The growing demand for electricity driven by AI is reshaping power and energy markets, with even oil giants like Exxon Mobil joining the fray.
Exxon announced plans to build a power plant dedicated to data centers, highlighting the anticipated surge in electricity demand from tech companies over the next decade. One estimate suggests nearly half of new AI data centers may face power shortages by 2027.
While Exxon already operates power plants for its internal operations, this new project marks its first venture into supplying power to external customers. The plant, planned to generate over 1.5 gigawatts, will run on natural gas despite Exxon's limited forays into renewable energy.
Notably, Exxon intends to implement carbon capture and storage (CCS), aiming to capture and store over 90% of the plant's carbon dioxide emissions.
The power plant will not be connected to the grid, sidestepping interconnection delays. Exxon’s strategy document calls it “reliable, fully-islanded power with no reliance on grid infrastructure.” The company has not yet revealed the location of the facility.
Exxon anticipates completion of the facility within the next five years. This timeline is more aggressive than nuclear power plants, which are also attracting attention from energy-hungry tech firms but are primarily scheduled to come online in the early 2030s.
However, Exxon faces competition from rapidly deploying renewable energy projects. Google’s recent $20 billion renewable energy investment (with partners) will begin supplying power to the grid in 2026. Microsoft is also investing in a $5 billion, 9-gigawatt renewable energy portfolio, with its first solar project scheduled to come online in the next six to nine months.
Complicating matters for Exxon, the inclusion of CCS significantly increases the costs of a fossil fuel power plant. While the Inflation Reduction Act offers tax credits of $60 to $85 per metric ton of carbon captured, commercial-scale CCS is still relatively untested. Some facilities have met their targets, while others have fallen short; a long-running Canadian facility only managed to capture around 60% of the targeted carbon dioxide, rather than the promised 90%.
