Authored by Irina Slav via oilprice.com,

Natural gas and coal remain the sources of over half of U.S. electricity generation despite a massive government-sponsored push to build out wind and solar as replacements for hydrocarbons.

These have indeed grown as a percentage of generation capacity and as a portion of output. And yet, coal and gas remain dominant, supplying 58% of the electricity generated in the U.S. over the first eight months of this year, according to data from LSEG.

This, Reuters’ Gavin Maguire reported, is down from 60.4% during the first eight months of 2021, which might give transition advocates some hope a zero-carbon grid may be possible at some point in the distant future. However, in absolute terms, output from coal and gas-powered plants has gone up, Maguire noted, meaning they actually supplied more electricity to the grid than they did when they accounted for a bigger percentage of total output back in 2021.

The reason, of course, is rising demand and the inflexibility of wind and solar. As weather-dependent energy sources, these cannot provide on-demand electricity unless they are paired with massive batteries that have yet to be built economically. So, the grid relies on the baseload, round-the-clock, on-demand generation from coal and gas power plants.

Population growth is one of the biggest reasons for this increase in electricity demand. Another, more prominently featured in the media, is the rise of artificial intelligence in the IT industry. In June, The Energy Information Administration reported that U.S. electricity demand had rebounded after the pandemic lockdowns, with the strongest growth recorded in “a handful of states experiencing rapid development of large-scale computing facilities such as data centers.”

Indeed, data centers and the growth in artificial intelligence applications are becoming potentially significant challenges for the energy transition because of the electricity demand they will add to the current total. There are also problems with raw materials for constructing all the data centers necessary to enable even greater utilization of artificial intelligence, which in turn would add more electricity demand that would need to be met by reliable round-the-clock sources.

In this context, it is hardly a surprise that natural gas specifically is enjoying growing demand. The International Energy Agency acknowledged this in a report from December last year. In it, the IEA said that “a significant drop in the price of natural gas, coal plant retirements, low output from wind and hydropower, and high cooling demand in some regions caused the share of gas to increase,” reaching 45% of total generation in the summer months of 2023.

Gas demand is set to increase further as demand for electricity grows, and no amount of new solar and wind capacity additions can really affect this negatively. This might turn into a problem because building new gas-fired power plants is not even remotely as trendy as building solar installations.

Indeed, earlier this year, Upstream reported data from the Federal Energy Regulatory Commission revealing that only 67 MW of new natural gas generation capacity was added in the first four months of the year. This compared with a much more impressive 5.1 GW in the same period of 2023. Solar additions over the same period stood at 7.9 GW, up from 3.8 GW last year.

In the meantime, it has become harder to build a new natural gas plant because of updated EPA emissions rules that place weighty and expensive requirements on developers, making them think twice about building any new plants. Yet this might yet change because of artificial intelligence.

“Gas is the only cost-efficient energy generation capable of providing the type of 24/7 reliable power required by the big technology companies to power the AI boom,” Doug Kimmelman, founder and senior partner at Energy Capital Partners, the private equity investors, told the Financial Times earlier this year.

“It will not be done without gas,” EQT’s chief executive Toby Rice said as the issue of electricity demand from data centers came into the media spotlight—along with the issue of electrification, which is being promoted as an essential part of the energy transition. Essential as it may be, the electrification of transport, heating, and cooking will add new demand, too—and strain the grid further. This, in turn, would strengthen the growth of hydrocarbon energy as nuclear energy remains out of favor due to its high construction costs.

The situation is something of a vicious circle. There is a push to electrify as many things as possible to reduce emissions. Yet this electrification push adds to electricity demand, which can only partially be satisfied by the preferred sources of the transition camp—wind and solar. Since this demand must be satisfied, ultimately, the electrification push increases demand for natural gas and, to a lesser extent, coal. Ironically, it seems that there cannot be a transition without electrification, but there cannot be electrification without hydrocarbons.