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Chevron Advances Plans to Develop U.S. Data Centers with Power Generation

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Chevron is moving forward with plans to develop data centers in the U.S., entering the permitting and engineering phases for multiple sites, according to a company executive. These centers will also feature the generation of electricity, primarily powered by natural gas, to meet the growing demand from data centers across the country. The energy consumption of these facilities, which are large warehouses for servers, is expected to triple in the next three years as the need for artificial intelligence and computing power intensifies.

The Big Tech industry has already begun securing power purchase agreements to meet their massive electricity demands, with some companies buying power directly from nuclear plants or signing deals with utilities to add power generation to the grid. This surge in data center demand is shaking up the U.S. power industry, with record peak demand and a rise in natural gas consumption.

Chevron, alongside ExxonMobil, announced plans last year to start power generation specifically for data centers, marking a departure from their usual focus on supplying energy for their own operations. Daniel Droog, Chevron’s Vice President of Power Solutions, stated at the CERAWeek conference in Houston that there is “high customer interest” in this new venture.

With data centers growing larger—some now requiring 50 times more power than traditional facilities—Chevron is targeting the development of power plants and data center sites with capacities around 1 gigawatt (GW), expected to be operational by 2027 or 2028. Droog emphasized that speed, reliability, and scale are central to their strategy.

The company has not revealed specific customers or the exact locations of these future data centers but indicated that southern, western, and midwestern regions are likely targets. These centers will be primarily powered by natural gas, with some sites potentially incorporating carbon capture or renewable energy sources.

Natural gas, which was previously avoided by Big Tech due to climate concerns, has now become a favored option due to its relatively low cost and availability in the U.S., the world’s largest gas producer. The company is also set to receive seven GE Vernova gas turbines by 2026, to aid in the power generation process.

AI to Fuel Record Year for M&A in U.S. Power Sector

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Dealmakers anticipate that 2025 will be a record year for mergers and acquisitions (M&A) in the U.S. power sector, driven by the surging demand for electricity to support artificial intelligence (AI). This growing appetite for power generation and infrastructure assets is fueled by the massive energy needs of data centers that power AI technologies.

According to sources in the industry and at the CERAWeek energy conference in Houston, the first two months of 2025 have already seen significant deal-making activity, with 27 power deals valued at $36.4 billion. A standout transaction was Constellation Energy’s acquisition of Calpine for $16.4 billion. This surge in deal volume contrasts sharply with the broader M&A market, which has experienced its weakest start since the global financial crisis.

Power sector deal flow is expected to increase as companies race to meet growing electricity consumption. Private equity firms and institutional investors, such as KKR and PSP Investments, are actively pursuing investments, with KKR and PSP’s $2.8 billion acquisition of a 20% stake in American Electric Power’s (AEP) transmission network as one of the major recent deals. Strong electricity price increases have boosted the shares of power companies, enabling larger transactions.

The influx of capital into energy investments is substantial, with $334 billion in dry powder (capital raised but not yet deployed) by the end of 2024. Much of this capital is earmarked for investments in power generation, infrastructure technologies, and renewable energy projects. These funds are also fueling the increasing trend of taking public power companies private, as seen in the $2.2 billion sale of Altus Power to TPG’s climate investment arm.

The demand for power infrastructure has also driven utilities to divest non-core business units. In early 2025, Eversource Energy agreed to sell its Aquarion Water unit for $2.4 billion, while National Grid announced the sale of its U.S. renewables business to Brookfield Asset Management.

Despite challenges, such as rising costs for essential components like steel, aluminum, and copper, and uncertainties around tax credits for renewable projects, the deal-making momentum in the power sector is expected to continue. Market volatility, including potential impacts from Trump administration policies and immigration reform, will likely make existing power assets even more valuable, spurring more deals.

J.P. Morgan Forecasts Data Center Spending Could Boost US GDP by 20 Basis Points in 2025-2026

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J.P. Morgan projects that spending on data centers could add between 10-20 basis points to the U.S. economy in 2025-2026, driven by the ongoing surge in technology investments fueled by the artificial intelligence (AI) boom. The growing demand for computing power, particularly following OpenAI’s launch of ChatGPT in 2022, has accelerated investments in data centers, which support the infrastructure necessary for AI development.

Major cloud companies, such as Microsoft and Alphabet, have been heavily investing in AI technologies, and J.P. Morgan anticipates that these investments will significantly contribute to U.S. gross domestic product (GDP). The economic boost is expected to stem from increased demand for data center construction, technology equipment, and power generation and transmission infrastructure. According to the bank’s estimates, data center spending could have contributed 0.1%-0.3% to GDP growth in 2024.

Additionally, J.P. Morgan noted that each new 5-10 gigawatt power generation capacity expansion could require up to $20 billion in investment, which would add 7 basis points to GDP. As U.S. power consumption is expected to hit record levels in 2025 and 2026, the federal government has taken action to support this growth, with President Joe Biden signing an executive order aimed at addressing the massive energy needs of rapidly expanding AI data centers.

The data center sector’s economic impact is expected to continue in the coming years, driven by advancements in AI innovation. However, J.P. Morgan cautioned that the long-term success of this growth will depend on whether the expected returns on these investments are realized, similar to previous technology booms.