Dive Brief:
- Atlas Energy has inked a multiyear agreement to secure 1.4 gigawatts of incremental natural gas power generation assets from Caterpillar to meet surging electricity demand.
- Under the agreement, the Austin-based power systems and proppant supplier will invest $840 million to obtain large natural gas reciprocating generator sets, including Caterpillar’s CG260-16 and G3520 models used for behind the meter and bridge power applications.
- Deliveries are scheduled between 2027 and 2029. Annual price increases will be capped at 8% per year, according to the agreement. The deal is one of Caterpillar’s largest as the company continues to build out its power systems segment for data center and oil and gas customers. It also has an extension option if more orders are needed.
Dive Insight:
What used to be Caterpillar’s weakest segment has become its fastest-growing, powered by surging investments in data centers. In the fourth quarter, power system sales reached $9.4 billion, up 23% from the previous year and well above Caterpillar’s construction and mining segments. In November, company executives told investors they would rename the segment to Power & Energy to better reflect the shift in demand toward power generation and oil and gas solutions.
At the investor conference, Jason Kaiser, group president of Power & Energy, outlined a plan to more than double Caterpillar’s power generation sales by 2030 by increasing large engine and natural gas turbine capacities. He also identified surging electricity demand as a big growth opportunity.
Customers are now coming to Caterpillar for backup and primary power solutions because “they’re unable to get a connection from the utility based on constraints in capacity or distribution,” Kaiser said.
Atlas Energy moved forward with its agreement to support private grid development. With Caterpillar’s equipment, the company estimated that it would own and operate about 2 gigawatts of power generation assets by 2030.
This comes as industrial customers seek alternative power solutions due to public grid constraints, John Turner, Atlas Energy’s president and CEO, said in a statement. The agreement with Caterpillar ensures “supply certainty, pricing discipline and execution reliability” as Atlas Energy builds out its long-term power strategy, he said.
Some utility interconnection queues span five to 10 years, according to Atlas Energy’s investor presentation. The company estimated that more than $1 trillion is needed over the next decade to improve public grid infrastructure, and sees the private grid market as fertile ground for investment.
