West Virginia, with its ready supply of cheap gas 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 nearly 1.4 gigawatts of power from a microgrid project underway in Mason County, W. Va. The developer, Nscale — a two-year-old startup building AI compute campuses in the U.S. and Europe — said it plans to deploy hundreds of gas generators by the first half of 2028.
The deal marks the first time that Microsoft has committed to a fully off-grid, gas-powered data center at the gigawatt scale, said Olivia Wang, a research analyst at Sightline who’s tracking the global data center pipeline. Previously, she added, the company has mainly used gas generators for backup capacity in its new data center builds, not as a primary energy source.
Nscale took over the project when it acquired American Intelligence & Power Corporation, which specialized in behind-the-meter microgrids for AI data centers. Stuart Pann, senior advisor at Nscale, told Latitude Media in an interview at CERAWeek that the company saw a lot of opportunity in West Virginia because it sits atop the Marcellus Formation, the largest gas field in the country, which spans Appalachia.
“We’re taking advantage of the geographic location of this facility, which can have four separate pipelines fed into it. There’s a chance to make this a gas hub, in the same way Henry Hub is,” Pann said, referring to a gas pipeline interchange in Louisiana that serves as a price benchmark for North America.
A Microsoft spokesperson said the company takes a portfolio approach to energy for its global AI infrastructure based on local conditions, grid readiness, and long‑term goals. That flexibility allows Microsoft to “bring capacity online faster, ensure reliability, and limit strain on local grids while continuing to invest in efficiency and carbon‑free energy for the future.”
Nscale is part of a wave of AI data center developers who’ve arrived in West Virginia in the last year. Gov. Patrick Morrisey said last week that Google bought property and received approval for a multibillion-dollar data center project. Three other companies — Penzance, Fundamental Data LLC, and TransGas Development Systems LLC — also popped up. Google didn’t respond to questions about the energy plans for its West Virginia development, but the other three companies are relying on gas.
The rush in West Virginia is emblematic of all the ways hyperscalers, desperate for power, are reshaping the U.S. energy system and prioritizing speed-to-power over climate targets, .
The gas gold rush
West Virginia last year enacted 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 rescinded a requirement that microgrids rely on renewables, paving the way for gas and coal to provide baseload power for off-grid developments.
Building behind-the-meter means companies can sidestep PJM, where the wait time for a grid interconnection runs more than six years.
Meanwhile, start ups like Nscale are part of a new generation of companies known as neoclouds seeking to cash in on the AI boom by taking on the financial risk of building infrastructure, from generation to server racks. Nscale has raised nearly $4 billion so far, and in March added three new directors to its board, including former top executives of Meta and Yahoo.
Until now, Nscale has prioritized projects where there’s abundant renewable energy, spokesman Jeffrey Gelman said. For example, the company is using hydropower in Northern Norway, wind and solar power in Portugal, geothermal in Iceland, and wind power in West Texas.
“We’ve generally defaulted to finding the lowest carbon options for building, and a lot of our computers are powered by 100% renewables,” Gelman said.
That approach seems to have changed, however. In West Virginia, there aren’t plans to develop clean energy, Pann said, adding that the gas generators Nscale bought from the equipment giant Caterpillar remove most nitrous oxide emissions.
They still cause planet-warming carbon emissions, though Nscale is also exploring the potential of adding carbon capture and sequestration technology. That will depend on what customers demand and whether it pencils out economically, Pann said, noting that CCS requires its own pipelines.
Microsoft’s strategic shift, and the hurdles to growth
Microsoft has ambitious climate goals of its own, but the last few years have complicated those efforts.
On the one hand, the hyperscaler’s buildout of AI infrastructure has increased its emissions and carbon intensity since 2020, and greater investment in gas will likely continue that trend. This week, the company confirmed to Bloomberg that it’s in talks with Chevron and investment fund Engine No. 1 about a long-term offtake deal for a proposed gas power plant in Texas.
At the same time, the company is doubling down on its carbon removal investments, so much so that it dominates the market; in 2025, the company bought 93% of the global carbon removal on the market. Microsoft is also one of the largest corporate buyers of renewable energy, which helped the tech giant in 2025 reach its goal to match 100% of its own electricity demand with clean power.
The company also invests in clean baseload options old and new, including Constellation’s effort to restart the Three Mile Island nuclear plant, and an offtake agreement with Helion Energy for its first commercial fusion plant, targeted for 2028.
Meanwhile, apparently at the urging of the White House, Microsoft in January outlined its “community-first” principles for AI infrastructure in an attempt to quell local opposition to data centers, which has emerged as a major risk to the AI race. That included promises to cover the costs of powering its data centers, advocating for policies needed for “affordable, reliable, and sustainable power,” and adding to the local tax base.
Last year, the company scrapped plans for a data center in rural Wisconsin after community pushback, WPR reported.
West Virginia isn’t immune to these risks. No Local opposition is already intensifying against projects by other developers, including Fundamental Data and TransGas Development Systems, fueled in part by provisions in the state’s new data center law.
For example, the law allows data center developers to redact “confidential business information,” a definition that can be applied broadly and include emissions, noise levels, and water usage. The law also stripped local governments of the right to enforce local zoning ordinances against data center projects, and sends at least 60% of property tax revenue from data centers to state programs, while 30% is set aside for municipalities where 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 constraints, equipment constraints and local opposition.” That opposition is “now a true material driver of attrition” in the development pipeline, she said.
