- Project Kilby is a planned 2.67 gigawatt behind the meter gas power station in West Texas, built to power a Microsoft data center under a 20-year deal, with first power targeted for 2028.
- It runs entirely behind the meter, with no connection to the Texas grid operator ERCOT, and captures stranded associated gas from the Permian Basin.
- Chevron reports four behind the meter projects with about 2,032 megawatts of capacity and more than 7 billion dollars of power innovation projects under execution.
- This is not a regulated utility model: Chevron sells power to a single private customer, not a public rate base, so it is a private power developer, not a utility.
- For energy B2B sellers, the signal is that oil majors are moving into on-site power and selling electrons and reliability, not just molecules.
A gas power plant built for one data center
Project Kilby is a natural gas power station Chevron plans to build near Pecos in West Texas to supply a Microsoft data center. Chevron and Microsoft signed a 20-year agreement, and the plant is designed to power the data center campus 100 percent behind the meter, meaning the electricity never touches the public grid.
The plant is planned to ramp to about 2.67 gigawatts of nameplate capacity in phases, starting with roughly 1.58 gigawatts and adding a further unit of about 987 megawatts. Chevron expects to take a final investment decision by the end of 2026 and to deliver first power in 2028, operating the project through a dedicated vehicle in partnership with a specialist developer.
A defining feature is that Project Kilby will have no interconnection with ERCOT, the Texas grid operator. It is engineered to capture stranded associated gas from the Permian Basin and turn it into on-site power, bypassing both a congested grid and the years-long wait for a grid connection. That is the same demand wave described in why data centers are driving gas turbine demand.
Project 54A natural gas power generation complex at dusk, the kind of behind the meter plant now being built to power data centers directly.Two problems solved by one plant
The first driver is demand. Artificial intelligence data centers need enormous, firm, fast to connect electricity, and the grid cannot deliver it quickly enough. A co-located gas plant can. By selling power directly to a hyperscaler, Chevron moves up the value chain from selling gas to selling the electricity that gas produces, capturing more of the margin.
The second driver is supply. The Permian Basin produces large volumes of associated gas that can be stranded, flared or sold cheaply for lack of takeaway capacity. Turning that gas into behind the meter power for a data center gives Chevron a high value home for molecules it already controls. This is the same logic running through Baker Hughes' pivot to data center power, from the equipment side rather than the operator side.
It is also a strategic hedge. As oil demand growth slows, power is a place to redeploy cash and capability. Chevron says it has more than 7 billion dollars of power innovation projects under execution and lists four behind the meter projects totalling about 2,032 megawatts, so Project Kilby is a flagship, not a one off.
A private power developer, not a regulated utility
The word utility usually means a regulated company that supplies the public grid, serves many customers and earns a return on a rate base approved by regulators. Project Kilby is none of those things. It serves a single private customer, has no grid interconnection and sits outside the ERCOT market entirely, so it is not regulated as a public utility.
A more accurate description is that Chevron is becoming a private, or behind the meter, power developer: it builds, owns and operates generation for one large buyer under a long bilateral contract. That is closer to an independent power producer selling under a private agreement than to a regulated electric utility. The distinction matters, because a private power developer keeps the commercial freedom and the merchant risk that a regulated utility gives up.
| Feature | Project Kilby | A regulated utility |
|---|---|---|
| Customers | One private buyer (a data center) | Many, across the public grid |
| Grid connection | None, fully behind the meter | Connected to the public grid |
| Pricing | Private 20-year contract | Regulated tariffs and rate base |
| Regulator | Not a rate-regulated utility | State public utility commission |
| Fuel | Stranded Permian associated gas | Mixed, market sourced |
The buyer wants power and certainty, not a commodity
The lesson is that the fastest growing energy buyer is no longer only an oil and gas operator, it is a hyperscaler that needs firm power now. An oil major that can package fuel, generation and a 20-year contract into on-site electricity is selling reliability and speed, not a commodity. Sellers and marketers in the energy supply chain should follow that shift, because it changes who signs the deal and what they need to hear. It connects directly to Chevron's Project Kilby deal with Microsoft and to the wider move into behind the meter power.
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What is the most important signal in Chevron's move into behind the meter power?
Frequently asked
Not in the regulated sense. Chevron is building behind the meter gas power plants like Project Kilby that sell electricity to a single private customer under a long contract, with no public grid connection or rate base. That makes it a private power developer for large energy buyers, not a regulated public utility.
Project Kilby is a planned natural gas power station near Pecos, West Texas, that Chevron will build to power a Microsoft data center under a 20-year agreement. It is designed to ramp to about 2.67 gigawatts of capacity, runs entirely behind the meter with no ERCOT connection, and targets first power in 2028.
Behind the meter means the power is generated and consumed on site, without flowing through the public electricity grid. For a data center it means a dedicated power plant next door, which avoids the multi-year wait for a grid interconnection and gives firm, controllable supply.
Data centers need large amounts of firm, fast to connect electricity that the grid cannot supply quickly. Chevron can turn stranded Permian gas into on-site power, capture more margin by selling electricity rather than just gas, and redeploy capital into power as oil demand growth slows. It reports more than 7 billion dollars of power innovation projects under execution.
Project Kilby alone is planned at about 2.67 gigawatts. Chevron has also reported four behind the meter projects with a combined capacity of about 2,032 megawatts, indicating a broader behind the meter power business rather than a single project.
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