Data center developers have a commercial reason to pay twice as much for their electricity if it brings revenue forward.

Under a high-CAPEX cost on-site gas generation scenario, the premium over grid power sits around 2% to 6% of disclosed revenue figures. That can be a manageable price when equipment is already committed, financing costs are accruing, and delivery deadlines are coming.

Three factors support the decision to opt for behind-the-meter (BTM) generation:

• High revenue, between $9-25M/MW-year from public disclosures,
• A relatively small 2-6% premium compared to the opportunity cost of not operating,
• Committed equipment purchases and financing obligations that drain cash quickly.

Have a question about US data center development?

Reach out to tim.woodruff@modoenergy.com, or ask Ko - Modo Energy's AI analyst

Revenues up to $25M/MW-year incentivize operating as soon as possible

Disclosed data center cloud contracts show how much revenue developers can earn from powered capacity. On the low end, IREN’s Microsoft agreement is worth $9.7B over a five-year average term across 200 MW of IT capacity, equivalent to $9.7M/MW-year. On the high end, Nebius reports $20-25M/MW-year for four major Q2 deals.

High compute revenue makes on-site gas a premium worth paying

At an illustrative all-in reciprocating gas-engine price of $125/MWh, the full on-site cost for power would require about 13% of gross compute revenue at the IREN contract rate, and 5% to 6% at Nebius’ rates.

But the incremental cost over purchasing power from the grid is smaller.. Against $66/MWh - the - the premium accounts for approximately 6% of revenue at the IREN rate and 2-3% at Nebius' rates.