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Energy

Energy Companies Are Dancing in the Data Center Money Fountain

With investment in AI booming, any business that can promise quick generation is looking pretty good right now.

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Power lines and a data center.
Heatmap Illustration/Getty Images

It’s a good time to be selling stuff to data center developers.

That was the message from the beginning of earnings season for the renewables and the energy industry: If you can promise power to data centers quickly, you’re doing good business. (If you’re just a software business that investors think will be displaced by large language models, the value of your company has probably fallen by a quarter so far this year).

Caterpillar, while better known for its gargantuan mining and construction equipment, also sells gas turbines and reciprocating engines — basically giant car engines that run on natural gas. Its power generation business is now by far its biggest segment, outpacing oil and gas and industrial, and its revenue of $3.2 billion in the fourth quarter was 44% more than a year earlier.

“Sales increased in large reciprocating engines, primarily data center applications. Turbines and turbine-related services increased as well,” the company said in its earnings release late last month. And it’s not likely to stop: “We anticipate growth in power generation for both CAT reciprocating engines and solar turbines driven by increasing energy demand to support data center build-out related to cloud computing and generative AI.,” the company’s chief executive officer Joe Creed said on a call with analysts. We “talk to hyperscalers and large data center customers weekly and make sure we stay in line with their plans.”

And those hyperscalers are going to spend even more in 2026.

Big tech companies have some $600 billion in capital expenditures planned for this year, with the growth in spending coming largely from data centers.

And while the vast majority of the cost of owning an AI datacenter is the chips, you need power to run a data center, and the more quickly you can get that power, the sooner your data center can be up and running.

This “speed-to-power” problem has thus put a massive premium on any power generation technology that can be deployed quickly.

Like fuel cells.

Bloom Energy, the long-tenured fuel cell company, reported around $780 million in quarterly revenue in the fourth quarter, up 36% from the year before. “Our growth has been fueled by seismic changes in customer attitude towards power,” the company’s founder and chief executive, KR Sridhar, said on the company’s earnings call Thursday. “On-site power has moved from being a decision of last resort to a vital business necessity. This shift has led large power users to seek Bloom to fulfill their needs. Our demand from data centers and commercial and industrial or C&I customers is secular and growing.”

Bloom has been kicking around for two decades, but it took the data center boom for the company to really, well, bloom.

Large turbines for natural gas power are sold out through the end of the decade; meanwhile, Bloom claims to be able to get fuel cells on site before the data center itself is fully constructed. “We can ramp up and provide that additional power to that customer before they are ready,” Sridhar said. “Typically, it takes more than a year to stand up a greenfield data center. It takes more than a year to stand up a factory, from permits all the way to full implementation. We can be ready for them before then.”

While on-site power can be crucial to actually beginning operations, data centers tend to want to connect to the grid eventually, which means more demand for services from utilities and large scale developers of power. The utility and developer NextEra has long promoted the “speed to power” narrative, pointing out that it’s far easier to procure and assemble solar panels and batteries than it is gas turbines.

“Battery storage now represents almost one-third of our 30-gigawatt backlog, with nearly 5 gigawatts originated over the past 12 months. We don’t see this demand slowing. Nearly every region in the country needs capacity, and battery storage is the only new capacity resource available at scale,” NextEra chief executive John Ketchum said on the company’s earnings call late last month.

He also said that he would be “disappointed” if the company’s plans for 15 gigawatts of “data center hubs” doesn’t double to 30 gigawatts by 2035. These hubs, Ketchum said, will be powered “through a mix of new renewables, battery storage and gas generation.”

The Minnesota-based utility Xcel said it expects to have 3 gigawatts of contracted data centers by the end of this year and six by 2027.

“If you think about where we sit in sustainability goals as a company, where these hyperscalers and data centers and customers of data center developers wanna be, it’s a highly sustainable product,” Xcel’s chief executive Bob Franzel said on the company’s earnings call Thursday.

As for the companies actually making the solar panels and batteries that could power data centers, they largely haven’t reported earnings yet, although the American solar manufacturer First Solar did get a scare recently when its share price dropped 13% last Thursday — and no, not because of a change in tariffs or tax credits or permitting rules. It was because Elon Musk said he wanted to build 100 gigawatts of solar panels a year. The speed to power question, at least for Elon Musk, is not limited to Earth.

“We think the best way to add significant capability to the grid is solar and batteries on Earth and solar in space,” Musk said on Tesla’s fourth quarter earnings call last week.

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