Distributed Energy

New Collaboration May Convert Natural Gas, Coal-Bed Methane into H2 Supplying Data Centers with Off-Grid Power

March 11, 2025

Gas producer Diversified Energy, fuel-to-electric technology firm FuelCell Energy and energy infrastructure developer TESIAC have announced a strategic partnership to address the urgent energy needs of data centers by supplying as much as 360 MW of electricity to three locations in Virginia, West Virginia and Kentucky.

Rod Walton, EnergyTech Managing Editor

The data center industry's future electricity demand may exceed 80 GW in the U.S. by the 2030s.

This massive expansion of data center load may be too large to be met purely with renewable energy resources or even utility grid power.

The partnership aims to create an Acquisition and Development Company (ADC) for delivering reliable, cost efficient, net-zero power from natural gas and captured coal mine methane (CMM) to meet the high demand of data centers for reliable power. The collaboration will leverage in-basin natural gas production, advanced energy generation through fuel cell technology, and infrastructure financing to create an energy solution adapted for the rapid expansion of data center power capacity requirements.

“Our natural gas and coal mine methane asset footprint is advantageously positioned in the Appalachian Region to support the power generation needs of data centers directly,” said Brad Gray, president and chief financial officer of Diversified Energy, in a statement. ”The market demand for the type of reliable, quickly dispatchable power that only natural gas can deliver is incredibly strong, and we’re excited about the potential of this partnership to deploy Diversified Energy-produced natural gas and coal mine methane (CMM) and pair it with Fuel Cell’s advanced industrial-scale technology to create an efficient, cost-effective, environmentally sound solution for the next generation power needs of data centers.”

This region below West Virginia is rich in shale gas resources such as the Marcellus and Utica plays. The Marcellus alone produces close to 25 billion cubic feet in natural gas per day, most in the U.S. on average, according to the federal Energy Information Administration.

Kentucky is among the top six U.S. states for coal production at close to 28 million short tons per year.

Natural gas or CMM, extracted from coal mines by Diversified Energy and delivered through pipeline to fuel cells, could generate power through the electrochemical conversion of methane to hydrogen, and to electricity. The combustion-free process is virtually free of air pollution emissions, accelerating air permitting and enabling the system to be operational soon as compared to combustion-based systems.

Heat co-generated by the fuel cells is harnessed and converted to chilling for the data center, thus increasing overall system efficiency and further enhancing economic value. The process is eligible for established environmental and tax credits having the potential to provide cash flow in addition to the economic benefits of gas and power sales.

“We believe the future of AI (artificial intelligence) and other high-performance computing will require an abundant supply of clean, reliable, and locally generated power, ensuring that data centers can operate with maximum efficiency and sustainability” Jason Few, CEO of Fuel Cell Energy, said in a statement. “By leveraging an abundant supply of natural gas and coal mine methane (CMM), we’re confident we can address data center energy needs more quickly and cleanly than other market alternatives, accelerating the time to revenue for data centers and their customers.”

Diversified Energy will supply natural gas and CMM or captured waste methane from coal mines that otherwise would have been vented into the atmosphere, from its Appalachian Basin production as the base fuel. FuelCell Energy will deploy its fuel cell energy platforms, while TESIAC will contribute investment and development expertise, securing highly competitive financing options to accelerate deployment while maintaining long-term profitability and scalability.

The aim of this collaboration will focus on behind-the-meter or off-grid solutions, rather than rely on utility grid-based power. Designing the projects as off-grid can avoid long interconnection delays and enable faster deployment.

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About the Author

Rod Walton, EnergyTech Managing Editor | Senior Editor

For EnergyTech editorial inquiries, please contact Managing Editor Rod Walton at [email protected].

Rod Walton has spent 15 years covering the energy industry as a newspaper and trade journalist. He formerly was energy writer and business editor at the Tulsa World. Later, he spent six years covering the electricity power sector for Pennwell and Clarion Events. He joined Endeavor and EnergyTech in November 2021.

Walton earned his Bachelors degree in journalism from the University of Oklahoma. His career stops include the Moore American, Bartlesville Examiner-Enterprise, Wagoner Tribune and Tulsa World.

EnergyTech is focused on the mission critical and large-scale energy users and their sustainability and resiliency goals. These include the commercial and industrial sectors, as well as the military, universities, data centers and microgrids. The C&I sectors together account for close to 30 percent of greenhouse gas emissions in the U.S.

He was named Managing Editor for Microgrid Knowledge and EnergyTech starting July 1, 2023

Many large-scale energy users such as Fortune 500 companies, and mission-critical users such as military bases, universities, healthcare facilities, public safety and data centers, shifting their energy priorities to reach net-zero carbon goals within the coming decades. These include plans for renewable energy power purchase agreements, but also on-site resiliency projects such as microgrids, combined heat and power, rooftop solar, energy storage, digitalization and building efficiency upgrades.