Microsoft’s Project Kilby aims for power delivery by 2028, Stifel says

Microsoft and Chevron signed a 20-year power purchase agreement for Project Kilby, a 2.67 GW natural gas plant and co-located data center in West Texas, with first power delivery targeted for 2028, according to Stifel. The behind-the-meter facility will directly power Microsoft's AI operations, highlighting the tech industry's growing energy demands.

Microsoft’s Project Kilby aims for power delivery by 2028, Stifel says A 20-year deal with Chevron to build a 2.67 GW gas plant and co-located data center in West Texas highlights just how desperate the AI industry is for electricity. Microsoft and Chevron just signed a 20-year power purchase agreement for what might be the most telling infrastructure project in the AI arms race. Project Kilby, a combined natural gas power plant and data center in West Texas’s Permian Basin, is designed to generate roughly 2.67 gigawatts of capacity. That’s enough electricity to power approximately 2 million homes, all routed to feed Microsoft’s AI ambitions. The first power delivery is targeted for 2028, according to Stifel’s analysis, with full buildout stretching into the 2030s. A final investment decision is expected later in 2026, pending permits. What Project Kilby actually is Here’s the setup. Chevron’s Energy Forge One unit, working alongside investment firm Engine No. 1, will develop the facility in Reeves County near Pecos, Texas. The plant will primarily use GE Vernova turbines, supplemented by Solar Turbines from Caterpillar. The critical design choice: the entire project operates behind the meter. In English, that means the data center draws power directly from the adjacent gas plant without touching the regional electricity grid. It’s a self-contained energy loop. Chevron projects the economic impact will exceed $10 billion in state and local tax revenue. The development is expected to create around 2,000 jobs. Why Big Tech is going off-grid The 20-year term of this agreement tells you something about how Microsoft views AI demand: not as a cycle, but as a structural shift. You don’t lock into two-decade contracts for a fad. For Chevron, the deal represents a meaningful diversification play. Instead of selling natural gas into commodity markets where prices swing wildly, the company secures a long-duration customer with one of the most creditworthy counterparties on the planet. Look, there’s an obvious tension here. Microsoft has made aggressive climate commitments, pledging to be carbon negative by 2030. Building a multi-gigawatt natural gas plant doesn’t exactly scream decarbonization. What this means for crypto and digital infrastructure The crypto angle might not be obvious at first glance, but it’s significant. Every megawatt that gets locked up in an AI data center deal is a megawatt that Bitcoin miners and blockchain infrastructure providers can’t access. Bitcoin mining operations have historically gravitated toward exactly the kind of cheap, stranded energy that West Texas offers. The Permian Basin has been a hotspot for mining firms taking advantage of flared natural gas that would otherwise be wasted. When Microsoft and Chevron absorb 2.67 GW of local generation capacity behind the meter, that’s energy that never reaches the market where miners compete for it. For investors watching the intersection of energy and compute, Project Kilby crystallizes a few themes worth tracking. GE Vernova, which supplies the primary turbines for the project, sits directly in this supply chain. The final investment decision expected later this year will determine whether Project Kilby moves from announcement to construction. Given the scale of the commitments involved, from Microsoft’s AI compute needs to Chevron’s projected $10 billion economic impact, the incentives for both parties to proceed are substantial. Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy https://cryptobriefing.com/editorial-policy/ .