West Virginia, with its cheap gas supply and a new law allowing off-grid data centers, may be the next frontier for big-name customers like Microsoft.
The hyperscaler in March signed a “letter of intent” to secure about 1.4 gigawatts of power from a microgrid project underway in Mason County, W. Va. The developer, Nscale – a two-year start-up building AI compute campuses in the US and Europe – says it plans to use hundreds of gas turbines in the first half of 2028.
The deal marks the first time Microsoft has committed to a full-scale, gas-powered data center at the gigawatt scale, said Olivia Wang, a research analyst at Sightline who tracks the global data center pipeline. Previously, he added that the company used gas generators for the capacity to maintain new data center operations, not as a primary source of energy.
Nscale took on this task when it acquired American Intelligence & Power Corporation, which specializes in state-of-the-art microgrids for AI data centers. Stuart Pann, Nscale’s senior consultant, said Latitude Media in an interview with CERAWeek that the company saw many opportunities in West Virginia because it sits on top of the Marcellus Formation, the largest gas field in the country beyond Appalachia.
“We are taking advantage of the location of this facility, it can have four separate pipelines fed to it. There is an opportunity to make this gas station, in the same way as the Henry Hub,” Pann said, referring to the exchange of gas pipelines in Louisiana that serves as a measure of the price of North America.
A Microsoft spokeswoman said the company takes a strategic approach to powering its global AI infrastructure based on local conditions, grid readiness and long-term goals. That flexibility allows Microsoft to “deliver network capacity faster, ensure reliability, and reduce stress on local networks as it continues to invest in carbon-free energy for the future.”
Nscale is part of a wave of AI data center developers that have arrived in West Virginia in the past year. Governor Patrick Morrisey said last week that Google bought the property and received approval for the multi-billion dollar data center project. Three other companies – Penzance, Fundamental Data LLC, and TransGas Development Systems LLC – also came forward and planned to build a new gas development. A Google spokesperson said its project will connect to the grid.
The West Virginia rush illustrates all the ways that hyperscalers, hungry for energy, are changing the US energy system and prioritizing energy efficiency over climate goals.
Gas gold rush
West Virginia last year passed a law to attract data center investment by allowing developers to build off-grid power plants as long as the projects use more than 70% of the electricity generated. The law also removed the requirement for microgrids to rely on renewables, paving the way for gas and coal to provide the energy base for off-grid development.
By building behind the meter, companies can block PJM, where the wait time for internet connection is more than six years.
Meanwhile, startups like Nscale are part of a new generation of companies known as neoclouds that want to capitalize on the AI boom by taking the financial risk of building infrastructure, from generation to servers. Nscale has raised nearly $4 billion to date, and in March it added three new executives to its board, including former Meta and Yahoo executives.
So far, Nscale has placed the first projects where there is a lot of renewable energy, said attorney Jeffrey Gelman. For example, the company uses hydropower in Northern Norway, wind and solar power in Portugal, geothermal power in Iceland, and wind power in West Texas.
“Most of the time we can’t find low-carbon options for building, and most of our computing is powered by 100% renewables,” said Gelman.
However, that trend seems to have changed. In West Virginia, there are no plans to develop clean energy, Pann said. He added that the Nscale gas generators bought from Caterpillar’s large equipment removes most of the nitrous oxide and carbon monoxide produced.
They are still causing planet-warming carbon emissions, although Nscale is exploring the potential of adding carbon capture and storage technology. That will depend on what customers want and whether it pencils out the economy, Pann said, noting that CCS needs its own pipeline.
Microsoft’s strategic change, and barriers to growth
Microsoft has its own climate goals, but the past few years have complicated those efforts.
Hyperscaler construction of AI infrastructure has increased its production and carbon footprint since 2020, and large investments in gas are likely to continue that trend. This week, the company confirmed to Bloomberg that it is in discussions with Chevron and the investment fund Engine No. 1 regarding a long-term supply reduction agreement for a proposed gas-fired power plant in Texas.
At the same time, the company is doubling down on its investments in carbon removal, to the point where it dominates the market. By 2025, the company has bought 93% of the world’s carbon emissions from the market. Microsoft is also one of the largest consumers of renewable energy, which has helped the tech giant to meet its 2025 goal of meeting 100% of its electricity needs with clean energy.
The company is investing in old and new clean energy, including Constellation’s effort to start the Three Mile Island nuclear plant, and a deal with Helion Energy for its first commercial plant, targeted for 2028.
Meanwhile, apparently with the encouragement of the White House, Microsoft in January outlined its “primary” principles for AI architecture in order to eliminate local opposition to data centers, which has emerged as a major risk in the AI race. That included promises to cover the cost of powering its data centers, advocate for policies needed for “affordable, reliable and sustainable energy,” and increase local taxes.
Last year, the company abandoned plans for a data center in rural Wisconsin after public pushback, WPR reported.
West Virginia is not immune to these dangers. Local opposition has been growing against projects by other developers, including Basic Data and TransGas Development Systems, fueled in part by provisions in the new data center law.
For example, the law allows data center developers to turn in “confidential business information,” a broadly applicable definition that includes emissions, noise levels and water use. The law also deprived local governments of the right to enforce local laws against information center projects, and sends at least 60% of property tax revenue from information centers to government programs, while 30% is set aside for the municipalities where the projects are built.
Wang’s research showed that between 30% and 50% of large data centers scheduled to come online this year are expected to be delayed due to power problems, equipment problems and local opposition. ” He said that opposition “has now become a real material driver” for reform.
#Microsoft #accepts #offgrid #gas #West #Virginia #data #centers