Greenwashing criticism surrounding natural gas investments by Wall Street private equity firms and global technology giants is growing ahead of the 31st Conference of the Parties to the United Nations Framework Convention on Climate Change (COP31), scheduled for November 9 to 20. Funds marketed around the energy transition are being invested in expanding gas-fired generation as electricity demand from artificial intelligence (AI) data centers surges.
On November 7, local time, energy news outlet Oilprice reported that major funds describing themselves as focused on the energy transition were investing in natural gas generation facilities and companies associated with gas-powered data centers.
Environmental news outlet Grist also reported in its analysis that Wall Street private equity firms were earning returns through energy transition funds amid growth in renewable energy and electrification, while including natural gas assets among their main investment targets.
Dan Cohn, an energy finance analyst at the Institute for Energy Economy and Financial Analysis (IEEFA), said Wall Street interprets the meaning of the energy transition flexibly, noting that the inclusion of gas, power equipment and data center companies aligns with the views of some institutional investors.
These investments rest on the argument that natural gas is a transitional fuel between coal and oil and renewable energy. Blackstone and others maintain that natural gas is necessary for a reliable electricity supply and the energy transition.
Big tech links gas-fired power projects to efforts to secure electricity for AI
Major technology companies that have publicly pledged to reduce carbon emissions are also participating in large gas-fired power projects to secure electricity for data centers.
Amazon is pursuing construction of a combined power generation complex in Texas that includes seven large gas-fired power plants. In August, Nvidia and SoftBank announced that they would work with the US federal government to build a large fossil fuel power generation complex in Ohio to support AI computing.
Microsoft signed a 20-year power purchase agreement (PPA) with Chevron to supply a very large data center in West Texas with 2.67 gigawatts (GW) of natural gas-fired power.
Critics point to a widening gap between companies’ carbon reduction targets and their actual investment priorities as they become more dependent on gas-fired generation to secure the electricity needed to expand AI infrastructure.
Methane leakage must also be considered as LNG’s climate impact draws debate
Assessing the climate impact of natural gas requires consideration not only of carbon dioxide emitted at power plants but also of methane leakage during extraction and transportation.
Methane, the main component of natural gas, remains in the atmosphere for less time than carbon dioxide, but its warming effect over the 20 years following release is about 80 times greater. Higher leakage during gas production and transportation reduces the emissions savings relative to coal.
Liquefied natural gas (LNG) also requires substantial energy for liquefaction, storage and maritime transportation. Some peer-reviewed studies have found that LNG’s climate impact could exceed that of coal when methane leakage and supply chain emissions are included. However, comparisons vary with leakage rates, transportation distances, power generation efficiency and the time horizon used to assess warming effects.
As the United Nations urges faster emissions reductions to meet the Paris Agreement’s goal of limiting global temperature rises to 1.5 degrees, investment criteria for energy transition funds and the ways major technology companies procure electricity are emerging as major issues. At the heart of the dispute are the extent to which natural gas should qualify as a transition fuel and how emissions across the entire supply chain should be verified.
Original Korean article: m-economynews.com
English brief by Korea Wind Intelligence, koreawindintel.com
