Chevron plans to reach a final investment decision later this year on a power plant that would use natural gas to supply Microsoft’s 2.7-gigawatt Project Kilby AI data center in Reeves County, Texas, under a 20-year agreement. The final investment decision will be made after the project receives all its permits, expected later this year. The Project Kilby data center would start receiving power in late 2028, and a fuller build-out would continue into the 2030s. Most of the electricity will come from large gas turbines supplied by Chevron’s partner, GE Vernova, with additional turbines provided by Caterpillar. The power will initially supply just the data center and will not be connected to the electric grid. Any excess power, however, will be provided to stabilize the grid when it connects to the grid at a later date, according to Jeff Gustavson, president of Chevron New Energies. Construction has not yet started on the data center.
Chevron is working with Joulent, an energy company launched by investment firm Engine No. 1, to build a power-generation complex to supply the data center with natural gas produced from Chevron’s fields in the area. The collaboration between Chevron and Joulent is their first big AI data center project. The 2.7 gigawatt center would be housed on more than 2,000 acres in the heart of the Permian Basin oil-and-gas field. The site is located about 20 miles south of Pecos, where Chevron has been producing oil and gas for years.
Wait times for grid-connected electric service can be five to seven years in many places. Because data centers need faster access to electricity, the concept of “Bring Your Own Power (BYOP)” provides faster access and avoids cost impacts on other ratepayers. About a quarter of all data center capacity under development plans to build their own power on-site. Data provider Cleanview is tracking 59 of those data centers with a combined capacity of about 90 gigawatts. The Trump Administration has encouraged companies to pursue this route where possible, to speed construction and deployment of infrastructure.
There are engineering challenges to building “behind-the-meter” projects. Without a grid connection, the Kilby project will require an overbuild of power equipment and a large battery storage system to maintain reliability. Because solar resources in West Texas are better than in other areas, and with the complex already planning a large battery storage system, the project developers may add solar power at a later date.
Microsoft plans to invest $190 billion in capital expenditures this year, up 61% from 2025. Because the rapid growth of AI requires energy infrastructure that can scale quickly and reliably, the partnership with Chevron makes sense, as Chevron can deliver natural gas from the Permian Basin, located in West Texas and southeastern New Mexico, to data centers at a competitive cost.
Microsoft needs power sources that can reliably meet the 24/7 demand of its data centers, which wind and solar power alone cannot provide due to their intermittency, despite the company having invested heavily in them earlier. To provide reliable power 24/7 and limit carbon dioxide emissions, Microsoft invested in the restart of the Three Mile Island nuclear plant in Pennsylvania in 2024. Constellation Energy plans to restart the nuclear plant on schedule in 2028, supplying power to Microsoft and helping stabilize the grid. The plant will be renamed the Crane Clean Energy Center; the restart will cost $1.6 billion, financed by the company’s funds. Microsoft agreed to purchase the plant’s Unit 1 electricity output for 20 years.
Other partnerships may be in the works. Late last year, Exxon Mobil partnered with NextEra Energy to develop a 1.2-gigawatt gas-fired power plant with carbon-capture technology. At the time, the companies were in talks with a potential data-center customer. NextEra and Google are developing three data center campuses and are seeking additional locations. In October, the companies announced a deal to restart a NextEra nuclear reactor in Iowa. NextEra’s goal is to have 15 gigawatts of new power generation for data center hubs operating by 2035.
How China Powers Its Data Centers
Last year, the International Energy Agency (IEA) reported that China’s data center electricity supply was dominated by coal, with a near-70 % share, followed by renewables with near 20%, nuclear power with near 10%, and natural gas accounting for the remainder. Between 2024 and 2030, coal is expected to remain the largest source of additional electricity for China’s data centers, with annual generation increasing by nearly 90 terawatt hours.
However, Oil Price reports that China has just launched the world’s first offshore wind-powered underwater data center, using seawater cooling and renewable electricity to reduce energy, water, and land requirements. The 24-megawatt-capacity Shanghai Lingang undersea data center demonstration project was made possible by an investment of around $238 million. It is located over 10 miles off Shanghai’s coast, submerged 10 meters below the water’s surface, and is mainly powered by an offshore wind farm.
Conclusion
Chevron and Microsoft are partnering to build a large data center in West Texas, fueled by natural gas turbines that will not initially be connected to the electric grid. The concept of “Bring Your Own Power” is becoming more widespread as data centers can obtain electricity more quickly by building their own power sources without affecting other consumers’ rates. A final investment decision on the Project Kilby data center power source is expected later this year, once permits have been obtained. If it is a go, the data center would start receiving power in late 2028, and a fuller build-out would continue into the 2030s. About a quarter of all data center capacity under development plans to build their own power on-site. The Trump Administration has encouraged companies to pursue this route where possible, to speed construction and deployment of infrastructure.
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