Behind-the-Meter AI: Microsoft-Chevron’s West Texas Bet. 3 Min Read. Getty.
Chevron and Microsoft have signed a 20-year agreement to supply dedicated power for a planned data center campus near Pecos, Texas, advancing one of the largest pairings of compute infrastructure and on-site generation in the US, the companies said on Monday.. The development, called Project Kilby, will combine a Microsoft-operated data center with a co-located natural gas power plant developed by Chevron subsidiary Energy Forge One and investment firm Engine No.
1. The project targets approximately 2.67 GW of generation capacity built in phases, with first power planned for 2028. Chevron said it expects to reach a final investment decision by the end of 2026..
Scale, Timing, and Jobs. The deal formalizes discussions disclosed in April. Roughly two months later, the companies have converted those talks into a 20-year agreement, giving Microsoft a long-term source of dispatchable power as utilities warn that large new loads could face lengthy interconnection timelines..
Related:The AI Demand Dilemma: Utilities Confront Speculative Growth. Microsoft said the campus will add roughly 2 GW of data center capacity over the next five to seven years to support AI and cloud workloads. The company said the development is expected to create more than 6,000 construction jobs and hundreds of permanent operational positions..
Equipment, Fuel, and Location. Chevron said most of the generation capacity will come from gas turbines supplied by GE Vernova, with additional capacity provided by Solar Turbines, a Caterpillar subsidiary. The project is sited in the Permian Basin near abundant natural gas production and existing energy infrastructure, allowing Chevron to supply both fuel and power..
“Our agreement with Microsoft through Project Kilby represents Chevron’s unique ability to deliver power to AI customers with certainty, speed, and at a competitive cost,” Jeff Gustavson, president of Chevron New Energies, said in a statement.. In a LinkedIn post announcing the agreement, Microsoft EVP and COO Carolina Dybeck Happe described the partnership as a model that brings together technology, energy, capital, and local communities to support future AI growth..
Deliverable Megawatts. Project Kilby joins a growing group of developments pairing power generation and AI infrastructure. Similar efforts involving Crusoe, Lancium, ExxonMobil, and NextEra Energy reflect a broader push by developers to secure power, fuel, land, and computing capacity as part of a single project..
The project’s configuration emphasizes “deliverable megawatts” – power that can reliably and continuously reach compute – rather than just announced nameplate capacity. That framing echoes a broader shift, according to Ihab Osman, an independent strategist focused on data center and mission-critical infrastructure..
Related:Texas May Have Accidentally Built the Perfect Grid for AI. “The unit of AI development is no longer the data center; it is the energy-compute complex,” Osman said.. ERCOT, meanwhile, has raised questions in recent planning documents about how much announced AI demand will ultimately materialize, noting that many proposals lack firm commitments to power supply, equipment, or financing.
Against that backdrop, Project Kilby appears further along than many announced AI campuses: Microsoft has signed a 20-year power agreement, Chevron and Engine No. 1 have identified turbine suppliers, and the project has a defined customer, generation plan, and commercial timeline..
“The valuable unit is no longer the installed GPU or turbine nameplate,” Osman said. “It is the deliverable megawatt that can continuously reach compute.”. Why It Matters.
For Microsoft, the agreement provides dedicated, dispatchable generation at a time when utilities across major data center markets are warning that new large loads could face lengthy interconnection timelines. For Chevron, it creates a long-term customer for a multi-gigawatt power development in a location with ample fuel supply and existing energy infrastructure..
Related:Why Data Centers Are Turning to Behind-the-Meter Power. More broadly, the competition to build AI infrastructure is expanding beyond chips, servers, and buildings. Increasingly, it includes the land, fuel, water, turbines, permits, and community support required to turn planned megawatts into deliverable ones..
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