Chevron signs 20-year power deal to supply Microsoft data center in Texas

In short: Chevron signed a 20-year deal to sell electricity to Microsoft for a large data center project in West Texas.

What happened

Chevron said it has agreed to supply power to Microsoft for a data center in the Permian Basin in West Texas. A data center is a large building filled with computers that store data and run online services, similar to a giant server room.

Chevron is developing the project, called Project Kilby, with Engine No. 1, a US investment firm. The plan is for 2.7 gigawatts of electricity capacity, which is enough to power a large city. Chevron did not share the cost.

Chevron expects to decide later this year whether to build a gas-fired power plant for the project. Jeff Gustavson, Chevron’s president of new energies, said the company sees this as a competitive advantage and suggested more power projects could follow. He also said the project will not start with renewable power, but solar power could be added in the future.

Why it matters

AI services require lots of electricity because they run on many computers at once, and companies like Microsoft are building more data centers to keep up. At the same time, West Texas produces so much natural gas, often as a byproduct of oil drilling, that the region sometimes struggles to move it away through pipelines. Chevron’s plan could turn that extra gas into local electricity, like using surplus ingredients instead of paying to throw them out.

Source: Financial Times