U.S. natural gas power generation is set to increase, lending to growth opportunities for midstream companies.
Developers plan to add 18.7 gigawatts (GW) of combined-cycle capacity to the grid by 2028, with 4.3 GW already under construction, according to the U.S. Energy Information Administration. This will provide a tailwind for midstream companies, which offer crucial infrastructure for the industry by transporting natural gas to demand centers, including power plants.
The midstream segment of the energy sector stands out due to its fee-based business model. The segment provides services for fees under long-term contracts, ensuring stable and predictable cash flows. Rising demand for natural gas is creating growth opportunities for natural gas pipelines.
Since 2016, natural gas has been the leading source of electricity generation in the U.S. However, new natural gas capacity additions were minimal last year, as only one industrial sector combined-cycle gas turbine (CCGT) power generator came online.
Developers anticipate a notable increase in 2025, with plans to add 1.6 GW of CCGT capacity, according to the EIA. Additionally, more than half of the 3.3 GW of capacity that developers expect to bring online in 2026 is already under construction per the EIA.
Furthermore, another 3.3 GW of capacity is expected to come online in 2027, and an additional 10.6 GW may be added in 2028, which would be the most CCGT capacity coming online in any year since 2018.
Recent Examples of Midstream Companies Capitalizing on Demand Growth
During its first-quarter 2025 earnings call on May 1, TC Energy (TRP) announced the Northwoods Project. This new project on the ANR system is anticipated to be in service in 2029.
The project will serve power generation to support demand from data centers and overall economic development in the U.S. Midwest. It’s backed by a 20-year take-or-pay contract with an investment-grade counterparty, according to the firm.
Meanwhile, DT Midstream (DTM) is constructing a lateral from its Midwestern Gas Transmission pipeline to a power plant in Indiana, which is switching from coal to natural gas.
See more: Rising Electricity Demand Needs Natural Gas & Midstream
Add Exposure to Midstream Companies Benefiting From Growing U.S. Natural Gas Demand
The Alerian Energy Infrastructure ETF (ENFR ) delivers exposure to the midstream space and currently holds both TC Energy and DT Midstream.
ENFR tracks the Alerian Midstream Energy Select Index (AMEI). The index is a composite of North American midstream energy infrastructure companies, including C-corps as well as MLPs. Energy infrastructure companies are those engaged in the pipeline transportation, storage, and processing of energy commodities.
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