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Electric Power, Energy Transition, Natural Gas, Emissions
January 28, 2025
HIGHLIGHTS
Highly-efficient gas turbines planned
Industry observers raise questions
Chevron is joining GE Vernova and investment firm Engine No. 1 to develop natural gas-fired generation to power US data centers in the Southeast, Midwest and West, the companies said in a Jan. 28 news release, raising questions among industry observers.
The companies refer to the sites as "power foundries," leveraging seven US-made GE Vernova 7HA gas turbines on an accelerated timeline. The projects are expected to deliver as much as 4 GW at co-located data centers in the regions, with initial in-service target dates by the end of 2027.
These highly efficient turbines have net heat rates ranging from 7.9 MMBtu/MWh to 8.1 MMBtu/MWh in a gas simple cycle package. After all seven are deployed, their daily power burn would total no more than 1.316 Mcf/day.
The team behind this effort has "considerable experience developing inside-the-fence cogeneration solutions for refineries," Steve Piper, S&P Global Commodity Insights director of energy research, said.
"Applying that model to data centers makes sense," Piper said. "The rationale for the sale of Calpine to Chevron made it pretty clear the merchant gas sector intends to compete in this space. What is new about this announcement is the concept of new purpose-built inside-the-fence generation."
A Chevron spokesperson said the projects are likely to be located on the US Gulf Coast, the interior west states of Colorado, Nevada, Utah and Wyoming, and several locations in the Midwest. Criteria include "gas supply, regulatory environment (including incentives), customer preferences," the spokesperson said.
The developers expect to have the flexibility of integrating lower carbon solutions such as carbon capture and storage and renewable energy sources.
"Energy is the key to America's artificial intelligence dominance," Chris James, Engine No. 1 founder and chief investment officer, said in the news release. "By using abundant domestic natural gas to generate electricity directly connected to data centers, we can secure AI leadership, drive productivity gains across our economy and restore America's standing as an industrial superpower. This partnership with Chevron and GE Vernova addresses the biggest energy challenge we face."
The Chevron spokesperson said the company's customer base will be all the "large hyperscalers and co-locators; discussions are well advanced and will now accelerate."
Brian Korgel, executive director of The University of Texas at Austin Energy Institute, said the Chevron announcement represents "a trend that we're seeing."
"ExxonMobil recently made a similar announcement in December," Korgel said in a Jan. 28 email. "There is a similar trend to use nuclear power for data centers. There seems to be a realization that the intermittency of renewable power (wind and solar) provides a challenge for providing firm power to the data centers. With the various new low carbon intensity tax incentives from the Inflation Reduction Act, there are now a variety of new viable low carbon energy solutions."
But if the Trump administration halts the 45Q tax credit for carbon capture and sequestration, "it will probably no longer be cost competitive to do the carbon mitigation work that the data companies are looking for and need to meet their sustainability goals," Korgel said.
"Without the IRA tax incentives, I don't think these projects still happen, but we will see," Korgel added.
Additionally, Alison Silverstein, an energy consultant and former Federal Energy Regulatory Commission senior adviser based in Austin, Texas, said that a Chinese-made AI model called DeepSeek reportedly uses less memory than rival models, cutting energy demand and costs.
"Is there a meaningful risk that the need for massive amounts of new generation and transmission is much smaller than current breathless estimates?" Silverstein asked Jan. 28.
The Chevron spokesperson said the urgency of need, robustness of competition and acceleration of innovation "is why we built the partnership we built."
"We're offering a solution that addresses the urgent need for behind-the-meter, off-the-grid energy to power existing data center infrastructure needs today," the spokesperson said. "We have had several conversations with potential customers, and they are aligned with these needs that require solutions at speed and scale."
Randy Jones, head of the Texas-based Mountaineer Market Advisors energy consultancy, raised another question relevant in the wake of the mid-February 2021 winter storm that left more than 4 million Texas customers in the dark some for days. A big factor in that crisis was the failure of gas-fired generation.
"The arrangement ... begs the question of, 'What happens in a condition following a contingency of lost generation?'" Jones said. "Will the data center become a client of the transmission and service provider for real power? Will the reactive requirements fall to the TSP?"
The generation developers did not address this question, but the news release said that over time the model is "designed to sell surplus power to the US power grid through future interconnects, supporting broader energy demands while keeping costs low."
Commodity Insights' Piper said these projects may face competition from renewable-plus-storage projects, which "could at least impact supply negotiations."
In the news release, Chevron Chairman and CEO Mike Wirth described this effort as playing a part in "President Trump's vision for a new American golden age, powered by our enormous energy resources and unrivaled workforce."