The electricity bottleneck facing AI data centers is fueling a massive wave of off-grid power financing. Private equity heavyweights including Blackstone, KKR, Apollo, and Brookfield are pouring into this space through project investments, equity stakes, and equipment financing, seeking to bypass lengthy grid construction timelines and supply power directly to data centers.

Blackstone leads US$5.3 billion bet on natural gas off-grid power

This summer, an investment consortium led by Blackstone with participation from KKR and Apollo reached an agreement with pipeline giant Williams Companies to acquire a 49% equity stake in five natural gas power projects under development for US$5.3 billion. These projects are specifically designed to provide off-grid power to data centers.

Speed is the core competitive advantage of off-grid power. Williams said its first 200 megawatts of off-grid generation capacity came online less than 18 months after commercialization. By contrast, Fitch Ratings estimates that building new grid-connected power plants and high-voltage transmission lines typically takes five to ten years.

Equity stakes and equipment financing: two parallel paths

Beyond direct project-level investments, some investors are taking equity stakes in off-grid power companies to gain broader exposure to industry growth.

In May, Blackstone and Halliburton jointly announced a US$1 billion equity investment in VoltaGrid. VoltaGrid specializes in building and operating off-grid natural gas power systems for data centers.

Carl Bivens, a real estate partner at law firm Troutman Pepper Locke, said:

"As a lot of private equity and other money has come into the market, different deal structures have emerged. When private equity gets involved, they want to hold ownership interests in the development entity."

The other path is providing equipment financing to end customers. Last autumn, Bloom Energy announced that Brookfield Asset Management agreed to provide up to US$5 billion to finance future power projects for AI data centers, with Bloom supplying fuel cells. In June, Bloom announced that Brookfield would expand the potential financing scale to US$25 billion.

According to a person familiar with the financing arrangements, Bloom has relied on infrastructure funds and investment firms to form special purpose vehicles (SPVs) to finance the deployment of its products for more than a decade, but investor interest has accelerated noticeably of late.

Project-level financing continues to land as Oaktree joins Nebius

In July, project developer Industrial Development Funding (IDF) and Oaktree Capital Management announced a joint US$1.7 billion investment to install Bloom fuel cells at a Nebius data center.

Under the deal structure, Oaktree provides minority equity financing, Mitsubishi UFJ Financial Group (MUFG) leads senior debt financing, and Nebius pays Bloom for electricity.

Contract duration mismatch emerges as a potential risk

Off-grid power assets can last for decades, but AI computing contracts are typically much shorter, with GPUs inside data centers often facing replacement within a few years. This cyclical mismatch is a core structural risk investors currently face.

To address this, investors are pushing for longer-term customer commitments. Carl Bivens said the market is increasingly leaning toward requiring large cloud service providers to sign 10- to 15-year contracts with five-year renewal options.

"That gives investors a longer guaranteed rent runway and also allows institutional investors to amortize their costs on behind-the-meter solutions or data center construction," he said.

IDF CEO Nik Nunes offered another response logic: even if a data center's electricity demand changes, the power supply assets themselves retain value — electricity can be sold to the broader market.

"If I have a power module that has been substantially amortized over six to eight years, I have a lot of flexibility to sell power into the grid or other markets," Nunes said.