pipeline opportunity. Hey, Rob, welcome to the Pipeliners Podcast.

Rob Jennings: Russel, happy to be here. Thanks for having me.

Russel:

I’m looking forward to this conversation because I think, in a lot of ways, pipeliners have heard a lot of bad news in the last 5 or 10 years, and we’re going to talk about some stuff that’s good news for pipeliners, so that’ll be a pleasant change of pace.

Before we dive in, I want you to do this, tell us a little bit about who you are and where you are, what you do, all that kind of good stuff.

Rob:

Absolutely. Thanks, Russel. My name is Rob Jennings. I’m the Vice President for Natural Gas Markets at the American Petroleum Institute.

Most of your listeners have probably heard of API, but if not, we are the largest trade association representing the entire oil and natural gas industry, so all the way from upstream production through midstream pipelines, and then downstream, and of course, LNG exports.

At API, my role is to work on any policy that impacts demand for US natural gas. The big movers in that space lately have been the power sector, of course, and then increasingly over the past decade or so, LNG exports. That’s what I do. I’m based here in Washington, DC. Again, happy to be here and chatting with you today.

Russel: How is it that a guy who is working for API and is talking about the oil and gas value chain is going around talking about electrical demand? How does that come about?

Rob:

Well, there’s a pretty big nexus between the natural gas industry and electricity. As of last year, natural gas is the largest source of US electricity generation. It’s about 43 percent. That’s been a big growth area.

If you turn back the clock to, say, 2005, our biggest source of electricity was coal at about 45 percent. Gas was very low, below 20 percent. The show revolution really flipped the script on that. Now we’ve got gas accounting for close to half of power generation, and coal has really waned in the wake of that big growth from gas. That’s the nexus there, Russel.

Russel: Let’s build a little context. Our subject is Electricity Demand Growth and Why That’s Pipeline Opportunity. Let’s build a little context. What’s been going on for the last 20 years or so with electrical demand in the US?

Rob:

Since about 2005, 2007, roughly, demand for electricity in the US, interestingly enough, has been almost perfectly flat. Demand in 2024 was only slightly higher than it was back in the mid-2000s. That was a big change from the preceding decades.

If you look back at the ’50s, ’60s, ’70s, ’80s, and even ’90s, demand for electricity in the US grew very rapidly. The big drivers there were, of course, population growth and expanding workforce, rural electrification, and things like that.

As we got into the 2000s, the economy in the US really evolved a bit from more of a manufacturing-type economy into a services and information-based economy.

That meant we had fewer electricity-intensive industries. At the same time, we started putting in place energy efficiency standards for buildings, for houses, and for appliances. Your washing machine today uses a lot less electricity than its counterpart did 30 years ago. Those drivers have combined to keep electricity demand very flat over the past 20 years.

That’s lulled us into a false sense of security in terms of the way power markets work, in terms of the pace at which we have to build infrastructure, including pipelines and things like that. That’s really what’s been happening over the past two decades.

Russel:

I find this interesting. If you think what was going on in the ’50s, ’60s, and ’70s is that was the heart of the manufacturing revolution. Not revolution, but manufacturing really went to town starting with World War II. It was a massive scale-up.

Manufacturing requires a lot of power demand because you’re moving conveyors. You’re moving equipment. Most of that’s done with electrical motors.

As we’ve outsourced more and more and more of our manufacturing overseas, that demand has dropped way off, but we haven’t seen electric demand drop off because population has grown.

Likewise, you mentioned all the energy-saving things we’ve done with home construction and building construction and other things, and yet that hasn’t caused electrical demand to become less. It stayed flat.

What, in effect, has happened is, we’ve done all these electrical demand-reducing activities, but the net result is the demand just stayed flat. Frankly, that’s compelling because just the natural growth along with population, you would expect to see three percent or so growth every year.

Rob:

That’s a great point. A good way to look at it is the per capita consumption of electricity in the US is declining. I remember when we hit a population of 300 million in the US back in 2006, I was in high school. That was a big deal.

Today, we’re closer to 350 million. During that period, that demand for electricity has stayed almost perfectly flat. That intensity metric is probably the best way to look at just the actual decline in usage per person.

Russel: It’s interesting too because the reality is, in terms of the number of machine hours an individual is interacting with something that consumes electricity is way up.

Rob: You’re absolutely right. Just think of your average day. Your alarm clock is your cell phone. You turn on the news. You run the microwave. You look at your iPad. You turn on your TV and watch…

Russel: You’re on your computer all day long.

Rob: Netflix.

Russel: Some of us are driving electric cars. Our machine hour per day per person using electricity is way, way up. Then even so, electrical demand is flat.

Rob: It is impressive that demand is flat, given all the things you said. Think about how many people have electric heating today that used oil or something else as of a decade ago. It is impressive. It speaks to just the gains in efficiency that we talked about earlier.

Russel: What is the next 10 or 20 years going to look like?

Rob:

That’s the trillion-dollar question or multi-trillion-dollar question, if you look at some of the stock market valuations these days. The biggest change we’re seeing now is all of the predictions out there.

The electric utilities, the grid operators, everybody has updated their forecasts over the last couple of years. They’re looking at things like the return of advanced manufacturing to the US, the reshoring of jobs that had gone overseas. They’re looking at the advent of…

Russel: Before you jump off of that, I want to go a little slower, Rob, and just dig into each of these subjects a little bit. The reality is, when that manufacturing comes back, it won’t be done the same way it was done before. There’ll be a much higher level of robotics involved in that manufacturing…

Rob: That’s absolutely right.

Russel: which means there’ll be a much higher number of machine hours to manufacture the same product. Again, that equipment is probably going to be more efficient in terms of how much electricity it uses, but there’s going to be a proliferation of that equipment.

Rob: Absolutely. It’s a pretty big shift from what used to be human energy to now electrical energy, through these robots and other automation. That’s a great point.

Russel: Return of manufacturing. Let’s talk a little bit about that in scale. How much manufacturing are the prognosticators saying is going to return? How fast?

Rob:

That depends on how you ask. If you look at the last few years of industrial policy in the US, President Biden had the infrastructure bill, the Inflation Reduction Act. The idea there was to really use an incentives approach, what we call a carrot approach, tax credits for building things here in America.

They announced close to a trillion dollars in new manufacturing facilities, a lot of which were across the Southeast, the Mid-Atlantic and the Midwest, but some in Texas as well.

Then we had a pretty big shift last year, of course, with the election of Donald Trump to his second term. His industrial policy is far different in that it uses what we call the stick approach, the punishment approach. That comes in the form of tariffs.

What they’re doing is effectively saying, “If you don’t build in the US, then you don’t get access to the major consumer market that is the United States.” We’re a very consumer-driven economy.

Just in the last year since he’s taken office, we’ve seen multi-trillions of dollars worth of announced new manufacturing facilities, everything from steel and fertilizer and lithium and other critical minerals and things like that, but down to even apparel and furniture and things like that. It’s coming at a vast scale.

Time will tell exactly how things shake out, but we could be looking at a fairly significant boom in manufacturing here in the US.

Russel:

In my mind, I’m listening to you talk and I’m trying to quantify, what does that mean in terms of incremental electrical demand? It’s hard to say because it’s hard to say what the current manufacturing demand is versus what the new manufacturing demand will be, but it’s significant.

It’s probably a 30 percent increase in manufacturing electrical demand in the next five years. It’s a big number.

Rob: It very well could be. Absolutely.

Russel: That’s a big factor. What’s the next big factor?

Rob:

The other big driver here — it’s something you cannot open the newspaper without seeing headlines about — is the advent of data centers that are needed to drive artificial intelligence. Artificial intelligence has really pervaded just about every corner of our economy over the last couple years.

The thing about these data centers is that they are very, very energy hungry. We’ve got data centers now that use as much electricity as a nuclear plant produces. Arguably, that’s an even bigger driver than the reshoring of these manufacturing jobs.

That’s something we’re watching very closely because there’s a bit of a mismatch between how quickly you can build a data center, which could take anywhere from one to three years, versus a large new power generation facility, which, for, say, a gas plant, could be three to five years, three to six years and for a nuclear plant can be even more than that.

That’s one of the big challenges we’re facing as demand for electricity ramps up quickly over the next 5 to 10 years, is can we build the power generation we need to support that and to win the AI race, which the Trump administration has really staked its legacy on.

Russel:

There’s some interesting dynamics too with regards to that. I’ve been to some meetings in Houston where this has been discussed in the private equity community.

In the regulators of electric power, the ones that say, “Yes, you can site a plant. Yes, there’ll be demand to support it,” they’re not inclined to let a data center build dedicated generation because they want that generation on the grid.

The flip side of that is the grid can’t support that. The lead times on some of the critical infrastructure to build out the grid, like switchgear and transformers and things of that nature, is multiyear right now, which also goes back in this loop about, what about manufacturing?

Rob:

That’s a great point. One of the big debates now around these data centers is whether they should, what we call, BYOG, bring your own generation. Should they just build so they know they have it, or should they rely on the grid? The different power markets around the US are attempting to address this in different ways.

Actually, pretty interestingly, last Friday, the Department of Energy sent a letter to FERC, the Federal Energy Regulatory Commission, which is just down the street from here, from us here at API, saying, “You guys need to figure this out.”

They laid out some principles and said, “Look, we need to minimize the impact of this on rate payers. We need to accelerate and expedite the speed with which we get these data centers and power generation online.”

That’s just another indication of how important this administration views us winning the AI race and us being able to reshore these manufacturing jobs and having the power needed to do that.

Russel:

If I were to speculate, what I think we’re going to see is a proliferation of smaller generation. I think that’s what we’re going to see. The other question that comes up around all this, there’s also a huge amount of house-level generators being installed throughout the South, where they have storms that knock the power out.

Most of that stuff runs off of natural gas. That’s not permitted. At what level do you permit a generator?

Rob: That’s a great point. You could set a cutoff in terms of the electricity output, if you say one megawatt and below doesn’t need a permit or something like that. That’s another question that the regulators are really going to have to grapple with.

Russel:

There’s a lot of 750 kVA generators out there that are tractor trailer side that people drive around and drop on job sites for industrial level loads for a period of time. That stuff’s not permitted. Anyways, it’s a very interesting question. All of that goes to, that’s all great, but what are you going to fuel that stuff with, and how are you going to get the fuel to it?

There’s data centers. Of course, we’re all hearing about data centers. They are very power-hungry. Every data center that’s going in is consuming more power than a small city, typically.

Rob: They’re big, almost unfathomably huge, in terms of the loads they need.

Russel: What else is going on that is going to drive electrical demand?

Rob:

Those are the two big ones, but there are a couple other things happening that present different types of challenges. The main bucket they fall into really is that, there are a lot of things that we have historically used fossil fuels for, like the transportation sector and the heating sector, residential/commercial heating sector.

A lot of those are being converted to electricity based largely on state policies, either incentives or requirements and things like that. While the magnitude of that demand isn’t going to be nearly as big as, say, reshoring or data centers, what it does present is challenges in terms of patterns.

Let’s say you’ve got an entire city where half the people convert to electric vehicles. During the day, they’re all at work, but then they come home at 5:30. All of them suddenly plug in their electric vehicles in their garages overnight to charge. You’ve got a surge of demand hitting the grid just as the sun is going down.

If this is a city that’s powered heavily by solar, that’s just when the solar generation is waning for the day. You’ve got to make sure you’ve got some flexible generation that can turn on quickly to meet this load.

Similarly, on the heating side, we know the heating demand peaks in the winter. That’s also when you’re not getting much out of your solar generation. You can see why, while the magnitude isn’t as big, just the patterns of usage from these new types of loads is going to be challenging for utilities and grid operators around the US.

Russel:

I think electric power transportation is here to stay. We actually moved away from electric power transportation in a lot of cities because there used to be a lot of street cars and stuff that were electrically powered. We’ve moved away from that. We moved away from that to buses. Most of those buses were diesel powered.

Now we’re powering them on compressed natural gas or summer electric, but there’s issues with it. I don’t know if we’re going to see an expanded demand in electric vehicles, but I think we’re going to see an expanded use.

There’s a lot that’s going to happen with battery technology. I don’t think lithium is the technology we’re going to land on long-term. We’re going to come up with something that’s better, either because of cost or because availability of the material to make the batteries.

That’s going to be around for a long time. How that’s going to impact load is not well understood.

I think we understand how it impacts it if we’re going to have it in the neighborhoods, but I don’t think we understand it, how it’s going to impact us if, well, what if I take a fleet of city buses and I put them on electric power? That’s going to have to get powered overnight.

Rob: Absolutely.

Russel: Am I going to need dedicated power generation to recharge all those batteries in the buses, and then how am I doing that? Because I’m not going to do it with wind and I’m not going to do it with solar, at least not directly. Right?

Rob:

Yeah. We’ve made a lot of advancements in battery storage over the last 20 years. One of the challenges, though, is the duration. It’s effectively how long these batteries can discharge for.

Today, what you see on the market is mostly the four-hour duration. That’s how they refer to it. You really need to get at least to 8 and more likely up to 10 and 12 to really make that wind and solar generation round the clock and more reliable for uses like what you’re describing with city buses.

Russel:

There’s some interesting technology that’s being looked at as ways to mechanically store electrical power. That’s a whole another conversation, but it plays into this.

If you were going to speculate, how much additional demand are we going to see in the next 5 to 10 years? Is it 5 percent, 10 percent, 30 percent? What’s your best guess?

Rob:

It’s hard to say. There’s been so many forecasts out there over the past two years. Some of them are extremely bullish. Some of them are less bullish. We tend to look at what the grid operators are saying. When I say grid operators, I mean the folks who really run these big multistate, centralized grids.

I’m sitting here in Washington, DC. We’re part of the PJM grid, the Pennsylvania-Jersey-Maryland grid. That’s the largest in the US. It covers 13 states plus Washington, DC. You, of course, are down outside of Dallas. Is that right? Dallas, right?

Russel: Outside of Houston.

Rob: Outside of Houston. That’s right. You’re part of ERCOT, which is a big grid, but not quite as big as the mid-Atlantic. If you look at the latest forecast from PJM, they expect total electricity demand in this grid, in this footprint, to grow 60 percent in the next 10 years.

Russel:

Here’s what’s interesting to me about that is, most of the data center build is not going to happen in that area because the cost of power is too high. It’s going to happen other places closer to the fuel sources and closer to where permitting is not as big a challenge, I would assert.

I don’t know that. I’m making that up. If that’s 60 percent, that means we have to build 60 percent more generation capacity.

Rob: Quickly.

Russel: Quickly. That’s a bit daunting.

Rob:

Agreed. Of course, at the end of the day, you’ve got to make sure that you’re not impacting consumers, your average consumer who just wants to go home and run his air conditioner, that he’s not getting hit by higher bills because we’re building data centers next door to his house.

That’s going to be a persistent challenge and political challenge, really, over the next decade as this industry continues to grow.

Russel: I would also assert that we’re going to see increases in wind and increases in solar, but that will not be adequate to support this demand, that it’s going to require an increase in all of the available sources of power generation, coal, gas, nuclear, etc.

Rob:

That’s absolutely right. One of the characteristics of the data centers and the manufacturing facilities that are coming online is they need baseload power. They run 24 hours a day. The data centers, of course, are going to run 24 hours a day. If you’re a manufacturing facility running three shifts, you need power around the clock.

That’s why we’re confident that, at least in the near term — we’re talking the next 5 to 10 years at least — gas is going to be a critical part of the solution to meeting this demand. One of the best things about gas is it can run around the clock. You can run these big, new combined cycle plants 90 percent of the time.

Russel:

If you talk about the fuels that could support that kind of load, you basically have gas, coal, nuclear, and fuel oils, diesel, that sort of thing. Fuel oils, too expensive, not economic for this kind of thing. Nuclear, you’re probably not getting it permitted and built in the next five years.

That might be a player in the next 10, but it’s not the next player in the next 5. Now you’re down to coal and gas. It’s really, what are the economics, and how quickly can you bring the power online based on those two?

Most of that, I would argue that, for most of the country…Well, I’ll say it this way. In the area where coal proliferates — and given the area where the data centers and the manufacturing proliferate — they may not be co-located. It’s going to be easier to get gas to a lot of those locations than coal, just in terms of transportation costs.

Rob:

Absolutely. We used to produce a billion tons a year of coal. We produce about half of that now. It’s going to be difficult to ramp coal production back up. Just think about the labor force that doesn’t exist anymore. The coal miners didn’t exist anymore.

A lot of that stuff was moved by railroad, and those railroads have been literally picked up from…the spurs that took you from the main railroad to the power plant are gone. Again, that’s just another indication that we really think this is going to be a gas story. That’s why we think you can’t have a gas story without a pipeline story.

Russel: That’s where I was headed with all this. The take is, if it’s a 60 percent increase in gas and gas is currently 40 percent of the demand, it’s probably a doubling of the gas.

Rob: Yeah, it could be. Again, there’s a lot of forecasts out there of exactly how much incremental gas you could need, including from some of the producers themselves. We don’t make forecasts at API, but we love to look at them and try and come up with our own internal view.

Russel: We should probably do the legal declaration. Anything that we’re saying is not anything that represents a position that API holds. It’s simply two guys talking and their personal opinions.

Rob: Yep.

Russel: Legal words to be added later. [laughs]

Rob: That works for me.

Russel: I’m speculating a bit, but I think, just a rule of thumb, windage and elevation, next five years, we could see it doubling in gas demand.

Rob: Yeah. Gas demand in the power sector. That would be something.

Russel: That starts to create a whole lot of questions about who’s going to spend the bits to get that out of the ground? Are they going to do that in areas that are already producing and where the infrastructure is there? Even if they do, they’re still not going to have enough takeaway capacity because the takeaway is going to have to grow.

Rob: Absolutely. That’s one of the reasons that API, we have an enormous campaign right now to try and get federal permitting done, because we really need to fix some of these statutes that govern the development of linear infrastructure like pipelines, transmission lines, because we know we’re going to need more of them in the future to power growing demand from AI, from manufacturing, etc.

Russel: Rob, what do you think some of the vulnerabilities or challenges of this are going to be, beyond just the permitting, and the supply chain, and the construction? What are some of the other issues that people should be thinking about and addressing as it comes to building all this additional capacity?

Rob:

Yeah, I think one of the challenges that’s already reared its head, and in fact, it’s basically become the top issue in the New Jersey gubernatorial election that’s happening next week, it’s just the issue of rising electric utility bills.

That’s another issue that you can’t open the newspaper without seeing a headline for, is the notion that our bills are rising for the first time, rising much faster than they have over the past 20 years.

The notion that we’re going to be bringing on so much new demand for electricity, and it’s not quite clear yet that we’re going to be able to bring on the corresponding amount of power generation. What does that mean for customer bills?

Like I said, that’s going to be a real political challenge for the next five years, something that the Trump administration and beyond is going to have to grapple with. Because again, this has become an arms race. It’s become the space race. Who is going to win the battle for artificial intelligence supremacy?

You’ve got to be able to convince the guy that just wants to pay his bill every month that this is worth winning. That’s probably the biggest challenge/vulnerability that we’re going to face.

Russel:

What this conversation is causing me to reflect on, is I’m old enough to remember the gas shortages of the ’70s. That’s right around the time that I was starting to drive. I remember, “What day of the week is it? Can I go get gas?”

Gas was cheap. It was like 25, 30 cents a gallon when all that started, but I had a 30-gallon tank in my car and got like 8 miles to the gallon. It wasn’t one of the more hungry cars.

There was a whole shift that occurred in the country around energy policy that followed that. That was also during the period of time where the pipelines were buying gas. They had to sell at rates that were negotiated with the public trust.

They were having to buy gas at a price. They couldn’t recover their cost at the price they were allowed to sell. They just quit shipping the gas. We’re going to see some of that kind of stuff that’s going to be the outcome of policies that have been implemented in the last 20 years.

Rob:

That’s right. The two agencies we talked about earlier, the DOE, Department of Energy, and FERC. FERC especially is going to have to…They’re the ones that regulate wholesale rates for power and pipeline tariffs for interstate natural gas pipelines. They’re going to have to be tackling a lot of these challenges and figuring out ways to protect consumers. That’ll be the space to watch.

Similarly, at the state level, the state public service commission that’s effectively the FERC’s counterpart at the state level, they’re the ones that set the rates that you pay for electricity every month. They’re going to have to grapple with this rapid growth.

Again, I just can’t overstate the false sense of security we’ve been lulled into by the fact that we’ve had not only very affordable natural gas, but no growth in demand for electricity over the past 20 years.

Russel: We’ve been able to do some things that if we were growing and had different demands, we wouldn’t be able to do. Those decisions, those policies, are not going to work in the new reality. They’re either going to cause prices to go up or supply to get iffy, or we’re going to have strategic issues as a country in our ability to compete effectively in AI.

Rob:

That’s absolutely right. You asked about vulnerabilities. One of the other things that we’re watching closely is, especially in terms of policies that have been set over the past decade or so, we’ve had a lot of states set very ambitious, what we call, renewable portfolio standards.

These are effectively requirements that a certain percentage of electricity produced in a state comes from a certain energy source. In many cases, it’s wind and solar.

Those policies, almost all of them, were set during that period where demand for electricity wasn’t growing at all, so complying with them was pretty straightforward. You retire a megawatt of coal, and you bring on a megawatt of wind or solar and you’ve complied for that year.

With demand growing, that math gets a little trickier because not only do you have to replace the retiring megawatt of coal, but you’ve got to bring on a new megawatt as well to meet the growth for demand. That can make a lot of those policies more difficult to comply with, certainly more expensive, but more…

[crosstalk]

Russel:

You have to do it in a shorter time frame. The other thing we haven’t talked about and probably should talk about is just the other vulnerability or weakness is just very simply the grid. Much of the electrical distribution grid in the US is 50 years or more old.

In some parts of the country, it’s over 100 years old, particularly in parts of California and in the Northeast. Particularly the original hydroelectric power generation, that stuff is very, very old. A lot of that distribution has not been properly maintained.

If you want to read a great book about this, read “California Burning.” It’s a really well-written book. It talks about natural gas and how it plays into all that as well. It’s interesting when you have a historical construct for some of the decisions that are being made today. It provides all that.

All this to say that I’m going to assert — again, I’m making this up — that what makes logical sense is smaller generation where you’re generating the power where you’re going to use the power, because that takes the load off the grid.

One of the challenges with both solar and with wind is it has to come through the grid. Particularly wind is widely dispersed. You have to build a grid and get it off the grid. You can’t just build it right next to where you’re going to put the data center in.

What that means is there’s going to be more smaller generation versus large generation going out to the grid. What does that mean? That means more pipelines.

Rob: We need them and we hope we can get this permitting reform done, hopefully this Congress, so we can build those pipelines. It’s never been more clear that we need them.

Russel: I think that given what’s going on in China and what they’re doing with AI and other things, we are at risk of losing our ability to be self-determined.

Rob: They don’t have the permitting challenges that we have. They greenlit a 70,000-megawatt hydropower dam earlier this year. They’re still bringing online new coal plants. These new generators aren’t getting litigated into oblivion or blocked by other market forces.

Russel: They don’t even really have a mechanism for doing that.

Rob: That’s what we’re up against. That’s why it’s important to get rid of some of these unnecessary barriers to building new infrastructures here in the US.

Russel:

I couldn’t agree more. Look, great conversation. The good news is more pipelines are going to need to get built, operated, and maintained. For those of us that are working in the pipeline business and have been hearing for the last 10 years how wind and solar is going to replace us, not in my lifetime.

[laughter]

Rob: Thanks, Russel. It’s been a pleasure.

Russel: Probably not in the lifetime of anybody currently alive.

Rob: That’s right.

Russel: Look, great to talk to you, Rob. It’s been a pleasure to have you. We’re definitely going to have to have you back.

Rob: Absolutely, Russ. I look forward to it. Thanks again.

Russel:

I hope you enjoyed this week’s episode of the Pipeliners Podcast and our conversation with Rob. Just a reminder, you should register to win our customized Pipeliners Podcast YETI tumbler. Just visit pipelinepodcastnetwork.com/win and enter yourself in the drawing.

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Russel:

If you have ideas, questions, or topics you’d be interested in learning about, please let me know, either on the Contact Us page at pipelinepodcastnetwork.com, or you can reach out to me directly on LinkedIn. Thanks for listening. I’ll talk to you next week.

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