Black Hills to Build 564 MW Gas Capacity and Manage 2.1 GW Microgrid for Google Data Center in Wyoming

Black Hills Corp. is set to build 564 MW of new natural gas-fired generation and manage approximately 2.1 GW of third-party resources to serve Google's planned data center load in Cheyenne, Wyoming, in a project that underscores the intensifying debate over how to power the rapid buildout of AI-driven computing infrastructure in the United States.

The South Dakota-based utility holding company said the project would draw on a total resource mix of about 2.7 GW, including reserve margins and excluding transmission expansion. The new gas capacity would be built at Black Hills' existing Cheyenne Prairie Generating Station between 2027 and 2029 at a cost of $1.8 billion. The new units would be owned by a non-regulated Black Hills affiliate rather than the Wyoming utility.

The gas expansion, however, represents only part of the power strategy. The project also includes 2.1 GW of third-party resources — which project documents suggest would be powered by turbines and fuel cells — operating through a privately managed microgrid under Wyoming's Large Power Contract Service tariff. Black Hills would not own these resources but would instead collect a microgrid management fee for coordinating grid operations, reliability services and dispatch across the contracted resources and market purchases.

Under the arrangement, Google would cover the costs of serving the data center, with contractual protections intended to shield existing utility customers from project-related expenses. Those protections address stranded assets, early termination and unexpected costs. Google has already advanced $399 million for long-lead equipment purchases, which Black Hills expects to reimburse before July 2027.

The utility projects approximately $150 million in net income from the project in 2030 and $2.4 billion in unlevered free cash flow through 2048, after accounting for its generation investment. Black Hills expects to begin earning returns on the investment next year by introducing microgrid management fees. The company has secured an air quality permit for the Cheyenne Prairie expansion and is pursuing additional siting and transmission approvals.

The deal reflects a broader industry divide over what kind of generation should serve the wave of data center loads being built across the country. Utilities facing gigawatt-scale requests have largely turned to new gas-fired capacity that can be sited at existing plants, while tech companies driving the demand have pledged to run on carbon-free power. Google, for example, has a goal of matching its consumption with clean energy around the clock by 2030. Between those two positions lies a range of approaches, including nuclear uprates and restarts, long-term power purchase agreements for solar, wind and storage, on-site or behind-the-meter generation, and hybrid arrangements like the one in Cheyenne. State regulators, grid operators and developers are seemingly working through the trade-offs between speed, reliability, cost and emissions one deal at a time.

Google's latest agreement is drawing criticism for its reliance on new gas. Jesse Jenkins, a Princeton University energy researcher and co-founder of Firma Power, criticized the Wyoming deal as a departure from Google's emphasis on bringing new clean electricity online. His criticism came as Google announced a separate agreement with Constellation Energy to add 890 MW of nuclear capacity through upgrades to existing reactors — a deal Jenkins praised on X as a model for powering data centers. Jenkins argued that data center developers should instead tap wind, solar and battery storage projects awaiting grid interconnection rather than build new gas-fired generation to meet surging electricity demand.