Two years ago, Engine No. 1 reserved natural gas turbines, a move that could prove critical to its newest project.
The investment firm has formed a new company with Chevron to power AI data centers in the United States using U.S. natural gas. The venture, which will use natural gas turbines from GE Vernova and co-locate them with the data centers, won’t use the existing transmission grid to help avoid a spike in electricity prices.
The move comes amid increased corporate demand for artificial intelligence, which requires data centers and a massive amount of energy to run them.
The new venture also follows Donald Trump’s declaration of a national energy emergency to encourage more oil and gas production to power AI data centers. Trump claims domestic fossil fuel production is needed to keep the U.S. ahead of China on AI, even though there is evidence that solar can cost-effectively do the job.
Trump, whose reelection campaign received $445 million from the fossil fuel industry, has delivered a long list of benefits to oil and gas companies so far, including stopping all wind and solar projects, hampering electric vehicle adoption, and pulling the U.S. out of the The Paris Climate Agreement. Even though Engine No. 1’s project has been in the works for two years, it benefits from the policy changes.
There clearly is a lack of available power right now for companies to fully benefit from AI, a shortage that is particularly problematic in supply chain management, particularly for the kind of turbines provided by GE, which have a three-year wait list. That’s where the new company wants to fit in.
“The bottleneck for AI is going to be power, so as an investment firm we mapped the supply chain to find out where,” said Erik Belz, president and COO of Engine No. 1. “As we dug into it, what we learned was that the bet we had to make is access to the physical equipment required to deliver base load power at scale.”
Belz said that around 18 months ago there were a lot of technology companies trying to find solutions that harness renewable or alternative energy resources like nuclear fusion, but Engine No. 1 concluded that the power demand of this industry would not be met in a reliable enough manner in this way.
At the end of 2024, however, a team of Silicon Valley researchers, including employees from Tesla, Anthropic, and Stripe, among others, released a report that found that found that solar microgrids (not connected to the national grid) are a far quicker way to power these data centers than natural gas. In addition, according to the research, the cost is similar to natural gas, cheaper than other sustainable alternatives, and mitigates carbon emissions.
“You wouldn’t be able to solve that level of power with the reliability that they were talking about with anything other than natural gas, at least as the base load,” he said. “So that’s what led us to want to control the equipment bottleneck that will emerge there. We built the consortium around this by going to GE Vernova and securing the equipment required to build this new company and by putting down a lot of money.”
Separately, Belz disputed the Silicon Valley study, citing research from Rice University that said, among other things that comparing the cost of power generation from renewables and natural gas is misleading and ignores the unreliability of sources like solar. A renewable system needs to incur costs for additional storage and integration, for example, he said. Once those are added back, Rice found that renewables are 10 times as expensive as energy sources such as natural gas.
The remaining part of Engine No. 1‘s strategy involved finding a partner that can help with work such as finding land, gas supply, and management.
“Chevron brings expertise in carbon capture management, land acquisition, and access to a broad network in the development space to help us move and mobilize a force of scale to execute this sort of a development project,” said Belz. “This consortium brings the best of each organization. GE with equipment, Engine No. 1 with customer contacts and the innovation around pulling this group together, and Chevron from an industrial standpoint. So we can accelerate the time to power on this.”
Belz joined Engine No. 1 in November 2022 from Blackstone, joining as head of private equity. Speaking to II at the time, he said he shared the company’s mantra that the world needs to decarbonize but also accept that traditional energy resources are still necessary in a functioning economy.
He confirmed that while this project would be deployed and grown on natural gas, over time the company would look to layer in renewable sources and deploy carbon capture technologies, and rethink the carbon intensity of the project over time.
Additional reporting from Julie Segal.
