CERAWeek 2025 by S&P Global—‘Build Baby Build’

Since 1983, energy executives have made the trek to Houston for CERAweek, often referred to as the Superbowl for the energy industry. What started out as an oil and gas conference for a few dozen now draws more than 10,000 attendees with 1,400 speakers from 89 countries. And “energy” includes oil and gas, coal and nuclear, renewable energy sources (solar, wind, geothermal, hydro), and energy storage.

High-Level Politics

First to the stage: U.S. Department of Energy (DOE) Secretary Chris Wright

The message was clear: There’s a new sheriff in town with new priorities for U.S. energy policy. At CERAWeek 2024, then-U.S. DOE Secretary Jennifer Granholm told the audience, “LNG exports will soon be in the rear-view mirror.” Today’s U.S. DOE Secretary, Chris Wright, works in an alternate universe seeking energy supply dominance. Wright removed the “pause” invoked on permitting LNG projects by Granholm and is providing permitting support to speed up the construction of pipelines and LNG export facilities.

Chris Wright, U.S. Department of Energy Secretary

“Climate change is a global physical phenomenon that is a side effect of building the modern world. I am a climate realist. Everything in life involves trade-offs. Everything,” Wright said.

Race for AI Leadership

At CERAWeek 2024, the conference was abuzz with the realization that AI has created demand for more electricity than had been forecasted. However, since March 2024, the magnitude of the pending electricity shortage has become more fully understood. AI has evolved from a gradual step-up in productivity to an Arms race.

“The implications on national defense make it simply critical that America leads the AI race,” Wright said.

Stated more directly at CERAWeek by Doug Bergum, U.S. Secretary of the Interior, having global atmospheric temperatures increase by 2 degrees by 2050 is not an existential threat.

“The two existential threats at hand are Iran getting nuclear weapons and losing the AI war,” he said.

More generation capacity of all types is needed immediately to supply the electricity-hungry AI data centers. Utilities and developers in many regions of the United States are racing to install baseload gas turbine combined-cycle power, but they can’t get it fast enough (FIGURE 1). Deliveries for large gas turbines from GE Vernova, Siemens Energy, and Mitsubishi are now being scheduled for 2028 - 2029. Once the turbines are delivered to the site, it typically takes approximately 12 months to build out a combined-cycle plant. Heat recovery steam generators (HRSG), step-up (or step-down) transformers, and other electrical equipment have their own supply-chain challenges.

States with the highest data-center build potential. Credit: Mark Axford

John Ketchum, CEO of NextEra Corp., the largest utility company in the United States, lamented, “We completed a modern combined cycle in 2022 for $785 per KW, but a new build for 2030 commercial operation will cost $2,400 per KW.”

There will be winners and losers in the race for AI dominance and quantum computing market share. Amazon, Microsoft, Alphabet (Google), META (Facebook), and Oracle are all investing billions and racing aggressively to get a competitive edge.

With the large gas turbine supply essentially sold out for the next three to four years, other solutions are coming into play:

• Buying or leasing smaller gas turbines or reciprocating engine gensets as a short-term bridge
• Unretiring mothballed nuclear plants and coal plants
• Upgrading transmission lines to de-bottleneck the grid
• Using demand-side management to create “virtual power plants” to reduce peak load.

The power surge from AI will need all these solutions and more.

Energy Transition Reinvented—Now Energy Addition

The power surge from AI has done more than create a bonanza for turbine OEMs and engineering, procurement, and construction contractors. “Build Baby Build” has also brought about the remake of the energy transition to the energy addition.The energy trilemma of security, affordability, and sustainability has been reshaped (FIGURE 2).Security and affordability now rule the roost as practical solutions rise to the top. Funding for the green energy fantasy of green hydrogen (or any hydrogen) is fading rapidly. Offshore wind generation is not financeable in most regions of the world without substantial government subsidy. Carbon capture as a universal attachment to all gas and coal plants is not affordable. Specialized carbon-capture projects at huge sequestration hubs with substantial economies of scale may survive. Ironically, OXY’s direct air capture technology shows some promise by removing CO₂ from the atmosphere and injecting the CO₂ into directly oil and gas formations to enhance production of more oil and gas, thus linking to the energy addition.

The new energy trilemma. Credit: Mark Axford

Small Modular Reactors (SMR)

Modular nuclear reactors are getting serious attention for providing carbon-free baseload generation. A nuclear renaissance has been talked about for decades but could never overcome the history of project costs far exceeding budgets. Now, a new approach is on the table: SMRs built offsite in a factory and delivered to the job site, perhaps adjacent to an existing nuke or fossil-fueled plants.

There is also a race to establish the SMR design that could become the standard for the new era of nukes. GE Vernova, with Hitachi, is promoting a 300 MW SMR and plans to begin operation of unit 1 of 4 in 2029 at an existing nuclear power plant at Darlington (Toronto), Ontario. Other SMR designs by NuScale Corp., Google, and Amazon are focused on design modules in the 80 – 100 MW size, modeled after the U.S. Savannah commercial cargo ship (FIGURE 3).

History of U.S. nuclear. Credit: Mark Axford

Keep your Eyes on Alaska

On the last day of CERAWeek, Alaska Governor Mike Dunleavy described, with great enthusiasm, his outlook for a $44 Billion LNG export project. The Alaska LNG Project has three major components:

1. A 3.5 BCFD gas-gathering and processing plant on the north slope, an 800-mile 42-foot pipeline to Niniski (near Anchorage), and a 20 million MTPA liquefaction near Kenai. The project also includes carbon capture.
2. Construction of the gas pipeline would begin in 2026 with gas flowing in 2028.
3. The conditioning plant and export facility are scheduled for completion in 2030 - 2031.

While financing is not yet in place, Dunleavy is highly optimistic.

"We have all the permits, feedback from all the court cases, the support of the President of the United States, and Asian allies that need gas," Dunleavy said.

Unlike the major LNG terminals in Texas and Louisiana, Alaska LNG can be delivered in a straight shot to Japan, Korea, India and Southeast Asia without traveling through the Panama Canal.

Alaska LNG project update. Credit: Mark Axford

The project, which was approved during Trump's first term as President, received Federal Energy Regulatory Commission authorization in 2020 and final legal approval in 2022 but was put on hold during the Biden administration. Trump signed an executive order during his first day in office called “Unleashing Alaska’s Extraordinary Resource Potential.” The executive order removed certain restrictions on drilling as well as barriers to development mining and timber resources imposed by the previous administration. After more than 10 years of planning and permitting, it looks like the Alaska LNG Project could become a reality. Stay tuned.