US producers, top regulator see gas winning resource competition to power AI

Stakeholders in the US natural gas market are optimistic the increasing electricity demand driven by datacenters will significantly stimulate gas demand. While advancements in computing efficiency and the adoption of nonfossil energy sources could limit the share of gas in meeting power needs, gas producers and regulators maintain that natural gas will remain a key resource due to its abundance and reliability. US Federal Energy Regulatory Commission Chairman Mark Christie emphasized that gas-fired generation is essential to satisfy the rising power demands of planned datacenters because of the challenges associated with building nuclear plants and the reluctance to invest in new coal facilities.

Some tech companies are pursuing gas-fired power for their datacenter projects. For instance, Meta, the parent company of Facebook, is collaborating with utility Entergy to build a large AI datacenter in Louisiana that will feature three combined-cycle combustion turbines with a total capacity of nearly 2.3 GW. Google, meanwhile, is making strides toward sustainability through a partnership with Kairos Power to deploy 500 MW of advanced nuclear projects starting in 2030. Currently, 64% of Google’s datacenters operate on carbon-free energy.

Potential Opportunities and Risks of Private Credit

The private credit market has grown substantially due to regulatory changes, the search for yield and a growing recognition of its distinct features. S&P Dow Jones Indices explores the performance, consistency and correlation of private credit with public markets, focusing on broadly syndicated loans, which share private credit’s characteristics of illiquidity and complexity. The interest in private markets is largely attributed to the illiquidity premium associated with lock-up periods, with public and private credit performing similarly in 2023.

However, over a 10-year horizon, private credit indexes have demonstrated superior performance. While all indexes faced declines in March 2020 due to the COVID-19 pandemic, private credit had a stronger recovery, highlighting the differences between private and public markets. In the first five years analyzed, private credit generally yielded higher returns than public credit, although investment-grade bonds occasionally outperformed. A study by PineBridge Investments indicated that private credit outperformed the broadly syndicated loan market by an average of 157 basis points, primarily due to its illiquidity premium.

Learn more about Private Credit Solutions from S&P Global Market Intelligence.