Microsoft's AI buildout in West Texas is poised to rely on fossil fuels for years, with Chevron saying it will supply natural gas to a massive Microsoft data center under a 20-year agreement, as CNBC reported.
What happened?
Chevron said Monday that it intends to use natural gas to power Microsoft's Project Kilby data center in Reeves County, Texas, through a long-term arrangement. CNBC reported that the site is expected to require nearly 2.7 gigawatts of electricity, roughly equal to the consumption of 2 million homes.
Instead of drawing electricity from the wider grid, the facility would have power generated specifically for its own use, CNBC reported. Chevron said GE Vernova, its partner, would supply most of the large gas turbines, while Caterpillar would provide additional turbines.
Work on the project has not started yet. Chevron told CNBC it expects to decide later this year whether to make the final investment, and if it proceeds, Microsoft would start receiving power in 2028.
The outlet also noted Microsoft is already spending aggressively on new data centers, with planned capital expenditures of $190 billion this year.
Why does it matter?
The deal reflects a growing tension tied to the AI boom. While the technology could offer major benefits, it also requires vast amounts of electricity and water to operate at scale, which could offer major downsides.
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That could result in bringing more polluting energy sources to the fore, as in this case. In fairness, that isn't always the full story.
According to CNBC, Microsoft has invested heavily in renewable energy to offset the pollution associated with its data centers. Even so, the Chevron deal suggests the company does not view wind and solar as enough on their own to satisfy the constant power demand those facilities require.
The company has also pursued nuclear power, backing the 2024 restart of Pennsylvania's Three Mile Island.
Using natural gas to meet rising AI demand could lock in fossil fuel use for decades at a time when many companies are facing mounting pressure to reduce climate pollution.
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What are people saying?
Jeff Gustavson, president of Chevron New Energies, suggested to CNBC that "there's really no competition with local electricity consumers."
"In fact, over time, as we have excess power, we plan to push that into the grid to help stabilize it," Gustavson added to the outlet.
Noelle Walsh, Microsoft's president of cloud operations and innovation, said in the press release that the rapid growth of AI "requires energy infrastructure that can scale quickly and reliably."
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