Summary
- Driven by broad electrification, industrial onshoring, and an unprecedented AI data center buildout, US electricity demand is experiencing a step-change in growth that the traditional power grid is struggling to accommodate.
- To bypass utility grid bottlenecks and meet aggressive construction timelines, tech giants and data center operators are increasingly turning to dedicated, on-site natural gas turbines for reliable, rapid, and scalable power.
- Midstream companies are expanding natural gas pipelines to help meet demand from utilities and to serve data centers directly, driving long-term EBITDA growth for the space.
US power demand is experiencing a historic surge, fueled by broad electrification and a massive wave of AI data center construction. With the traditional electrical grid struggling to keep pace, data center operators are increasingly turning to rapid, behind-the-meter natural gas solutions to secure reliable power. Learn more below about the drivers of increased power demand, the rising need for natural gas to provide reliable energy, and how midstream companies are capitalizing on this shift.
Broad electrification and data center growth drive a step change in US power demand.
After decades of stagnation, US power demand is surging, driven by broad electrification, industrial onshoring, and the AI data center buildout. For 2025, US power generation was up 2.8% from the prior year, setting a record.
The traditional power grid is struggling to match the scale of new electricity demand. As an example, PJM Interconnection, which manages the grid for 13 states including Virginia, expects its summer peak demand to grow at an annualized rate of 3.6% over the next decade. In 2021, PJM’s 10-year average annual growth rate estimate was 0.3% per year, less than a tenth of the current 10-year growth outlook.
Overall, the International Energy Agency (IEA) forecasts that US electricity demand will rise at a 1.9% compound annual growth rate (CAGR) through 2030. The IEA predicts data centers will represent roughly half of the demand growth, adding ~210 terawatt-hours (TWh) of consumption, which equates to the annual electricity consumption of ~19 million U.S. homes.
The AI data center boom is backed by unprecedented capital deployment. The five largest tech giants – Amazon, Google, Microsoft, Meta, and Oracle – are projected to spend ~$700 billion collectively in fiscal 2026 alone (based on consensus estimates for Microsoft and company guidance for others). This represents a significant increase from September’s expectation for $465 billion in collective investment this year. Despite the magnitude of the buildout, capacity remains constrained. On their 4Q25 earnings call, Google management explicitly cited “power, land, [and]supply-chain constraints” as hurdles for compute capacity.
The rise of behind-the-meter natural gas solutions.
With grid constraints and limitations, data center operators are increasingly seeking dedicated power solutions to support reliability, scalability, and speed of deployment. Bring your own power (BYOP) has been a key theme for data centers. Earlier this month, tech giants signed the Ratepayer Protection Pledge, committing to secure the power generation and transmission updates needed for their data centers to avoid burdening American households. Accordingly, hyperscalers are adopting “behind-the-meter” (BTM) strategies, which rely on dedicated, on-site power generation to bypass utility grids struggling with long wait times for new connections.
To execute this, operators are leaning heavily on natural gas turbines, which can be built and fueled with direct pipelines much faster than waiting for grid upgrades. Specifically, natural gas infrastructure can be deployed in just 2-4 years, aligning well with aggressive data center construction timelines. Furthermore, most planned data center capacity is already clustered near existing natural gas networks, particularly in Texas as shown below.
Source: BloombergNEF, DC Byte final 1Q25 data as of 2/18/26
Note: Colors may appear ‘mixed’ due to a single data center with capacity in multiple stages at once.
Power demand from information technology (IT) load is expressed in units of megawatts capacity
Utilities are also adapting to support the large load growth from data centers. For instance, NextEra Energy (NEE) expects to develop ~6 gigawatts (GW) of natural gas generation through 2032. More broadly, NEE has said it will be disappointed if it does not deliver at least 30 GW to data centers by 2035. Albeit, it would not all be natural gas capacity.
While the long-term outlook for natural gas demand in North America is strong based on growing liquefied natural gas (LNG) export capacity alone (read more), power demand could also be a significant driver for natural gas. Kinder Morgan (KMI) expects US natural gas power demand to grow by 5 billion cubic feet per day (Bcf/d) to 2030. An average of four analyst forecasts suggests power needs could drive an incremental 9.9 Bcf/d of U.S. natural gas demand to 2030.
Looking further ahead to 2035, Williams (WMB) forecasts 10 Bcf/d of incremental power demand strictly within the U.S., while TC Energy (TRP CN) anticipates 12 Bcf/d of growth in the broader North American market. To put this growth into perspective, the U.S. consumed 91.6 Bcf/d of natural gas in 2025.
Natural gas demand provides opportunities for midstream.
To support growing power needs, midstream companies are investing heavily in regional pipeline expansions. Projects are dispersed around the U.S. given the broad-based nature of growing natural gas demand. Notable projects include Energy Transfer’s (ET) 2.3 Bcf/d Desert Southwest Expansion designed to connect Permian natural gas to surging power demand in Arizona and New Mexico. New announcements include TC Energy’s (TRP CN) launch of an open season for the 1.5 Bcf/d Crossroads Pipeline specifically serving data center and power demand in the Midwest and a private joint venture’s advancement of a pipeline to support growing data center demand in North Dakota. Most of these pipelines are expected to come online in 2028 and 2029, aligning with the startup of a large number of data centers.
Midstream companies are negotiating directly with data centers for connection agreements.ET commenced natural gas deliveries to an Oracle data center in Texas in January, and management noted they are currently negotiating over 150 different data center or power opportunities and expect to execute significantly more deals tied to BTM generation. As another example, Kinetik (KNTK) recently signed a connection agreement for CPV’s Basin Ranch Energy Center, a 1.35 GW power plant in West Texas. MPLX (MPLX) signed a Letter of Intent with MARA Holdings to supply Delaware Basin gas for 400 MW of data center power generation (scalable to 1.5 GW).
Pipeline operator Williams (WMB) has a dedicated power solutions division, with ~$7.3 billion in execution across four projects serving data centers. The four projects represent 1.9 GW, and the company has another 6 GW in backlog, for which it has already secured long-lead equipment. Power will be a key contributor to WMB’s 10+% CAGR for EBITDA from 2025 to 2030 (read more). In Canada, Pembina (PPL CN) expects to sanction its 1.8 GW joint venture Greenlight Electricity Centre in 1H26.
The volume of demand is translating into robust project backlogs across the sector. Kinder Morgan’s (KMI) project backlog increased to $10 billion, with roughly 60% power-related. KMI management has identified a “shadow backlog” of over $10 billion in additional opportunities, representing >10 Bcf/d of capacity. WMB’s pipeline backlog grew to $15.5 billion, while DT Midstream (DTM) increased its 5-year organic project backlog last quarter by ~50% to $3.4 billion, heavily weighted toward pipeline projects. Enbridge’s (ENB CN) secured growth backlog increased to ~C$39 billion, while TRP noted its late-stage “pending approval” bucket has grown to ~C$8 billion. TRP has another $12 billion in early-stage opportunities.
With major projects coming online in 2028 and 2029, the most significant earnings impact is still ahead. Reflecting this multi-year growth runway, several natural gas-focused midstream players have issued strong long-term guidance. Anchored directly to end-user demand via fee-based contracts, these projects include strong counterparties and offer excellent long-term visibility to cash flows (read more).
Bottom line.
The AI-driven data center boom and broader electrification trends are driving a step-change in US power demand. As data center operators increasingly bypass a constrained grid in favor of behind-the-meter natural gas solutions, midstream companies are stepping in to bridge the gap. Paired with the ongoing buildout of LNG export capacity, higher demand for natural gas is translating into record project backlogs, extended contract visibility, and long-term, fee-based earnings growth for natural gas-focused midstream companies.
For investors looking to gain exposure to the growth in natural gas demand driven by data centers and broad electrification, midstream energy infrastructure offers a compelling option. Many of the key players at the forefront of this theme, including WMB, KMI, ET, ENB CN, TRP CN, MPLX, PPL CN, and KNTK are constituents of the Alerian Midstream Energy Select Index (AMEI). Energy infrastructure also tends to offer attractive yields, supported by fee-based businesses that provide some insulation from commodity price fluctuations. AMEI was yielding 4.8% as of March 12.
For more on this topic, watch the replay of our recent 30-minute webcast, “Power Demand, Data Centers, and the Case for Energy Infrastructure.
Looking for midstream insights in your inbox? Subscribe here to keep a pulse on midstream investing through our weekly updates.
AMEI is the underlying index for the Alerian Energy Infrastructure ETF (ENFR) and the ALPS Alerian Energy Infrastructure Portfolio (ALEFX).
Related Research:
WMB Analyst Day: Power & Pipe to Drive Robust Growth
Natural Gas, Demand-Pull Pipelines & Midstream Valuations
U.S. LNG Exports Surge Despite 4Q25 Headwinds
The Nationwide Expansion of Natural Gas to Meet AI Energy Demands
Midstream Leans Into AI Data Center Boom
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for ENFR and ALEFX, for which it receives an index licensing fee. However, ENFR and ALEFX are not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ENFR and ALEFX.
For more news, information, and analysis, visit the Energy Infrastructure Content Hub
