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.

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.

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.

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?

Even corporate ESG policies bend the knee to cheap Texas energy!

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?

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.

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.

Yet here in California, people keep making fun of Texas's power grid. California of all places.

But they are using wind:

> A majority of the generation will come from large GE Vernova (NYSE: GEV) turbines.

Mostly it says that the oil business runs the show here in Texas, and in Washington.

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.

it's easy ... they'll just change the definition of "carbon negative"!

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.

Another illustration that corporations do not have morals or ideologies. Do not anthropomorphize the lawnmower.

The planet go destroyed millions of times during its 4 billion history. I'm pretty sure it will survive this time as well.

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.

Mhm... meteorological summer starts 1st of June. Solstice was yesterday as well.

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?

We're getting a data center just north of Fargo, on the other side of the state from all the oil. I agree with you, not sure why they don't build out west instead.

Pretty sure the flares aren't anything like that anymore because some regulations changed where they can't flare so much, but yeah that was a crazy time period.

> Why not use all that wasted heat energy to power all these datacenters?

Probably not profitable enough to set up the infrastructure to capture, store, transport, and sell that as a product. Profit potential is the only factor that matters to decision makers.

When you say "it", I suspect it will pan out to American Elites, as opposed to America the nation, or Americans the people.

Quick search shows the reason is nothing to do with your sarcasm.

Its origin is traced back to a 1929 company, Solar Aircraft Company.

https://en.wikipedia.org/wiki/Solar_Turbines

Solar Turbines is one of the world's leading manufacturers of industrial gas turbines, with more than 17,000 installed in 100 countries

Much like that scoundrel Aurelian reviving the cult of Sol Invictus to greenwash the late roman empire. /s

Very normal. Here in Europe (well nordics at least) pretty much all the capacity of any wind farm is already sold before construction begins. The PPA (power purchasing agreement) is usually pretty much required to get the loan/funding anyway.

Basically most projects start with the wind company using its own money to find a site and get it approved and then they go and try to find someone to sell the electricity to at a fixed rate before construction begins as selling directly to the spot market has way too much risk for the banks to give loans.

Not sure how different it is in Central Europe with solar as there isn’t much solar up here in the north (just doesn’t make much sense as during the 3 to 4 months in the winter when electricity price is at the yearly maximum you produce effectively nothing)

Many people. My house loan was 30 years. Commercial real estate is often 20. Commercial 30 year bonds are common.

Many investments won't pay off unless there is a 30 year plan so lots of investors work on that long term. Even if an investment pays off sooner you often are accounting better off longer terms - see an accountant

This reminds me of startups signing 10 year leases on giant corporate campuses at the tail end of dotcom anticipating stonks perpetual growth.

The power plant probably amortizes over roughly that period. Price would be higher without a matching purchase guarantee, and so on.