Gas Fired AI Power Plants

[ChuckGeb]

In Musk's spare time:

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For a quintessential example of an exception that proves our proposed rule, we turn to Elon Musk, who reportedly built a supercomputer consisting of 100,000 Nvidia H100 graphics processing units (GPUs) in Memphis, Tennessee, in just 122 days. According to a stunning report in The Information, industry insiders were shocked to learn that Musk, to circumvent constraints presented by the local grid, is alleged to have simply built and operated an illegal, wholly unpermitted natural gas power plant onsite.....

“One major hitch for Musk’s breakneck construction schedule could have been electrical power. Initially, there wasn’t enough of it at the Memphis site for all of xAI’s power-hungry GPUs. Normally, that’s the kind of problem that could derail or delay a data center project. But Musk came up with a stopgap solution: He brought in mobile, natural gas–powered turbines to provide supplemental power while he waited for local authorities to approve a request for an additional 100 megawatts of power at the site. The Tennessee Valley Authority agreed to that request last week.
An immediate consequence of such developments would be a surge in demand for gas turbines and associated power equipment, products already in short supply. According to an industry insider we spoke to while researching this piece, the backlog of new turbine orders is “already several years, perhaps three to four.” For confirmation, we turn to GE Vernova’s most recent company earnings call (transcript prepared by Bloomberg):

“Turning to Power on Slide 7. The segment delivered another strong quarter with continued double-digit orders growth, increasing revenue and further EBITDA margin expansion. Orders grew 34%, led by higher equipment and services at Gas Power. Gas power equipment orders increased 40% as we booked nine [H-Class Gas Turbines] HA units in the quarter, which exceeded the total number of HAs booked in all of 2023. We also booked 15 aeroderivative units in the quarter, almost doubling units ordered in the third quarter of last year. Power services orders were up 29% due to higher demand from outages and upgrades. The robust demand for gas equipment and services is driving further growth in our backlog.

Based upon the backlog, we're funding capacity expansion from customer orders and related down payments to enable delivery of 70 to 80 heavy-duty gas turbines annually starting in 2026.”

On the winning side of the ledger sit producers of stranded natural gas in areas like the Permian Basin, where the fuel has sold for negative prices for much of 2024. A wave of distributed power plants constructed next to the cheapest natural gas in the world seems inevitable. In its earnings call two weeks ago, Diamondback Energy put out the word to data center developers that it is open for business. Here is Kaes Van't Hof, the company’s chief financial officer, firing up the ‘VACANCY’ sign (transcript prepared by Bloomberg, lightly edited for clarity):

“I think there is a lot of land out here in West Texas, a lot of surface. We have about 65,000 acres in our portfolio. We also control a lot of molecules. And so, I think, the mandate… from our investors is to stop selling your gas for zero and paying full boat for power. And so, we're going to find ways to benefit Diamondback shareholders by finding a new local market for our gas, but also insulating part of our business from what we believe to be an increasing power price in Texas over the next 10 years….

I think the message we kind of put out there is that West Texas has a lot of land, a lot of surface. It has a lot of gas that's being sold for less than it should. It's got a lot of water production with the oil production that we have in the basin. And I think that results in a very cheap way to develop power, and the data center operators have not been focused on the Permian yet. There's certainly some conversations that are happening and we're kind of putting the flag out there that this is a very cheap way to execute their business model, while benefiting Diamondback shareholders. So more to come on that. We're getting started, but we put a little teaser in the presentation this quarter.”

My comments: Looking at the latest presentation from Solaris Infrastructure reflects they are all over this opportunity. Their presntation materials are impressive. Assuming they have "Musk-like" brilliant team members, SEI just might just be one of the "winners'on the forefront of this huge opportunity!!

The Doomberg piece has further extensive analysis including the opportunities in Canada. The Doomberg substack subscription is well worth the toll for those interested in an expert deep dive analysis. The comments that follow his pieces add substantial additional insights from incredibly bright experienced people. Great macro view complement to EPG.

[dan_s]

Solaris Energy Infrastructure (SEI) is up 152% since they announced a "Transformational" merger on July 9. That it has entered into a definitive agreement to acquire Mobile Energy Rentals LLC (“MER”), a premier provider of distributed power solutions serving the energy and commercial & industrial (“C&I”) end-markets, for a purchase price of $200 million.

SEI as significantly more upside for us. Especially, since Diamondback Energy is bringing the idea of "Distributed Power Solutions to the attention of the Wall Street Gang.

Listen to the SEI Q3 conference Call.

November 15 Press Release: Solaris Energy Infrastructure, Inc. (NYSE:SEI) (“Solaris” or the “Company”), today announced it will present and host investor meetings at the Southwest IDEAS Conference in Dallas, TX on Wednesday, November 20, 2024. The Company presentation is scheduled to begin at 10:00 a.m. Central Time. Additional information about the Southwest IDEAS Conference can be found on the conference website, threepartadvisors.com/southwest.

Solaris also plans to host investor meetings at the Capital One Securities Energy Conference in Houston, TX on Tuesday, December 10, 2024, and the Goldman Sachs Energy, Clean Tech & Utilities Conference on Tuesday, January 7 and Wednesday, January 8, 2025.

Accompanying slides for all three events will be available on the Solaris Investor Relations website, ir.solaris-energy.com.

About Solaris Energy Infrastructure, Inc.

Solaris Energy Infrastructure, Inc. (NYSE:SEI) provides scalable equipment-based solutions for use in distributed power generation as well as the management of raw materials used in the completion of oil and natural gas wells. Headquartered in Houston, Texas, Solaris serves multiple U.S. end markets, including energy, data centers, and other commercial and industrial sectors. Additional information is available on our website, solaris-energy.com.