Microsoft and Chevron Plan a 2.67-Gigawatt Gas Plant to Directly Power a West Texas AI Data Center

Overview

Microsoft and Chevron announced plans on Monday to develop a 2.67-gigawatt natural gas power plant in West Texas to serve the tech company’s AI and cloud data centers, according to TechCrunch. Microsoft will buy power from the plant, known as Project Kilby, for 20 years, TechCrunch reported.

The deal pairs a dedicated, purpose-built power plant with a single data center campus, a structure the companies are pitching as a way to add large blocks of generation quickly to feed AI computing.

What We Know

• The project will be “among the largest co-located natural gas power and data center developments in the U.S.,” Chevron said in a press release, as reported by TechCrunch. “Co-located” means the generation is built on-site alongside the data center rather than drawn from the wider utility system.
• Most of the power will come from large GE Vernova turbines, with the rest supplied by Solar Turbines, a Caterpillar subsidiary, according to TechCrunch.
• The plant carries a substantial environmental footprint. Project Kilby will potentially release more than 13 million tons of carbon dioxide, 3,200 tons of criteria air pollutants, and 278,000 pounds of hazardous air pollutants, according to the Environmental Integrity Project, as cited by TechCrunch.
• The arrangement sits awkwardly against Microsoft’s climate commitments. Microsoft has pledged to eliminate its carbon emissions by 2030, a goal that will be harder to reach with the new power plant, TechCrunch noted.

Why It Matters

The agreement is the latest sign that AI power demand is outrunning the traditional utility grid in Texas. Data center activity has “exploded” in the state, according to Utility Dive, which reported that grid monitor projections showed 70.5 GW of new load could be interconnected to the ERCOT system by 2028.

Grid officials have flagged the reliability stakes of absorbing that much new demand. The disorganized integration of large loads constitutes the largest increased risk to ERCOT, Utility Dive reported, citing warnings that AI data centers exhibit “very fast, very large ramps” that can create issues for grid operators.

Against that backdrop, building dedicated generation directly next to a data center is one way hyperscalers are trying to secure firm, always-available power without waiting on shared grid infrastructure. Project Kilby is a large example of that co-located model applied to a single Microsoft campus.

What We Don’t Know

• The companies’ cited announcement does not, in the sources reviewed here, pin down a final construction cost, a firm commissioning date, or the full phasing schedule for reaching the 2.67-gigawatt figure.
• It is not established in these sources whether or when the plant would connect to the ERCOT grid, or how much of its output would be reserved exclusively for Microsoft over the life of the 20-year agreement.
• The emissions estimates come from an outside group, the Environmental Integrity Project, rather than from operating permits, so actual lifetime emissions will depend on final plant design, utilization, and any emissions controls Chevron adopts.