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auspiv
epistasis
This might make sense for oil producers to get rid of their natural gas, which is nearly a waste material, but I'm struggling to understand how it makes sense for Microsoft. Despite the cheap natural gas, and an abundance of investors and builders with natural gas expertise, in the competitive electricity generation market everybody is deploying solar and batteries in west Texas because it's still more profitable than gas generation.
Further, there's a gas turbine shortage so Microsoft choosing to put their (presumably limited) allocation of gas turbines in West Texas, where they have good alternatives, seems a bit mysterious. Why not save that massive amount of turbines for the northeast DCs, where renewables work far poorer yet gas is more reliable?
The reasons that seem most convincing to me:
1. Political environment is hostile to renewables and Microsoft doesn't want to paint a target on their back by choosing solar plus batteries, the choice others are making in West Texas.
2. Grid connection drastically changes economics, but pipelines for gas are cheap or something, so the massive cost and delay from grid interconnection simply isn't worth it
3. There are particular political favors going on with Chevron, e.g. Chevron wants gas in the area and is willing to increase MS's turbine allocation if they do it in west Texas, or Chevron is helping get around pesky local political approvals for data centers, or something like that.
The cost of gas does not seem like a justification for this, though.
skybrian
They will also want reliable power, which seems like justification enough to keep their options open. A “phased, modular approach” sounds like it would give them options. Maybe Microsoft could install solar and/or batteries later and use their natural gas turbines for backup?
With enough batteries they might get through the night, but seasonal shortages are much harder to handle that way.
I bet a carbon tax on data centers would be popular if the Democrats get back in.
Retric
You can generally solve seasonal shortfalls cheaply by simply adding more solar / wind until you no longer have a seasonal shortfall just a massive surplus in a different part of the year.
Put another way if you want to store power say 1GWh for the worst month, well a solar panel provides a lot of power over even the worst month. 20MW of solar panel averaging even 40MWh/day * 30 days = 1.2GWh and cost way less than 1GWh of batteries.
Near the arctic circle Wind fill the same niche.
cratermoon
> They will also want reliable power
Given the state of the power grid in Texas, this could be the most important consideration. Why? Texas is not connected to the national power grid, and only electricity from plants operating in Texas is available. The last winter and summer, demands on the grid have severely stressed, as reported in many places. In 2021 there as a state-wide crisis and almost a complete failure. https://en.wikipedia.org/wiki/2021_Texas_power_crisis
frollogaston
Do any huge datacenters run on solar + battery? I thought the point of gas turbines was to have reliable power that's set up quickly.
whaleofatw2022
Natural gas is cleaner to burn than coal, if I had to guess this is lazy half-done greenwashing, i.e. 'at least it's not coal!' Similar to California's measures for cleaner power generation.
pseudohadamard
There's an efficient gas turbine shortage. If you're willing to run older inefficient gas turbines it's not so bad, and when the gas is free it doesn't matter how inefficient they are.
Oy vey, what a perverse incentive.
stonogo
The cost of gas is completely irrelevant. In order to bring a new large load onto the grid, you have to coordinate with ERCOT, and they just made that process more tedious. Once you get your grid connection approved and built out, you have to source your own power anyway, and frankly there just isn't enough power on the market to realize the stated datacenter buildout goals in this country.
In short, you're going to have to build your own power plant anyway, so why bother with the grid? Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time. Unless you're dealing with nuclear, the fuel cost just doesn't matter compared to the rest of the buildout, and gas wins because you can take off-the-shelf turbines and bolt them down.
You can only get away with it in places that don't care about environmental regulations, which are the places most likely to approve new buildout of gas infrastructure anyway. Nobody in the northeast is going to approve the creation of a brand new carcinogen factory.
epistasis
> Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time.
Is it, though? There's a ton of projects out there waiting to get their solar on the grid in west Texas, partnering with one of them and launching the project early while waiting on the interconnection queue, and adding enough batteries, gives a more robust solution right now without the SPOF nature of large single generators.
Add to that the long backorder list for gas turbines right now, with no end in sight, and I'm surprised that Microsoft would power this particular location with turbines because it's probably their best chance to do off-grid massive solar projects.
Massive off-grid solar is what China is choosing for some absolutely massive new industrial projects. Nuclear is a no-go because it takes so long to deploy, but solar + batteries are cheap COTS and available in abundance, unlike gas turbines.
jtbaker
> Gas is the cheapest, fastest zero-to-production choice for onsite power generation, and has been for a long time.
Last I heard the wait time for turbines was ~5 years at the moment. I'm sure MSFT has some inside baseball with Chevron but it doesn't work as a general rule of thumb.
protocolture
>so why bother with the grid?
To sell excess back to the grid when funny things happen to texans in the winter?
iririririr
hopefully when the Ai bubble burst, all those new renewable plantals will be feeding the grid. and power will be the Aeron chairs of 2030.
outside1234
There is also probably a balance of payments aspect of this. Chevron uses a ton of Azure. They probably asked for Microsoft to use some amount of Chevron in exchange. This is probably that deal.
jillesvangurp
Gas and petrol are technically by products of oil refineries that produce all sorts of chemicals. Before cars took off, refineries used to dump petrol in rivers as it was worthless. Petrol is still in demand but facing world wide double digit percentage declines as a quarter of the vehicles being sold is now electric. These vehicles don't require any petrol/diesel. That is closer to 50% in China and the rest of the world is buying lots of these things. By the mid 2030s, most vehicles sold will be electric world wide. That means a lot of refineries that are currently subsidizing chemical production with petrol and gas sales, are going to face some serious demand issues for these by products over the next decades.
Texas is going to be somewhat shielded from this because of US policy on this front. But probably only for a few short years. Mostly LNG exports are currently very lucrative. But LNG production is bottlenecked on expensive infrastructure and shipping. And of course lots of importers of LNG are looking for more affordable alternatives as well because it is expensive. Doubly so since the recent Gulf conflict. A lot of planned infrastructure expansion just got cancelled.
So, there's probably a bit of gas overproduction happening in Texas currently and that's going to cause predictable issues when demand is going to be structurally lower. And the double whammy of petrol/diesel also going into structural decline is going to leave Texas with a lot of over production.
caminante
Profits still ain't easy.
Cheap gas is great, but 2.67GW of new build natural gas in this market will cost $6-8 billion in fixed costs. You need wholesale pricing of ~$50-60/MWh ... OVER 25 years! ... to recover just the fixed costs.
For West Texas, prices averaged mid-$30s over the last year.
Microsoft has all of the leverage here, and Chevron wants a big announcement in an area where they don't have a lot of experience.
hvb2
I don't understand why datacenters especially shouldn't be able to run mostly on renewables.
This won't apply to every datacenter, but the AI inference ones especially, should be seeing most demand during the day. So what's built in north America is used when it's daylight there?
If so, isn't that a perfect case for solar?
To be clear, I'm not saying it can power down, but at night it should be able to scale down significantly?
p1necone
> should be seeing most demand during the day
I don't know if this is necessarily true - latency isn't really important for inference in the same way as many other services (at least the max ~300ms latency you get from hitting something on the other side of the globe) - compute in NA can serve all the other timezones just fine.
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drysine
The most of the cost is GPU, not power.
Demand for AI is global (except for Anthropic, haha).
When you build a DC that works only when the sun is shining, you are wasting half of you GPU capacity
rwyinuse
That's why you build batteries that can store electricity for the other half. Or maybe nuclear power.
declan_roberts
Even corporate ESG policies bend the knee to cheap Texas energy!
supertroop
Is all natural gas the same or are there grades? Like is the gas that comes out of oil pumping the same kind I pay for to heat my house?
epistasis
Fascinating they're going this direction when solar and batteries are so cheap in Texas...
Nearly all new additions to the grid are solar, wind, and storage right now on Texas' grid. Not because of Texas regulations, but because Texas' grid is one of the few grids where generation decisions are all made by independent investors trying to make money.
Especially with the shortage in gas turbine manufacturing, very surprising! Not sure if this says more about Microsoft or datacenters.
bob1029
West Texas is like Costco for natural gas.
There are cases where the fields can produce more than the pipelines can carry away. If you put your gigantic gas turbines right next to the fields you can obtain access to some extremely cheap fuel. They might even pay you to burn it sometimes. Negative gas prices are a thing.
epistasis
And despite that, when there's any sort of price pressure, like there is for new electricity grid additions from investors, solar and batteries completely dominate the choice over natural gas in Texas.
Look at the map for 2026 of the grid buildout in Texas at the bottom of this page:
https://www.eia.gov/todayinenergy/detail.php?id=67205
All solar and batteries (yellow and black), with a few tiny blue dots for gas. It was the same story in 2025. And it will be the same story in 2027 because solar and batteries are getting even cheaper.
These are all decisions from private investors, trying to make money, and choosing solar and batteries over gas in the market where gas is the cheapest in the world, gas is like a waste product that's hard to get rid of.
Why would Microsoft choose dirty energy when all the profit-driven investors are choosing cheaper solar and storage?
ElevenLathe
This is just a guess, but is the reason the same one that the gas is cheap all the way out in BFE west Texas? In other words, even if you could generate electricity from wellhead gas more cheaply than a bunch of wind turbines, solar panels, and batteries just west of Fort Worth, can you actually export it to east Texas where all the demand is? The solution here being: let's build our giant demand machine directly on the steppe and skip all that expensive infra, because data is much cheaper to move than energy.
SJC_Hacker
Does that graph take into account capacity factor ?
qsxfthnkp2322
Because management at big tech could give any shits about you or where they live.
It’s easy to see.
sidewndr46
Replace "extremely cheap" with "zero cost" and you've got it correct. Texas at night is an endless sea of flare stacks. We burn off an unbelievable amount of natural gas just to get rid of it.
otterley
I've often wondered how this is lawful under the EPA. Obviously it must be, but it seems like a gross oversight to allow people to just burn natural gas and allow its byproducts to escape into the atmosphere yet not get any useful work out of it.
gnerd00
West Texas is also a basket of methane leakage -- see CarbonMapper et al
jambalaya8
looks like a terrible idea from my perspective also.
frollogaston
Yet here in California, people keep making fun of Texas's power grid. California of all places.
softwaredoug
While the US stays oil rich, we should expect the US to be a laggard in ending use of fossil fuels. China and EU are not oil rich, they’ll make a faster transition.
Of course it’s idiotic to actively hobble clean energy. Or to put your finger on the scale for one source of energy, like the current administration does.
But it’s not crazy to argue for “energy abundance” where the market just picks the cheapest energy on the market in the US and that just gradually moves cleaner over time.
epistasis
Well what I'm saying that is that on the Texas grid, solar and storage and wind are the cheapest energy, and being deployed in massive amounts because only on the Texas can an investor make money by providing the cheapest energy. (For most utilities, they take a fixed rate of profit and are incentivized to use the most expensive possible energy if they can get away with it.)
So Texas is not a laggard when it comes to clean energy, they are actually driving clean energy forward the most, because clean energy is the cheapest and most profitable energy. And that's despite Texas having natural gas that's insanely cheap right from Henry Hub.
What this tells me is that like most hyperscalers, Microsoft is not price sensitive on the electricity side, because energy costs are tiny compared to the massive capital costs of the GPUs. But why would they go this direction? What political influence would make Microsoft choose more expensive electricity, when in the past they've been fairly good at driving clean energy forward in their data center power choices, and they'd pay a premium on energy costs to go with clean energy?
tech_ken
I can think of a few angles that might have pushed them towards gas, mainly (a) they wanted on-demand generation cap, (b) they didn't want to get into the batteries game at the volume they'd require, or (c) they didn't want to deal with securing the space needed to produce 2.6GW of solar. Also yeah they're definitely not price-sensitive, any of the hyperscalars is more than happy to pay extra to get exactly what they want.
edit: for example that EIA list of new solar projects you linked indicates that the largest battery installations going up in '26 are all ~500MW, and that there are only four of them (of that size). I think the energy intensity of a multi-GW datacenter is the main reason that they're not going for solar here.
chasd00
> But why would they go this direction?
sibling comment has it, they want to do power generation on site and not connected to the grid and all the PITA that come with that. Further, they can pitch power independence to the locals which removes a big argument from the anti-datacenter crowd. Finally, the power gen i saw at Stargate in Abilene TX which was maybe 10 units (if that's what they're called) took up maybe 30 acres of land so they're not very big compared to the rest of the campus.
phil21
> What this tells me is that like most hyperscalers, Microsoft is not price sensitive on the electricity side,
What this should likely tell you, is that you are missing information and have an incomplete picture of the situation.
Or it could be MSFT just likes to spend extra money for no reason because they are simply stupid. I'm gonna go with the former though.
I'd be interested in all these behind the meter setups for large 24x7 loads that are being built using solar+battery though. I haven't heard of one personally, but I must be lacking information on the subject since you seem so certain these are common?
HDThoreaun
Solar makes sense for utility generation because demand goes down at night. For datacenter usage demand is effectively constant, so theyd need a fuckload of batteries which is where all the cost goes. It doesnt make sense to power 2.6 GW overnight fully on batteries. Much simpler, a.k.a faster, to just buy a plot next to an area with excess gas and build the whole thing there.
hvb2
> But it’s not crazy to argue for “energy abundance” where the market just picks the cheapest energy on the market
Except that there's externalities not priced in. The consequences of those are becoming increasingly visible and very expensive to address
wbl
Oil is readily transportable and there is a global market.
credit_guy
But they are using wind:
> A majority of the generation will come from large GE Vernova (NYSE: GEV) turbines.
alex43578
Unless the article specifies wind, GE Vernova makes gas turbines too.
nielsbot
It's gotta be gas turbines, not wind.
dtagames
Mostly it says that the oil business runs the show here in Texas, and in Washington.
epistasis
But I'm curious how oil could run the show for Microsoft though. Even if Microsoft wanted gas backup, they could add solar to the build, shut off the turbines during the day, and save money over an all gas setup.
Perhaps Microsoft had better ability to overturn local opposition to data centers if they had Chevron's political influence over the politicians too?
dtagames
What I meant was that all political and economic decisions here go in favor of oil. The war, the proposed laws to make Chinese EVs illegal, the softening of environmental regulations, etc.
Chevron and the US Government are joined at the hip, so these kind of deals "flow" naturally.
rconti
DC?
teepo
[flagged]
advisedwang
Microsoft says [1] they're going to be carbon negative by 2030. Hard to see them doing that while deploying gigawatts of new fossil fuels.
[1] https://www.microsoft.com/en-us/corporate-responsibility/sus...
ecshafer
Its easy, they are going to use fancy accounting to make it come true. Produce a ton of carbon, then buy a cheap, under-priced carbon credit to make it be a zero.
speed_spread
Or they'll use the greenhouse potential difference between released unburned methane and CO2 to greenwash the project.
ray_v
it's easy ... they'll just change the definition of "carbon negative"!
jmward01
I love how they are using a company named 'Solar Turbines'. Such an obviously misleading name. (From their website)[1]:
Powering the future through innovative, sustainable energy solutions.
Solar Turbines Incorporated, headquartered in San Diego, California, is a wholly owned subsidiary of Caterpillar Inc. Solar manufactures the world’s most widely used family of mid-sized industrial gas turbines, ranging from 1 to 39 megawatts. More than 17,000 Solar units are installed in more than 100 countries with more than 3 billion operating hours. Solar is a leading provider of energy solutions, featuring an extensive line of gas turbine-powered compressor sets, mechanical drive packages, and generator sets.
mlsu
To be fair, solar turbines has had the name since 1929 (they were then called solar aircraft company). It’s not like they’re being intentionally misleading.
jmward01
Thanks for point that out. I missed that context.
acheron
Maybe you should have looked it up before posting?
matthewmcg
They’ve said the company name comes from San Diego being so sunny.
bob1029
> A majority of the generation will come from large GE Vernova (NYSE: GEV) turbines and associated electrical infrastructure, with additional capacity provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc. (NYSE: CAT).
When they say "large GE Verona", they mean the 7HA. This is an actual power plant with proper emissions controls. Not the aeroderivatives in parking lots we've seen so far.
> Their plan includes the use of seven U.S.-made GE Vernova Inc. GEV 7HA natural gas turbines to deliver the plant's initial capacity.
https://finance.yahoo.com/sectors/energy/articles/chevron-mi...
mixdup
I guess that whole carbon negative by 2030 goal got shuffled down the priority list
tencentshill
Another illustration that corporations do not have morals or ideologies. Do not anthropomorphize the lawnmower.
nielsbot
And yet they are operated by people and people pull the levers. Interesting and confounding psychology there.
This is where government regulation, ideally a smart representative of the people's interests, comes into play. Hence the effort for companies to do regulatory capture. (See point #1)
jackbucks
Chevron and Microsoft agree to keep smoking crack and buy it for each other when needed and not tell anyone.
happosai
Yes, the planet got destroyed. But for a beautiful moment in time we created a lot of value for shareholders
- A Microsoft employee 2080
sajithdilshan
The planet go destroyed millions of times during its 4 billion history. I'm pretty sure it will survive this time as well.
nielsbot
I'm not really worried about the planet, but humanity. But I get your point.
blitzar
Shareholder value has been destroyed millions of times and they survived just fine too.
julosflb
And in the mean time, western europe is having its second heat wave even before summer starts.
nba456_
If Europe was as willing to drill for gas as the US is, they'd probably be able to run more ACs and save thousands of lives every year.
rwyinuse
No need for that when solar power and nuclear exist. The problem in Poland, Germany etc is prematurely getting rid of perfectly good nuclear power plants, not lack of gas drilling.
bayarearefugee
> If Europe was as willing to drill for gas as the US is, they'd probably be able to run more ACs and save thousands of lives every year.
They'd also be accelerating the collapse of AMOC... after which they won't need ACs anymore.
So I guess, yeah, this solves the problem of too much heat, in a fashion!
wazoox
Please explain how we run AC to avoid our forests burning, agricultural fields and orchards from drying, and the Mediterranean ecosystem from collapsing.
We must stop using fossil fuels as fast as possible, globally.
undefined
BoredPositron
Mhm... meteorological summer starts 1st of June. Solstice was yesterday as well.
egorfine
So we should expect even more AI bullshit in Windows 12.
ETH_start
I think one of the highest-leverage U.S. economic strategies right now is to maximize the upside from the AI data-center boom.
That means reducing any bottlenecks around not just data-center construction, but also adjacent industries like power generation and transmission.
If the U.S. can scale the infrastructure around AI faster than other countries, it can gain a decisive economies of scale advantage in numerous industries that could lead to export boom.
clearstack
capex certainty for 20 years. smart if AI demand holds, very expensive if it doesn't
fsuts
Why?
They aren’t building data centres just for Ai but building that can be repurposed.
They can use it for research or as new location as part of Azure and so on?
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The current natural gas price in West Texas (the WaHa hub, north of Coyanosa, TX) is negative. And has been for a while. The price peaked (dipped?) to -$9/MCF a couple months ago. That means gas producers had to pay $9 per MCF for it to be taken away. Oil in the Permian comes with gas, a lot of it, so to produce oil, you need to get rid of gas. Wells I'm familiar with have 4000-5000 cubic feet of gas per barrel of oil. Recall in oilfield M = thousand, so that's 4-5 MCF per bbl of oil.
There is no free gas pipeline capacity to get gas out of West Texas. Any time new pipelines are built, they are filled within months.
This makes a ton of sense for oil producers (which are also gas producers) who can sell their gas for less of a loss (potentially a profit!) and also for MSFT who can lock in long term contracts for minimal cost. I'd guess these contracts are for $1-2/MCF which is win/win for the oil companies in the area and MSFT.