The U.S. is on the cusp of entering a period where power demand is set to reach unprecedented levels. After a relatively stagnant growth over the past 20 years, forecasters predict a significant surge in electricity demand within the next decade. This growth is expected to be more than 10 times faster than the previous 10-year period. Several key factors will drive this surge, such as the electrification of the heating and transportation sectors, the widespread adoption of electric vehicles, and the expansion of AI data centers.
Natural Gas: The Backbone of Power Demand Support
Natural gas is set to play a crucial role in meeting the expected surge in power demand. Forecasters estimate that the country's gas consumption will increase by an additional 20 billion cubic feet per day by 2030, rising from 108 billion cubic feet per day last year. This projection does not even take into account the additional gas demand of up to 10 billion cubic feet per day from data centers. This favorable forecast bodes well for natural gas infrastructure stocks like Kinder Morgan (KMI 1.80%), Williams (WMB 1.60%), and Targa Resources (TRGP 2.03%). These stocks seem like attractive investment opportunities for those with around $1,000 to invest.Kinder Morgan: The Unrivaled Gas Infrastructure Leader
Kinder Morgan operates the largest natural gas transmission network in the country. It manages an extensive 66,000 miles of pipelines, transporting more than 40% of the nation's gas production. Additionally, the company owns 15% of the country's natural gas storage capacity. Roughly 64% of Kinder Morgan's cash flows originate from natural gas. Currently, the company has $5.1 billion worth of expansion projects in progress, with approximately $4.3 billion dedicated to new natural gas infrastructure. One of the most significant projects is a $1.7 billion investment to expand a pipeline system, which will supply an additional 1.2 billion cubic feet per day of gas to Southeast markets and is expected to come online by the end of 2028. Kinder Morgan has a plethora of potential projects in the pipeline, fueled by the greatest opportunity it has ever encountered for expanding its network. These growth projects are expected to provide the necessary fuel for the company to increase its cash flow and dividend. The pipeline giant currently offers a yield of over 4%. At this rate, a $1,000 investment could generate more than $40 in annual dividend income.Williams: A Prominent Player in Gas Infrastructure
Williams is a leading force in gas infrastructure. It operates over 33,000 miles of pipelines across the United States, handling approximately one-third of the country's gas demand. The most notable pipeline is Transco, which is the largest gas pipeline in the country in terms of volume. The company has a long list of gas infrastructure projects underway across its platform. These projects are expected to come online by the end of the decade, providing clear visibility into its ability to grow earnings. Williams anticipates growing its earnings by 5% to 7% annually in the long term, which should support a similar growth rate in its more than 3%-yielding dividend. In addition to the projects it is currently working on, Williams has a large pipeline of potential projects. It could invest over $10 billion across 30 potential projects that could come online between 2026 and 2032. Securing these projects would give the company more momentum to grow its earnings and dividend in the future.Targa Resources: A Leading Midstream Infrastructure Company
Targa Resources is a prominent midstream infrastructure company. It possesses natural gas gathering and processing assets, natural gas liquids pipelines and fractionation facilities, as well as liquid petroleum gas export capabilities. Targa holds the largest gas gathering and processing position in the Permian Basin, which is a world-class oil and gas resource. The energy midstream company has several expansion projects in progress, including six more natural gas processing plants in the Permian that are expected to come online by 2026. These projects position Targa to benefit from the growing volumes in the region. It also has several other projects in various stages of development to drive additional growth beyond this year. Targa Resources aims to return 40% to 50% of its growing cash flows to investors over the next several years. It anticipates a significant increase in its 1.5% yield, targeting a 33% increase in 2025 and continued meaningful annual growth thereafter. Targa also plans to opportunistically repurchase shares.Cashing in on the Surging Gas Demand
The expected surge in power demand over the coming decade is expected to fuel robust growth in natural gas demand. This presents gas infrastructure companies with more opportunities to expand their systems. Kinder Morgan, Williams, and Targa Resources are leaders in the sector, putting them in excellent positions to grow their earnings and dividends at attractive rates in the future. This growth should translate into strong total returns for their investors.