While data centers and artificial intelligence (AI) may dominate the news, investments by large load industrial and manufacturing sectors, particularly in the U.S. Southeast, are driving a significant portion of an expected rise in natural gas consumption.
Southeast utility Santee Cooper is looking to add more than 1,000 MW of natural gas-fired electric generation to help meet expected industrial growth and continued economic development across the state. The state-owned utility currently serves 27 large customers whose operations involve industrial, manufacturing and other energy-intensive economic activities. Its industrial customers represent about 17% of the utility’s total energy sales.
The Moncks Corner, SC-based utility provides gas and electric services to about 2 million people in all 46 counties in the state.
“South Carolina as a whole has had strong industrial growth over the past few years,” Santee Cooper spokesperson Mollie Gore told NGI.
The state’s economic growth clocked in at 5.7% in the third quarter of last year, driven largely by retail and advanced manufacturing, including the automotive, tire and aerospace industries, according to the latest report from the U.S. Bureau of Economic Analysis.
Santee Cooper is currently tracking a couple dozen large industrial prospects that are considering moving to its service territory. “I can’t put a number on expectations – we certainly don’t expect that they would all choose our service territory. But bringing in even a few would require additional generation on our system,” Gore said.
Santee Cooper’s Integrated Resource Plan (IRP), which was submitted to the state’s Public Service Commission in May 2023, also would add more than 2,100 MW of solar power by 2032.
“We need both [generation sources], particularly natural gas because it offers baseload capacity and also has the flexibility we need to support that much solar power, ramping up and down quickly in response to the intermittency of solar output,” Gore said.
Also included in the Santee Cooper IRP is the possibility for a large natural gas combined-cycle unit jointly with Dominion Energy South Carolina that would generate more than 2,000 MW to meet spiking demand.
Billions Targeted For Manufacturing, Industrials
South Carolina is not alone in seeing surging electricity demand.
In reports submitted to FERC in 2023, electric utilities revealed that grid planners anticipate a 4.7% surge in nationwide electricity demand by 2028, nearly double the estimate of 2.65% a year earlier. The Federal Energy Regulatory Commission report attributed the surge to the $630 billion investment in facilities that require substantial amounts of energy. The investments included $481 billion for manufacturing and industrial facilities and $150 billion for data centers.
“Even though data centers and AI get all the hype, it’s actually broader than that, in terms of a lot of reshoring of industrial loads that is occurring as well,” Williams CEO Alan Armstrong said during a recent earnings call.
The Southeast states, including the Carolinas, Georgia and Florida, appear to be strategically positioning themselves as hotspots for industries such as autos, airplanes and lithium batteries manufacturing. The region’s pro-business policies, among them sales tax exemptions and property tax incentives, as well as access to ports and railroads and low labor and housing costs, make them attractive for large-scale investments in the energy industry.
According to the U.S. Department of Energy, more than 200 transportation and clean energy manufacturing facilities have been announced since the Inflation Reduction Act (IRA) passed in August 2022.
These facilities represent over $100 billion in new investment. Their concentration in Georgia and the Carolinas is associated with near-term load growth.
‘Firm, Dispatchable’ Natural Gas
To power those facilities, natural gas would remain a critical component of the generation mix, as utilities in Georgia, North Carolina, Tennessee and Virginia are proposing to build dozens of gas-fired power plants over the next 15 years.
Georgia Power, a subsidiary of Southern Company, received approval last month to build three new gas- and oil-burning units at Plant Yates in Coweta County, GA.
“Georgia has continued to experience rapid economic growth since the filing of our IRP in early 2022,” said Georgia Power CEO Kim Greene. “Many businesses coming to the state are bringing large electrical demands at both a record scale and velocity,” Green said when the 2023 updated resource plan was released.
Georgia Power currently is projecting economic load growth of 6,600 MW through the winter of 2030, based on available economic data. This is 17-times higher than what was previously estimated by the utility.
Meanwhile, public power company Tennessee Valley Authority (TVA) plans to invest $16.4 billion over the next four years on additional generation and upgrades to its existing power system to meet rising demand from these and other industrial facilities, according to TVA director of Fuel Supply Jeff Avery.
Those plans include “adding 1.12 Bcf/d of natural gas generating capacity through 2029,” Avery said at the LDC Gas Forum Southeast in Ponte Vedra, FL. New builds include a 1,450 MW combined-cycle natural gas facility to replace the retiring Cumberland fossil fuel plant.
TVA also plans to retire the nine coal-fired units at its Kingston Fossil Plant in Roane County, TN, by the end of 2027. To replace that generation, TVA is seeking to build an energy complex housing about 1,500 MW of gas-fired generation.
Spurred by incentives in the IRA, Georgia, South Carolina and Tennessee also are among the Southeast states leading the development of a new Battery Belt, expanding lithium-ion battery factories.
“The diversity of our generation portfolio enables TVA to better meet changing market conditions and supports energy security for our customers at the lowest system cost,” CEO Jeff Lyash said during an earnings call. “Natural gas capacity provides critically important flexibility to reliably integrate renewables like solar into our system.”
TVA’s generation fleet is nearly 60% carbon dioxide-free and includes 29 hydroelectric dams, nuclear facilities and other renewables such as solar. Plans are underway to also add 10,000 MW of solar generation by 2035, including the first utility-scale solar site.
Feeding Demand
Nationwide, electric utilities are planning to construct more than 70 natural gas power-generating units between 2024 and 2030, U.S. Energy Information Administration data show.
The lion’s share planned through 2025 is concentrated in Florida, Gulf Coast states and Appalachia’s natural gas producing regions. However, much of the additional generating capacity would require pipeline builds to accommodate access to the natural gas needed to fuel the facilities.
For example, the combined-cycle unit planned by Dominion and Santee Cooper would necessitate a much larger conduit to accommodate the facility. Existing supply junctions are near Savannah and Augusta, but the utilities have yet to release details of where and how large the pipeline would be.
Avery said TVA is “definitely blessed” with access to seven major interstate pipelines. Its existing generation egress comes from ANR Pipeline Co., Columbia Gulf Pipeline, East Tennessee Natural Gas (ETNG), Tennessee Gas Pipeline, Texas Eastern Trans Co., Texas Gas Transmission Co. and Trunkline Gas Co.
Some of those pipelines have expansion plans in the works to meet the expected increase in natural gas consumption. Enbridge Inc. plans to modify its existing ETNG pipeline system to provide additional capacity for TVA. Pipeline heavyweight Williams also aims to expand its delivery of natural gas to states including Alabama, the Carolinas, Georgia and Virginia with Its Southeast Supply Enhancement project. Meanwhile, testing of the long-awaited Mountain Valley Pipeline (MVP) is nearing completion.
The dynamics of rising demand and lack of adequate infrastructure have been on full display in the early days of this summer. As natural gas prices continue to languish throughout most of the country, the Southeast has stood out for its premium prices and volatility.
Natural gas prices for next-day delivery at hubs across the Southeast surged on Monday (May 20) amid early summer heat that coincided with pipeline maintenance in the region. Transco Zone 5 moved 71.0 cents higher from Friday at $3.730, while Transco Zone 4 climbed 75.0 cents in heavy volume trade to an average of $3.685.
Temperature highs in major regional population centers reached into the mid- to upper-80s to start the week. Power demand climbed along with the mercury. This coincided with pipeline maintenance that had been disrupting flows between the Gulf Coast and Southeast, including on Transco and Southern Natural Gas Co. (Sonat). The combination drove natural gas prices higher.
Though prices had eased a bit by midweek, the scenario was similar to 2022 when Transco Zone 5 prices abruptly jumped to an all-time high for June-July at $16.43 on June 14, according to NGI Daily Historical Data. Prices at the hub averaged nearly $9.600 for the rest of that month, as heat and pipeline maintenance constrained natural gas flows to the Southeast markets and led to significant price volatility.
New debottlenecking projects would bring more supply into the Transco Zone 5 market. However, Wood Mackenzie analysts said without additional pipeline capacity, the Southeast market remains a “demand island” and the dynamics that unfolded in 2022 could become a regular feature.
