Each month that goes by brings higher forecasts for data center power demand, more large long-term contracts being signed by big tech and more talk of vertical integration.
That is the message behind Exxon’s announcement at its annual investor day that it is seeking to offer gas-fired power generation with carbon capture – a cradle-to-grave solution for near-zero carbon, always-available power.
You can’t build data centers without reliable power.
Reliable power comes from coal, natural gas, and nuclear energy.
But… new nuclear facilities require 7–10 years to develop and no one in the U.S. will build a new coal plant.
That leaves gas-fired power generation.
But…new gas-fired power requires new natural gas pipelines which don’t get built without 20-year contracts.
Who can do all this?
Well, for one, vertically integrated, state-regulated utilities operating under a cost-plus model that control the grid and are preferred buyers of generation and transmission related equipment.
Sure enough, last week saw Meta ink a 15-year contract with Entergy, a vertically integrated utility in Louisiana to build $3.75 billion of new generation and related transmission, selling power to a $10+ billion data center campus [i] Meta will also fund some carbon capture, solar and batteries to burnish their low-carbon bona fides. The new generation amounts to 17% of existing demand in Louisiana, which all else equal will lower costs to the other users of power in the state as the fixed costs of the existing system will be spread over more demand[ii].
It could also mean large natural gas infrastructure companies or even an integrated oil company like ExxonMobil that already has deep experience with rotating equipment, like motors, turbines, pumps, etc. (i.e. things that spin) in general and power generation in particular at its own facilities.
Forget drill, baby, drill! It’s now spin, baby, spin!
Big data has big demands for power that demands a big response from big companies that have the financial and operating wherewithal doing business in states whose regulatory policies and existing resources give them an advantage.
Its good to be “AI adjacent.” It’s even better to be AI adjacent, big and vertically integrated offering a solution like gas-fired power generation (carbon capture too) that is cost competitive with superior reliability performance.
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[i]“Utilities and Renewable Energy”, Sector & Sovereign Research, Hugh Wynne, December 9, 2024
[ii] IBID