Fueling Electrification - Investing in Natural Gas Infrastructure

Natural gas powers about 40% of electricity¹ in the US, driving gas turbine power plants across the country that provide base load. Historically gas demand has grown, despite overall power demand not growing, as it replaced coal. 

Gas Demand Growth is Set to Accelerate 

Source: EIA & EQT Research

As we enter the next chapter, and US power demand is set to grow materially (+55% by 2040 from 2020²), gas will play an even more important role. EQT Corporation estimates that by 2030 US gas demand will rise incrementally from 10 bcf/d (billion cubic feet per day) to 18 bcf/d³. This means gas is likely to grow at almost twice the rate of electricity demand.

The gas market is also tightening. The US is powering ahead as an exporter of natural gas via construction of liquified natural gas (LNG) terminals. These take gas from pipelines, liquify it, and move it by special vessels to export markets in Europe and Asia. The Energy Information Administration (EIA) estimates that liquified natural gas export capacity in the US is on track to increase from 11.4 bcf/d at the beginning of 2024 to 28.7 bcf/d in 2029⁴, should current projects begin operations as planned. This will tighten the gas market, and Boomberg New Energy Finance (BNEF) estimate a shortfall of gas all the way to 2030 reaching as high as 2.1 bcf/d in 2028⁵. This is creating incremental demand for investment in gas pipelines and gas infrastructure.

Why Natural Gas Infrastructure Investing is Appealing

Investing in the gas infrastructure component of electrification is attractive as these stocks often trade at half the multiples and twice the yield of other stocks in the electrification universe⁶, are less well covered, and offer diversification in energy more broadly. Recent additions to the Tema Electrification ETF (VOLT) in the space include*:

• Energy Transfer (ET) which owns the largest gas pipeline and storage infrastructure in Texas and the Midwest. ET connects to power plants and increasingly is able to serve data centres directly. The stock trades on 11x P/E⁷ offering compelling value.  
• Expand Energy (EXE) is the largest US gas producer in the US and the product of a merger between Chesapeake Energy and Southwestern Energy. As power buyers become more discerning many are looking to contract only from the largest and most reliable players. 

*Holdings are subject to change.

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