The current natural gas price in West Texas (the WaHa hub, north of Coyanosa, TX) is negative. And has been for a while. The price peaked (dipped?) to -$9/MCF a couple months ago. That means gas producers had to pay $9 per MCF for it to be taken away. Oil in the Permian comes with gas, a lot of it, so to produce oil, you need to get rid of gas. Wells I'm familiar with have 4000-5000 cubic feet of gas per barrel of oil. Recall in oilfield M = thousand, so that's 4-5 MCF per bbl of oil.
There is no free gas pipeline capacity to get gas out of West Texas. Any time new pipelines are built, they are filled within months.
This makes a ton of sense for oil producers (which are also gas producers) who can sell their gas for less of a loss (potentially a profit!) and also for MSFT who can lock in long term contracts for minimal cost. I'd guess these contracts are for $1-2/MCF which is win/win for the oil companies in the area and MSFT.
This might make sense for oil producers to get rid of their natural gas, which is nearly a waste material, but I'm struggling to understand how it makes sense for Microsoft. Despite the cheap natural gas, and an abundance of investors and builders with natural gas expertise, in the competitive electricity generation market everybody is deploying solar and batteries in west Texas because it's still more profitable than gas generation.
Further, there's a gas turbine shortage so Microsoft choosing to put their (presumably limited) allocation of gas turbines in West Texas, where they have good alternatives, seems a bit mysterious. Why not save that massive amount of turbines for the northeast DCs, where renewables work far poorer yet gas is more reliable?
The reasons that seem most convincing to me:
1. Political environment is hostile to renewables and Microsoft doesn't want to paint a target on their back by choosing solar plus batteries, the choice others are making in West Texas.
2. Grid connection drastically changes economics, but pipelines for gas are cheap or something, so the massive cost and delay from grid interconnection simply isn't worth it
3. There are particular political favors going on with Chevron, e.g. Chevron wants gas in the area and is willing to increase MS's turbine allocation if they do it in west Texas, or Chevron is helping get around pesky local political approvals for data centers, or something like that.
The cost of gas does not seem like a justification for this, though.
They will also want reliable power, which seems like justification enough to keep their options open. A “phased, modular approach” sounds like it would give them options. Maybe Microsoft could install solar and/or batteries later and use their natural gas turbines for backup?
With enough batteries they might get through the night, but seasonal shortages are much harder to handle that way.
I bet a carbon tax on data centers would be popular if the Democrats get back in.
You can generally solve seasonal shortfalls cheaply by simply adding more solar / wind until you no longer have a seasonal shortfall just a massive surplus in a different part of the year.
Put another way if you want to store power say 1GWh for the worst month, well a solar panel provides a lot of power over even the worst month. 20MW of solar panel averaging even 40MWh/day * 30 days = 1.2GWh and cost way less than 1GWh of batteries.
There is also probably a balance of payments aspect of this. Chevron uses a ton of Azure. They probably asked for Microsoft to use some amount of Chevron in exchange. This is probably that deal.
Natural gas is cleaner to burn than coal, if I had to guess this is lazy half-done greenwashing, i.e. 'at least it's not coal!' Similar to California's measures for cleaner power generation.
The cost of gas is completely irrelevant. In order to bring a new large load onto the grid, you have to coordinate with ERCOT, and they just made that process more tedious. Once you get your grid connection approved and built out, you have to source your own power anyway, and frankly there just isn't enough power on the market to realize the stated datacenter buildout goals in this country.
In short, you're going to have to build your own power plant anyway, so why bother with the grid? Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time. Unless you're dealing with nuclear, the fuel cost just doesn't matter compared to the rest of the buildout, and gas wins because you can take off-the-shelf turbines and bolt them down.
You can only get away with it in places that don't care about environmental regulations, which are the places most likely to approve new buildout of gas infrastructure anyway. Nobody in the northeast is going to approve the creation of a brand new carcinogen factory.
> Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time.
Is it, though? There's a ton of projects out there waiting to get their solar on the grid in west Texas, partnering with one of them and launching the project early while waiting on the interconnection queue, and adding enough batteries, gives a more robust solution right now without the SPOF nature of large single generators.
Add to that the long backorder list for gas turbines right now, with no end in sight, and I'm surprised that Microsoft would power this particular location with turbines because it's probably their best chance to do off-grid massive solar projects.
Massive off-grid solar is what China is choosing for some absolutely massive new industrial projects. Nuclear is a no-go because it takes so long to deploy, but solar + batteries are cheap COTS and available in abundance, unlike gas turbines.
> Is it, though? There's a ton of projects out there waiting to get their solar on the grid in west Texas,
gas turbines run at night too so there's no storage/backup supply issue to consider. They also take up significantly less space than wind or solar and those data centers are already gigantic.
There is no point in waiting for interconnection when you can just... not do that, and do all your generation behind the meter, with complete control of the generation to match your load. Solar wants an interconnect so they can sell off surplus; with gas you just turn the dial down to meet the load and walk away.
The clock is running on the datacenter goldrush. 70-90% of the capex window is going to be soaked up just with construction time. Introducing a capricious ERCOT permit process and shopping around for friendly solar projects to hop in bed with makes no sense when you can just write a check and solve the problem forever.
I'd bet the deal with Chevron was to enable Microsoft to hop the queue here and get those GEV turbines soonest.
I'm not saying wait for an interconnection, I'm saying take a project that already has a fully developed plan, that's waiting for interconnection, and build the DC right there next to it, beef up the battery component of the plan and go to town. Interconnection happens some time in the future, giving far more financial opportunities for everyone, but in the interim the electricity goes fully to the DC.
Because I expect the economics of enough batteries to carry a data center’s worth of demand through the night and morning is too expensive compared to essentially free natural gas.
Data centers would ideally run at ~100% utilization, so any drop in solar output needs to be fully met by batteries.
Good luck. The renewables overbuild required to firm baseload demand for a datacenter is insane. You need something like 4x solar and 1.5x storage in a 10hr battery.
Respectfully, the laws of NPV and IRR hurdles don't matter in Chinese infrastructure.
Whatever you choose in the US, it's not cheap, and developers crawl over each other to sign up hyperscalers. Race to the bottom.
Cheap gas is great, but 2.67GW of new build natural gas in this market will cost $6-8 billion in fixed costs. You need wholesale pricing of ~$50-60/MWh ... OVER 25 years! ... to recover just the fixed costs.
For West Texas, prices averaged mid-$30s over the last year.
Microsoft has all of the leverage here, and Chevron wants a big announcement in an area where they don't have a lot of experience.
I don't understand why datacenters especially shouldn't be able to run mostly on renewables.
This won't apply to every datacenter, but the AI inference ones especially, should be seeing most demand during the day. So what's built in north America is used when it's daylight there?
If so, isn't that a perfect case for solar?
To be clear, I'm not saying it can power down, but at night it should be able to scale down significantly?
Fascinating they're going this direction when solar and batteries are so cheap in Texas...
Nearly all new additions to the grid are solar, wind, and storage right now on Texas' grid. Not because of Texas regulations, but because Texas' grid is one of the few grids where generation decisions are all made by independent investors trying to make money.
Especially with the shortage in gas turbine manufacturing, very surprising! Not sure if this says more about Microsoft or datacenters.
There are cases where the fields can produce more than the pipelines can carry away. If you put your gigantic gas turbines right next to the fields you can obtain access to some extremely cheap fuel. They might even pay you to burn it sometimes. Negative gas prices are a thing.
And despite that, when there's any sort of price pressure, like there is for new electricity grid additions from investors, solar and batteries completely dominate the choice over natural gas in Texas.
Look at the map for 2026 of the grid buildout in Texas at the bottom of this page:
All solar and batteries (yellow and black), with a few tiny blue dots for gas. It was the same story in 2025. And it will be the same story in 2027 because solar and batteries are getting even cheaper.
These are all decisions from private investors, trying to make money, and choosing solar and batteries over gas in the market where gas is the cheapest in the world, gas is like a waste product that's hard to get rid of.
Why would Microsoft choose dirty energy when all the profit-driven investors are choosing cheaper solar and storage?
This is just a guess, but is the reason the same one that the gas is cheap all the way out in BFE west Texas? In other words, even if you could generate electricity from wellhead gas more cheaply than a bunch of wind turbines, solar panels, and batteries just west of Fort Worth, can you actually export it to east Texas where all the demand is? The solution here being: let's build our giant demand machine directly on the steppe and skip all that expensive infra, because data is much cheaper to move than energy.
It's something like 5-10 orders of magnitude cheaper to move information over fiber than it is to move the energy required to produce that same information through a [pipe/power]line.
I know this is nitpicking, but as a Texan I have to correct you on a point of grammar. The “west” in “West Texas” (and similarly for the other regions) isn’t an adjective; it’s part of the proper noun and should be capitalized. So it’s “West Texas,” not “west Texas.”
Yes, this is weird and no, I have no idea why we do it, but it’s really weird to read “export it to east Texas” — to the extent that I had to re-parse the sentence to figure out what you meant.
Thanks for this. I'm past the edit window now, but both ways felt wrong and I just picked one. I suppose "western Texas" and "eastern Texas" is what I should have written to avoid the problem.
> let's build our giant demand machine directly on the steppe and skip all that expensive infra, because data is much cheaper to move than energy.
Who cares if it's cheaper. It's that you're moving less of it. The more processing you can do near the source the smaller and cheaper your pipe out to the consumer can be.
Cut the tree on the hillside. Mill it in the valley. Then spend your precious boxcar volume shipping only the finished lumber out of the valley.
Right, shipping finished lumber is cheaper (per dollar of value) than shipping logs. That's exactly my point, but the lumber is bits and the electricity is the logs. A datacenter is a mill for turning electricity into bits!
Replace "extremely cheap" with "zero cost" and you've got it correct. Texas at night is an endless sea of flare stacks. We burn off an unbelievable amount of natural gas just to get rid of it.
While the US stays oil rich, we should expect the US to be a laggard in ending use of fossil fuels. China and EU are not oil rich, they’ll make a faster transition.
Of course it’s idiotic to actively hobble clean energy. Or to put your finger on the scale for one source of energy, like the current administration does.
But it’s not crazy to argue for “energy abundance” where the market just picks the cheapest energy on the market in the US and that just gradually moves cleaner over time.
Well what I'm saying that is that on the Texas grid, solar and storage and wind are the cheapest energy, and being deployed in massive amounts because only on the Texas can an investor make money by providing the cheapest energy. (For most utilities, they take a fixed rate of profit and are incentivized to use the most expensive possible energy if they can get away with it.)
So Texas is not a laggard when it comes to clean energy, they are actually driving clean energy forward the most, because clean energy is the cheapest and most profitable energy. And that's despite Texas having natural gas that's insanely cheap right from Henry Hub.
What this tells me is that like most hyperscalers, Microsoft is not price sensitive on the electricity side, because energy costs are tiny compared to the massive capital costs of the GPUs. But why would they go this direction? What political influence would make Microsoft choose more expensive electricity, when in the past they've been fairly good at driving clean energy forward in their data center power choices, and they'd pay a premium on energy costs to go with clean energy?
I can think of a few angles that might have pushed them towards gas, mainly (a) they wanted on-demand generation cap, (b) they didn't want to get into the batteries game at the volume they'd require, or (c) they didn't want to deal with securing the space needed to produce 2.6GW of solar. Also yeah they're definitely not price-sensitive, any of the hyperscalars is more than happy to pay extra to get exactly what they want.
edit: for example that EIA list of new solar projects you linked indicates that the largest battery installations going up in '26 are all ~500MW, and that there are only four of them (of that size). I think the energy intensity of a multi-GW datacenter is the main reason that they're not going for solar here.
sibling comment has it, they want to do power generation on site and not connected to the grid and all the PITA that come with that. Further, they can pitch power independence to the locals which removes a big argument from the anti-datacenter crowd. Finally, the power gen i saw at Stargate in Abilene TX which was maybe 10 units (if that's what they're called) took up maybe 30 acres of land so they're not very big compared to the rest of the campus.
> What this tells me is that like most hyperscalers, Microsoft is not price sensitive on the electricity side,
What this should likely tell you, is that you are missing information and have an incomplete picture of the situation.
Or it could be MSFT just likes to spend extra money for no reason because they are simply stupid. I'm gonna go with the former though.
I'd be interested in all these behind the meter setups for large 24x7 loads that are being built using solar+battery though. I haven't heard of one personally, but I must be lacking information on the subject since you seem so certain these are common?
There are many datacenters in Denmark with decade-plus power purchase agreements from a specific wind farm, but with so much news recently I can't find if there's any operational with their own supply.
Solar makes sense for utility generation because demand goes down at night. For datacenter usage demand is effectively constant, so theyd need a fuckload of batteries which is where all the cost goes. It doesnt make sense to power 2.6 GW overnight fully on batteries. Much simpler, a.k.a faster, to just buy a plot next to an area with excess gas and build the whole thing there.
But I'm curious how oil could run the show for Microsoft though. Even if Microsoft wanted gas backup, they could add solar to the build, shut off the turbines during the day, and save money over an all gas setup.
Perhaps Microsoft had better ability to overturn local opposition to data centers if they had Chevron's political influence over the politicians too?
What I meant was that all political and economic decisions here go in favor of oil. The war, the proposed laws to make Chinese EVs illegal, the softening of environmental regulations, etc.
Chevron and the US Government are joined at the hip, so these kind of deals "flow" naturally.
Its easy, they are going to use fancy accounting to make it come true. Produce a ton of carbon, then buy a cheap, under-priced carbon credit to make it be a zero.
I love how they are using a company named 'Solar Turbines'. Such an obviously misleading name. (From their website)[1]:
Powering the future through innovative, sustainable energy solutions.
Solar Turbines Incorporated, headquartered in San Diego, California, is a wholly owned subsidiary of Caterpillar Inc. Solar manufactures the world’s most widely used family of mid-sized industrial gas turbines, ranging from 1 to 39 megawatts. More than 17,000 Solar units are installed in more than 100 countries with more than 3 billion operating hours. Solar is a leading provider of energy solutions, featuring an extensive line of gas turbine-powered compressor sets, mechanical drive packages, and generator sets.
To be fair, solar turbines has had the name since 1929 (they were then called solar aircraft company). It’s not like they’re being intentionally misleading.
> A majority of the generation will come from large GE Vernova (NYSE: GEV) turbines and associated electrical infrastructure, with additional capacity provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc. (NYSE: CAT).
When they say "large GE Verona", they mean the 7HA. This is an actual power plant with proper emissions controls. Not the aeroderivatives in parking lots we've seen so far.
> Their plan includes the use of seven U.S.-made GE Vernova Inc. GEV 7HA natural gas turbines to deliver the plant's initial capacity.
> Why not use all that wasted heat energy to power all these datacenters?
Probably not profitable enough to set up the infrastructure to capture, store, transport, and sell that as a product. Profit potential is the only factor that matters to decision makers.
That makes sense for existing infrastructure, taking waste heat from data centers and piping it through existing public systems. Especially for government environments like Denmark.
I wonder what profits would need to be for a private energy company to install additional equipment at a remote fracking site to capture the burn off energy to then sell to a data center to then use.
I had to go read the article to check because other operators have been entering into PPAs with oil companies, but for photovoltaic power. E.g. Google and TotalEnergies.
> A majority of the generation will come from large GE Vernova turbines and associated electrical infrastructure, with additional capacity provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc.
Solar turbines is an interesting name for a gas turbine company. "It's green energy, we put solar in our name"
How is this sarcasm? I had almost the exact same thought in earnest: A gas turbine company being called Solar Turbines is quite interesting and unexpected if you're not familiar with that particular corporate history.
Not sure why it would be so contentious. I simply provided a reference to the why instead of commenting with a joke, sarcasm or whatever you feel like calling it.
I agree with OP that the name, while maybe not deliberately, is really confusing in 2026. I thought that was a wind turbines or a solar panel technology, definitely not gas.
And it takes all of 30seconds to look up instead of posting sarcastic hyperbole that the company is trying to greenwash their product by name when it’s a 100 year old company name.
Confusing as it may be for people like yourself, I don’t think it really defends posting sarcasm that is not based in reality.
Sorry, but who in his right mind, signs contracts for 20 years - could you have imagined the world today 20 years ago? No and no. All one should do is sign snippet contracts of 5 years with the offer of an option to predefined condition. Split it into 4 sequences with a renewal.
Very normal. Here in Europe (well nordics at least) pretty much all the capacity of any wind farm is already sold before construction begins. The PPA (power purchasing agreement) is usually pretty much required to get the loan/funding anyway.
Basically most projects start with the wind company using its own money to find a site and get it approved and then they go and try to find someone to sell the electricity to at a fixed rate before construction begins as selling directly to the spot market has way too much risk for the banks to give loans.
Not sure how different it is in Central Europe with solar as there isn’t much solar up here in the north (just doesn’t make much sense as during the 3 to 4 months in the winter when electricity price is at the yearly maximum you produce effectively nothing)
Many people. My house loan was 30 years. Commercial real estate is often 20. Commercial 30 year bonds are common.
Many investments won't pay off unless there is a 30 year plan so lots of investors work on that long term. Even if an investment pays off sooner you often are accounting better off longer terms - see an accountant
California's progressive policies have pushed out both data centers and Chevron out of the area. I'm sitting here wondering why Newsom is so proud of his achievements.
Newsom aside, the idea is to change from oil to non-oil, efficient from mono-industrial.. The US Oil minions claim to be blind to this and cite quarterly profits, again
The current natural gas price in West Texas (the WaHa hub, north of Coyanosa, TX) is negative. And has been for a while. The price peaked (dipped?) to -$9/MCF a couple months ago. That means gas producers had to pay $9 per MCF for it to be taken away. Oil in the Permian comes with gas, a lot of it, so to produce oil, you need to get rid of gas. Wells I'm familiar with have 4000-5000 cubic feet of gas per barrel of oil. Recall in oilfield M = thousand, so that's 4-5 MCF per bbl of oil.
There is no free gas pipeline capacity to get gas out of West Texas. Any time new pipelines are built, they are filled within months.
This makes a ton of sense for oil producers (which are also gas producers) who can sell their gas for less of a loss (potentially a profit!) and also for MSFT who can lock in long term contracts for minimal cost. I'd guess these contracts are for $1-2/MCF which is win/win for the oil companies in the area and MSFT.
This might make sense for oil producers to get rid of their natural gas, which is nearly a waste material, but I'm struggling to understand how it makes sense for Microsoft. Despite the cheap natural gas, and an abundance of investors and builders with natural gas expertise, in the competitive electricity generation market everybody is deploying solar and batteries in west Texas because it's still more profitable than gas generation.
Further, there's a gas turbine shortage so Microsoft choosing to put their (presumably limited) allocation of gas turbines in West Texas, where they have good alternatives, seems a bit mysterious. Why not save that massive amount of turbines for the northeast DCs, where renewables work far poorer yet gas is more reliable?
The reasons that seem most convincing to me:
1. Political environment is hostile to renewables and Microsoft doesn't want to paint a target on their back by choosing solar plus batteries, the choice others are making in West Texas.
2. Grid connection drastically changes economics, but pipelines for gas are cheap or something, so the massive cost and delay from grid interconnection simply isn't worth it
3. There are particular political favors going on with Chevron, e.g. Chevron wants gas in the area and is willing to increase MS's turbine allocation if they do it in west Texas, or Chevron is helping get around pesky local political approvals for data centers, or something like that.
The cost of gas does not seem like a justification for this, though.
They will also want reliable power, which seems like justification enough to keep their options open. A “phased, modular approach” sounds like it would give them options. Maybe Microsoft could install solar and/or batteries later and use their natural gas turbines for backup?
With enough batteries they might get through the night, but seasonal shortages are much harder to handle that way.
I bet a carbon tax on data centers would be popular if the Democrats get back in.
You can generally solve seasonal shortfalls cheaply by simply adding more solar / wind until you no longer have a seasonal shortfall just a massive surplus in a different part of the year.
Put another way if you want to store power say 1GWh for the worst month, well a solar panel provides a lot of power over even the worst month. 20MW of solar panel averaging even 40MWh/day * 30 days = 1.2GWh and cost way less than 1GWh of batteries.
Near the arctic circle Wind fill the same niche.
I don’t believe the “cheaply” part. You end up building storage that only gets used for one cycle a year, so the capital cost is very high per watt.
There is also probably a balance of payments aspect of this. Chevron uses a ton of Azure. They probably asked for Microsoft to use some amount of Chevron in exchange. This is probably that deal.
Natural gas is cleaner to burn than coal, if I had to guess this is lazy half-done greenwashing, i.e. 'at least it's not coal!' Similar to California's measures for cleaner power generation.
The cost of gas is completely irrelevant. In order to bring a new large load onto the grid, you have to coordinate with ERCOT, and they just made that process more tedious. Once you get your grid connection approved and built out, you have to source your own power anyway, and frankly there just isn't enough power on the market to realize the stated datacenter buildout goals in this country.
In short, you're going to have to build your own power plant anyway, so why bother with the grid? Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time. Unless you're dealing with nuclear, the fuel cost just doesn't matter compared to the rest of the buildout, and gas wins because you can take off-the-shelf turbines and bolt them down.
You can only get away with it in places that don't care about environmental regulations, which are the places most likely to approve new buildout of gas infrastructure anyway. Nobody in the northeast is going to approve the creation of a brand new carcinogen factory.
> Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time.
Is it, though? There's a ton of projects out there waiting to get their solar on the grid in west Texas, partnering with one of them and launching the project early while waiting on the interconnection queue, and adding enough batteries, gives a more robust solution right now without the SPOF nature of large single generators.
Add to that the long backorder list for gas turbines right now, with no end in sight, and I'm surprised that Microsoft would power this particular location with turbines because it's probably their best chance to do off-grid massive solar projects.
Massive off-grid solar is what China is choosing for some absolutely massive new industrial projects. Nuclear is a no-go because it takes so long to deploy, but solar + batteries are cheap COTS and available in abundance, unlike gas turbines.
> Is it, though? There's a ton of projects out there waiting to get their solar on the grid in west Texas,
gas turbines run at night too so there's no storage/backup supply issue to consider. They also take up significantly less space than wind or solar and those data centers are already gigantic.
> Is it, though?
Yes.
There is no point in waiting for interconnection when you can just... not do that, and do all your generation behind the meter, with complete control of the generation to match your load. Solar wants an interconnect so they can sell off surplus; with gas you just turn the dial down to meet the load and walk away.
The clock is running on the datacenter goldrush. 70-90% of the capex window is going to be soaked up just with construction time. Introducing a capricious ERCOT permit process and shopping around for friendly solar projects to hop in bed with makes no sense when you can just write a check and solve the problem forever.
I'd bet the deal with Chevron was to enable Microsoft to hop the queue here and get those GEV turbines soonest.
I'm not saying wait for an interconnection, I'm saying take a project that already has a fully developed plan, that's waiting for interconnection, and build the DC right there next to it, beef up the battery component of the plan and go to town. Interconnection happens some time in the future, giving far more financial opportunities for everyone, but in the interim the electricity goes fully to the DC.
Because I expect the economics of enough batteries to carry a data center’s worth of demand through the night and morning is too expensive compared to essentially free natural gas.
Data centers would ideally run at ~100% utilization, so any drop in solar output needs to be fully met by batteries.
> Data centers would ideally run at ~100% utilization
I don't think this is broadly accepted among major data center operators.
Of conventional data centers or one's running GPUs? If you're not saturating your GPUs you're likely leaving money on the table.
IIRC ERCOT estimated from their experience it was something like 85% on average?
What makes you think you can change the facility that's in the ERCOT queue while keeping your place in line?
>Is it, though?
When you can colocate across the street from someone who's otherwise paying to get rid of it is.
When the fuel is free-ish who cares about backorder on turbines. You can run big diesels on NG (just like the pipeline people do).
Good luck. The renewables overbuild required to firm baseload demand for a datacenter is insane. You need something like 4x solar and 1.5x storage in a 10hr battery.
Respectfully, the laws of NPV and IRR hurdles don't matter in Chinese infrastructure.
Whatever you choose in the US, it's not cheap, and developers crawl over each other to sign up hyperscalers. Race to the bottom.
>Add to that the long backorder list for gas turbines right now
If demand > supply then the price goes up. Doesn't mean you can't buy something though.
hopefully when the Ai bubble burst, all those new renewable plantals will be feeding the grid. and power will be the Aeron chairs of 2030.
Profits still ain't easy.
Cheap gas is great, but 2.67GW of new build natural gas in this market will cost $6-8 billion in fixed costs. You need wholesale pricing of ~$50-60/MWh ... OVER 25 years! ... to recover just the fixed costs.
For West Texas, prices averaged mid-$30s over the last year.
Microsoft has all of the leverage here, and Chevron wants a big announcement in an area where they don't have a lot of experience.
I don't understand why datacenters especially shouldn't be able to run mostly on renewables.
This won't apply to every datacenter, but the AI inference ones especially, should be seeing most demand during the day. So what's built in north America is used when it's daylight there?
If so, isn't that a perfect case for solar?
To be clear, I'm not saying it can power down, but at night it should be able to scale down significantly?
Even corporate ESG policies bend the knee to cheap Texas energy!
Chevron and Microsoft agree to keep smoking crack and buy it for each other when needed and not tell anyone.
Fascinating they're going this direction when solar and batteries are so cheap in Texas...
Nearly all new additions to the grid are solar, wind, and storage right now on Texas' grid. Not because of Texas regulations, but because Texas' grid is one of the few grids where generation decisions are all made by independent investors trying to make money.
Especially with the shortage in gas turbine manufacturing, very surprising! Not sure if this says more about Microsoft or datacenters.
West Texas is like Costco for natural gas.
There are cases where the fields can produce more than the pipelines can carry away. If you put your gigantic gas turbines right next to the fields you can obtain access to some extremely cheap fuel. They might even pay you to burn it sometimes. Negative gas prices are a thing.
And despite that, when there's any sort of price pressure, like there is for new electricity grid additions from investors, solar and batteries completely dominate the choice over natural gas in Texas.
Look at the map for 2026 of the grid buildout in Texas at the bottom of this page:
https://www.eia.gov/todayinenergy/detail.php?id=67205
All solar and batteries (yellow and black), with a few tiny blue dots for gas. It was the same story in 2025. And it will be the same story in 2027 because solar and batteries are getting even cheaper.
These are all decisions from private investors, trying to make money, and choosing solar and batteries over gas in the market where gas is the cheapest in the world, gas is like a waste product that's hard to get rid of.
Why would Microsoft choose dirty energy when all the profit-driven investors are choosing cheaper solar and storage?
This is just a guess, but is the reason the same one that the gas is cheap all the way out in BFE west Texas? In other words, even if you could generate electricity from wellhead gas more cheaply than a bunch of wind turbines, solar panels, and batteries just west of Fort Worth, can you actually export it to east Texas where all the demand is? The solution here being: let's build our giant demand machine directly on the steppe and skip all that expensive infra, because data is much cheaper to move than energy.
> data is much cheaper to move than energy
It's something like 5-10 orders of magnitude cheaper to move information over fiber than it is to move the energy required to produce that same information through a [pipe/power]line.
I know this is nitpicking, but as a Texan I have to correct you on a point of grammar. The “west” in “West Texas” (and similarly for the other regions) isn’t an adjective; it’s part of the proper noun and should be capitalized. So it’s “West Texas,” not “west Texas.”
Yes, this is weird and no, I have no idea why we do it, but it’s really weird to read “export it to east Texas” — to the extent that I had to re-parse the sentence to figure out what you meant.
Thanks for this. I'm past the edit window now, but both ways felt wrong and I just picked one. I suppose "western Texas" and "eastern Texas" is what I should have written to avoid the problem.
> let's build our giant demand machine directly on the steppe and skip all that expensive infra, because data is much cheaper to move than energy.
Who cares if it's cheaper. It's that you're moving less of it. The more processing you can do near the source the smaller and cheaper your pipe out to the consumer can be.
Cut the tree on the hillside. Mill it in the valley. Then spend your precious boxcar volume shipping only the finished lumber out of the valley.
Right, shipping finished lumber is cheaper (per dollar of value) than shipping logs. That's exactly my point, but the lumber is bits and the electricity is the logs. A datacenter is a mill for turning electricity into bits!
Because management at big tech could give any shits about you or where they live.
It’s easy to see.
Replace "extremely cheap" with "zero cost" and you've got it correct. Texas at night is an endless sea of flare stacks. We burn off an unbelievable amount of natural gas just to get rid of it.
West Texas is also a basket of methane leakage -- see CarbonMapper et al
looks like a terrible idea from my perspective also.
But they are using wind:
> A majority of the generation will come from large GE Vernova (NYSE: GEV) turbines.
Unless the article specifies wind, GE Vernova makes gas turbines too.
While the US stays oil rich, we should expect the US to be a laggard in ending use of fossil fuels. China and EU are not oil rich, they’ll make a faster transition.
Of course it’s idiotic to actively hobble clean energy. Or to put your finger on the scale for one source of energy, like the current administration does.
But it’s not crazy to argue for “energy abundance” where the market just picks the cheapest energy on the market in the US and that just gradually moves cleaner over time.
Well what I'm saying that is that on the Texas grid, solar and storage and wind are the cheapest energy, and being deployed in massive amounts because only on the Texas can an investor make money by providing the cheapest energy. (For most utilities, they take a fixed rate of profit and are incentivized to use the most expensive possible energy if they can get away with it.)
So Texas is not a laggard when it comes to clean energy, they are actually driving clean energy forward the most, because clean energy is the cheapest and most profitable energy. And that's despite Texas having natural gas that's insanely cheap right from Henry Hub.
What this tells me is that like most hyperscalers, Microsoft is not price sensitive on the electricity side, because energy costs are tiny compared to the massive capital costs of the GPUs. But why would they go this direction? What political influence would make Microsoft choose more expensive electricity, when in the past they've been fairly good at driving clean energy forward in their data center power choices, and they'd pay a premium on energy costs to go with clean energy?
I can think of a few angles that might have pushed them towards gas, mainly (a) they wanted on-demand generation cap, (b) they didn't want to get into the batteries game at the volume they'd require, or (c) they didn't want to deal with securing the space needed to produce 2.6GW of solar. Also yeah they're definitely not price-sensitive, any of the hyperscalars is more than happy to pay extra to get exactly what they want.
edit: for example that EIA list of new solar projects you linked indicates that the largest battery installations going up in '26 are all ~500MW, and that there are only four of them (of that size). I think the energy intensity of a multi-GW datacenter is the main reason that they're not going for solar here.
> But why would they go this direction?
sibling comment has it, they want to do power generation on site and not connected to the grid and all the PITA that come with that. Further, they can pitch power independence to the locals which removes a big argument from the anti-datacenter crowd. Finally, the power gen i saw at Stargate in Abilene TX which was maybe 10 units (if that's what they're called) took up maybe 30 acres of land so they're not very big compared to the rest of the campus.
> What this tells me is that like most hyperscalers, Microsoft is not price sensitive on the electricity side,
What this should likely tell you, is that you are missing information and have an incomplete picture of the situation.
Or it could be MSFT just likes to spend extra money for no reason because they are simply stupid. I'm gonna go with the former though.
I'd be interested in all these behind the meter setups for large 24x7 loads that are being built using solar+battery though. I haven't heard of one personally, but I must be lacking information on the subject since you seem so certain these are common?
Maybe this counts, although it isn't built yet:
https://www.datacenter-forum.com/edora/eurowind-energy-and-e...
There are many datacenters in Denmark with decade-plus power purchase agreements from a specific wind farm, but with so much news recently I can't find if there's any operational with their own supply.
Solar makes sense for utility generation because demand goes down at night. For datacenter usage demand is effectively constant, so theyd need a fuckload of batteries which is where all the cost goes. It doesnt make sense to power 2.6 GW overnight fully on batteries. Much simpler, a.k.a faster, to just buy a plot next to an area with excess gas and build the whole thing there.
> But it’s not crazy to argue for “energy abundance” where the market just picks the cheapest energy on the market
Except that there's externalities not priced in. The consequences of those are becoming increasingly visible and very expensive to address
Mostly it says that the oil business runs the show here in Texas, and in Washington.
But I'm curious how oil could run the show for Microsoft though. Even if Microsoft wanted gas backup, they could add solar to the build, shut off the turbines during the day, and save money over an all gas setup.
Perhaps Microsoft had better ability to overturn local opposition to data centers if they had Chevron's political influence over the politicians too?
What I meant was that all political and economic decisions here go in favor of oil. The war, the proposed laws to make Chinese EVs illegal, the softening of environmental regulations, etc.
Chevron and the US Government are joined at the hip, so these kind of deals "flow" naturally.
DC?
Microsoft says [1] they're going to be carbon negative by 2030. Hard to see them doing that while deploying gigawatts of new fossil fuels.
[1] https://www.microsoft.com/en-us/corporate-responsibility/sus...
Its easy, they are going to use fancy accounting to make it come true. Produce a ton of carbon, then buy a cheap, under-priced carbon credit to make it be a zero.
Or they'll use the greenhouse potential difference between released unburned methane and CO2 to greenwash the project.
it's easy ... they'll just change the definition of "carbon negative"!
I love how they are using a company named 'Solar Turbines'. Such an obviously misleading name. (From their website)[1]:
Powering the future through innovative, sustainable energy solutions.
Solar Turbines Incorporated, headquartered in San Diego, California, is a wholly owned subsidiary of Caterpillar Inc. Solar manufactures the world’s most widely used family of mid-sized industrial gas turbines, ranging from 1 to 39 megawatts. More than 17,000 Solar units are installed in more than 100 countries with more than 3 billion operating hours. Solar is a leading provider of energy solutions, featuring an extensive line of gas turbine-powered compressor sets, mechanical drive packages, and generator sets.
[1] https://www.solarturbines.com/en_US/about-us.html
To be fair, solar turbines has had the name since 1929 (they were then called solar aircraft company). It’s not like they’re being intentionally misleading.
They’ve said the company name comes from San Diego being so sunny.
Thanks for point that out. I missed that context.
> A majority of the generation will come from large GE Vernova (NYSE: GEV) turbines and associated electrical infrastructure, with additional capacity provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc. (NYSE: CAT).
When they say "large GE Verona", they mean the 7HA. This is an actual power plant with proper emissions controls. Not the aeroderivatives in parking lots we've seen so far.
> Their plan includes the use of seven U.S.-made GE Vernova Inc. GEV 7HA natural gas turbines to deliver the plant's initial capacity.
https://finance.yahoo.com/sectors/energy/articles/chevron-mi...
I guess that whole carbon negative by 2030 goal got shuffled down the priority list
Another illustration that corporations do not have morals or ideologies. Do not anthropomorphize the lawnmower.
And in the mean time, western europe is having its second heat wave even before summer starts.
If Europe was as willing to drill for gas as the US is, they'd probably be able to run more ACs and save thousands of lives every year.
> If Europe was as willing to drill for gas as the US is, they'd probably be able to run more ACs and save thousands of lives every year.
They'd also be accelerating the collapse of AMOC... after which they won't need ACs anymore.
So I guess, yeah, this solves the problem of too much heat, in a fashion!
Mhm... meteorological summer starts 1st of June. Solstice was yesterday as well.
Yes, the planet got destroyed. But for a beautiful moment in time we created a lot of value for shareholders
- A Microsoft employee 2080
capex certainty for 20 years. smart if AI demand holds, very expensive if it doesn't
With all the fracking in the USA, literally exponential growth, one of the things they do is gas burn off for months, sometimes years at all the sites
Why not use all that wasted heat energy to power all these datacenters?
(and why not build the datacenters at the Bakken formation)
You can see the burnoff from SPACE and it's for months at a time at each location, tell me that does nothing to global temperatures?
(look at the date on these photos, two decades of burnoff wasted energy)
* https://www.cnbc.com/2013/01/28/shale-gas-boom-now-visible-f...
* https://www.smithsonianmag.com/smart-news/at-night-giant-fie...
> Why not use all that wasted heat energy to power all these datacenters?
Probably not profitable enough to set up the infrastructure to capture, store, transport, and sell that as a product. Profit potential is the only factor that matters to decision makers.
Search "datacentre district heat Denmark" and you'll find several examples, such as Facebook's datacentre in Odense.
Or one in Copenhagen, I didn't realize some small amount of my hot water (and heating in the winter) came from a datacentre. Neat.
That makes sense for existing infrastructure, taking waste heat from data centers and piping it through existing public systems. Especially for government environments like Denmark.
I wonder what profits would need to be for a private energy company to install additional equipment at a remote fracking site to capture the burn off energy to then sell to a data center to then use.
I had to go read the article to check because other operators have been entering into PPAs with oil companies, but for photovoltaic power. E.g. Google and TotalEnergies.
https://pv-magazine-usa.com/2026/02/09/totalenergies-signs-1...
Also Google and itself. I guess there's a difference between Google and Microsoft after all.
https://storage.googleapis.com/gweb-uniblog-publish-prod/doc...
lol no way it lasts that long
> A majority of the generation will come from large GE Vernova turbines and associated electrical infrastructure, with additional capacity provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc.
Solar turbines is an interesting name for a gas turbine company. "It's green energy, we put solar in our name"
Quick search shows the reason is nothing to do with your sarcasm.
Its origin is traced back to a 1929 company, Solar Aircraft Company.
https://en.wikipedia.org/wiki/Solar_Turbines
How is this sarcasm? I had almost the exact same thought in earnest: A gas turbine company being called Solar Turbines is quite interesting and unexpected if you're not familiar with that particular corporate history.
Not sure why it would be so contentious. I simply provided a reference to the why instead of commenting with a joke, sarcasm or whatever you feel like calling it.
I agree with OP that the name, while maybe not deliberately, is really confusing in 2026. I thought that was a wind turbines or a solar panel technology, definitely not gas.
And it takes all of 30seconds to look up instead of posting sarcastic hyperbole that the company is trying to greenwash their product by name when it’s a 100 year old company name.
Confusing as it may be for people like yourself, I don’t think it really defends posting sarcasm that is not based in reality.
I didn't really think it was greenwashing, just hilarious to have one of the largest gas turbine companies in the world named "solar turbines"
> "It's green energy, we put solar in our name"
You can call this whatever you want.
We call them "jokes"
It's 2026 - they should change their fucking name.
How did that work out for X? I mean, Twitter. Or Meta? You mean Facebook?
Name recognition matters especially to people in particular segments.
Solar Turbines is one of the world's leading manufacturers of industrial gas turbines, with more than 17,000 installed in 100 countries
Much like that scoundrel Aurelian reviving the cult of Sol Invictus to greenwash the late roman empire. /s
Sorry, but who in his right mind, signs contracts for 20 years - could you have imagined the world today 20 years ago? No and no. All one should do is sign snippet contracts of 5 years with the offer of an option to predefined condition. Split it into 4 sequences with a renewal.
Very normal. Here in Europe (well nordics at least) pretty much all the capacity of any wind farm is already sold before construction begins. The PPA (power purchasing agreement) is usually pretty much required to get the loan/funding anyway.
Basically most projects start with the wind company using its own money to find a site and get it approved and then they go and try to find someone to sell the electricity to at a fixed rate before construction begins as selling directly to the spot market has way too much risk for the banks to give loans.
Not sure how different it is in Central Europe with solar as there isn’t much solar up here in the north (just doesn’t make much sense as during the 3 to 4 months in the winter when electricity price is at the yearly maximum you produce effectively nothing)
Many people. My house loan was 30 years. Commercial real estate is often 20. Commercial 30 year bonds are common.
Many investments won't pay off unless there is a 30 year plan so lots of investors work on that long term. Even if an investment pays off sooner you often are accounting better off longer terms - see an accountant
The power plant probably amortizes over roughly that period. Price would be higher without a matching purchase guarantee, and so on.
California's progressive policies have pushed out both data centers and Chevron out of the area. I'm sitting here wondering why Newsom is so proud of his achievements.
Yeah, why would a governor be proud of pushing out two things that are unpopular with his constituents...
Newsom aside, the idea is to change from oil to non-oil, efficient from mono-industrial.. The US Oil minions claim to be blind to this and cite quarterly profits, again
Then why does Texas install more solar?
Good riddance to both.
yeah. good riddance to east texas also.