Microsoft and Chevron Team Up for Texas Data Center

A prominent tech company has revealed plans to establish a presence in Texas through a collaboration with the state’s energy heavyweight.

Chevron announced on Monday its partnership with Microsoft to construct a new data center campus in Texas, dubbed “Project Kilby.”

The venture is anticipated to grow over time, aiming for a capacity of about 2.67 gigawatts.

The two companies have finalized a 20-year power purchase agreement, laying the groundwork for the integrated operation of the power plant and data center.

The facility will be situated in Pecos, Texas, located to the west of Midland.

Jeff Gustafson, president of Chevron New Energies, stated, “AI is reshaping the global economy, and abundant, affordable and reliable energy is essential to powering that transformation.” He mentioned that Chevron is in a strong position to utilize Permian natural gas to deliver power efficiently and at competitive rates. This project blends Chevron’s traditional strengths with new demands, potentially creating added value for shareholders and the communities involved.

The agreement marks a significant step toward a final investment decision expected by the end of the year. Initial power supply is projected for 2028, with expansion leading to a total capacity goal of 2.67 gigawatts.

This joint infrastructure aims to minimize the burden of high electricity costs on nearby households, which is often a concern when building new data centers.

The plans indicate that “Kilby is designed to provide reliable, distributable power directly to Microsoft while striving to lessen the impact on regional power grids, possibly bypassing the state’s primary grid entirely.”

While proponents highlight the potential for economic growth and environmental benefits, opponents argue that there are considerable flaws in the plan. Concerns have been raised that Microsoft may seek substantial tax incentives that could be detrimental to the state, as noted in a recent Mother Jones article.

Greg LeRoy, executive director of Good Jobs First, pointed out Microsoft’s omission of tax cost details in its commitment. “If they don’t clearly state, ‘I won’t reduce taxes,’ they’re leaving things unclear,” he remarked.

Environmental advocates have issued warnings about the project’s potential impact, including an estimated increase of over 13.8 million tonnes of greenhouse gas emissions annually, which is roughly equivalent to the emissions from nearly three million gasoline-powered vehicles.

The agreement was signed shortly after Governor Greg Abbott took office. He directed the Public Utilities Commission of Texas and the Electric Reliability Council of Texas to take “immediate action to shield residential ratepayers from the costs associated with data center expansion.”

In a directive, Abbott instructed the PUC to ensure that data centers bear the full cost of related electrical infrastructure, preventing any cost burdens on residential customers. This directive is in line with Senate Bill 6, which calls for a report from the PUC and ERCOT by July 17 and steps to minimize transmission costs for residential clients by July 31.

Project Kilby is set to primarily utilize natural gas for power generation and intends to use a non-potable brackish groundwater source to operate the power plant.