The Hidden Costs of Natural Gas: How Iowa Can Choose Stability Over Volatility
Jim Martin-Schramm, Senior Policy Analyst, Clean Energy Districts of Iowa
Energy bills have been rising nationwide, and in many states those bills are rising significantly faster than inflation. What’s the outlook for Iowa, and what can we do about it?
There are many factors that affect energy bills, and Clean Energy Districts of Iowa are constantly advocating for policies that keep energy affordable and clean – from intervening in ratemaking dockets before the Iowa Utilities Commission to legislative initiatives that will affect ratepayers.
An important issue for all ratepayers and policymakers to take seriously right now is the looming financial threat Iowa ratepayers are facing in the form of volatile and rapidly escalating natural gas prices.
Forecasts indicate substantial price hikes in the coming years, driven by massive national and local demand, threatening to destabilize household budgets and stifle economic growth. This reality poses a double whammy to Iowa customers and communities, because rising gas prices will be felt in rising electrical bills and rising home heating bills, given the high prevalence of natural gas as a primary heating fuel and in electricity production.
Policymaker and utility decisions now could lock Iowans into growing reliance on this increasingly volatile and expensive fuel, or shift towards a more stable and equally affordable and reliable mix of renewable energy and energy storage.
Natural Gas Market Warning Signs
The warning signs regarding rising fuel costs are already evident. According to the U.S. Energy Information Administration (EIA), the average cost of natural gas delivered for electricity generation across the United States saw a significant jump of 41.0% in July 2025 compared to the previous year. Year-to-date through July 2025, the average cost increased by 45.0%.
Looking ahead, market analysts anticipate that natural gas prices could surge further. In its most recent update, Morgan Stanley predicted Henry Hub natural gas prices will hit $5/MMBtu in 2026. The price was as low as $3/MMBtu on September 1, 2025.
Iowa is particularly vulnerable to these price shocks because it does not produce any natural gas, and key demand drivers are rapidly increasing the scarcity and cost of the fuel nationally. According to EIA, 59.3% of Iowa households use natural gas for home heating.
The first major driver is the accelerating export of Liquefied Natural Gas (LNG) due, in large part, to record U.S. natural gas production achieved through hydraulic fracturing and horizontal drilling techniques. As new export facilities come online, connecting U.S. gas supply to volatile global markets, domestic prices are inevitably pushed higher.
The U.S. is scheduled to add more than 5 billion cubic feet per day (Bcf/d) in LNG export capacity by 2026. According to EIA, LNG exports already hit a record in October 2025 and are projected to reach 16 Bcf/d in 2026. This rapidly expanding export infrastructure ensures that domestic natural gas supply will remain constrained relative to demand, locking in higher costs for Iowa families and businesses.
The second major strain on the gas supply is the skyrocketing electrical demand from data centers. Locally, this impact is already acute. Alliant Energy officials have indicated that the power demands for the area near Cedar Rapids will dramatically increase due to two specific data center projects being developed by Google and QTS. This enormous new load requires significant new generation capacity, driving proposals for large gas-fired plants, such as the 850-megawatt (MW) combined-cycle facility proposed near Fairfax. Alliant has also applied to build a 720 MW natural gas-fueled, simple-cycle “peaker plant” in Marshalltown, as well as two 94 MW peaker facilities that will use reciprocating internal combustion engines in Des Moines and Linn counties.
Elsewhere in Iowa, MidAmerican Energy has applied for a license to build a 518 MW natural gas-fueled, simple-cycle “peaker plant” in Adair County, and the Central Iowa Power Cooperative plans to build a 240 MW peaker plant in Scott County.
Nationally, demand growth from additional data centers is increasing regional electricity demand, including the need for more natural-gas-fired generation. Building massive fossil fuel infrastructure specifically to serve these energy-intensive facilities exacerbates the volatility risk borne by all ratepayers.
This leads to the third problem: the increasing reliance on natural gas for general electricity generation across the nation. According to EIA, natural gas is already projected to account for 40% of U.S. electricity generation in 2025 and 2026. Every dollar invested in prolonging this reliance is a dollar dependent on a volatile, price-surging fuel.
The Path Forward
The path forward, however, is clear and stable: harnessing Iowa’s abundant wind and solar resources coupled with energy storage. These technologies provide the necessary electrical services—including peak power and reliability—but critically, they operate with zero fuel costs.
The momentum for this transition is undeniable. MidAmerican Energy recently secured approval to build 800 MW of solar in Iowa, and Alliant Energy is currently seeking permission to build an additional 1,000 MW of wind. In addition, Alliant has secured approval to add at least 400 MW of battery energy storage in various places around its system.
Investing more in renewable energy plus storage in our electricity sector will help control rates for electricity ratepayers, but how does that influence natural gas customers and costs?
Gas is a national and increasingly international competitive market where supply and demand determine cost. As demand grows and supply potentially becomes constrained, prices will rise. If Iowa and other states dramatically increase gas usage in the electricity sector, prices will likely be higher for natural gas heating customers … and vice versa.
But the impacts of ever higher gas demand in the electricity sector extend beyond just prices. Winter storm Uri in Texas demonstrated the impact of constrained gas supplies during extreme winter weather, when the electricity sector and direct heating demands are both peaking. The result can be catastrophic when either gas-based electric plants fail, and/or gas supply to heating customers is insufficient to heat homes and businesses.
The warning lights are blinking. Now is not the time to put more eggs into a gas-dependent future.
Choosing reliable, clean energy—such as wind, solar, and batteries—instead of relying on expensive, volatile imported gas is the sensible choice for securing affordable and stable electricity rates for Iowa’s future. Ratepayers should demand solutions that eliminate, rather than embrace, uncontrollable commodity price risk.
Posted: December 8, 2025
