To Build a Data Center - Intro to Diesel Generation

Many people in the AI industry insist that there will be unbounded demand for power, and therefore there will effectively never be enough supply. But a growing cohort of investors argue that many power sources are coming online in the coming years: geothermal, small modular reactors (SMRs), improved turbines, better batteries, and more. Inference providers are exploring remote areas to capture stranded energy, with plans to build data centers over the next couple of years.

Despite this possible influx of supply, it's undeniable that there's significant demand for power right now, without the supply to meet it. The average time to acquire power for a new data center is four years[1]. Natural gas turbines are scarce, nuclear takes a decade to build, and renewables are intermittent. How can we capture this opportunity?

My answer: temporary generation powered by diesel. Diesel is a petroleum product. It's almost never used to generate power in ordinary circumstances, because the cost per MWh is significantly higher than natural gas, and the carbon emissions are worse. But in emergency situations, petroleum products are the solution.

In this post, I'll explain how to quickly build a data center powered by diesel and give napkin math economics.

Everyone knows that data centers need some form of power generation in addition to GPUs. But there are a bunch of other parts, which vary wildly in price and scarcity. I'm going to walk through a full setup (close to a "turnkey data center"), including:

Rental generators

Fuel & delivery

Transformers

GPU racks & cooling systems

Networking

Generation: Rental Units

A data center can be used for training or for inference. Traditionally, training required hundreds of megawatts colocated, with gigawatts preferred. For inference, some neoclouds and inference providers are fine with a setup as small as 50 MW. Since inference requires less power, it's easier to build a data center for, so I'll use that as the reference point.

Compared to other sources of generation, diesel units are easy to combine with each other. Each unit comes with multiple "ratings" (standby, prime, continuous), which specify how much power the unit can output under various conditions. In reality, the output of the generator is not constant, but we'll simplify and assume we're continuously outputting ~1-2 MW, though it varies depending on factors like temperature and altitude.

So it'd take around 40 diesel units to hit our desired output of 50 MW. Maybe 1-2 of those are backup generators. Each unit is the size of a 20 foot shipping container and weighs ~20,000 pounds.

The availability and cost of rental diesel units varies month-to-month. A rental diesel unit produces some number of megawatts, and it's rented for some period of months by vendors like Aggreko[2] or United[3]. An estimate for the cost of renting a diesel unit is somewhere around $40,000 per MW-month. So 50 MW of diesel generators costs around $2M/month, not counting fuel costs or anything else.

Combining diesel units requires "paralleling switchgear," which synchronizes the generators and allows the GPUs to split their load across them. Fortunately, rental diesel generators come with this switchgear; otherwise it'd take a year to get them.

Fueling the Generators

To use the rental generators, we need to burn diesel. You can review the basics of heat rate calculations in Power 2026[4].

How much diesel is required, and how much does it cost? The heat content of diesel is around 130,000 Btu/gallon at best (0.13 MMBtu/gallon), and a typical heat rate for a diesel generator is 9 MMBtu/MWh (though in reality, heat rates aren't constant). If we're producing 50 MW, a single day consumes the following:

(50 MW * 24 hours) * (9 MMBtu / MWh) / (0.13 MMBtu/gallon)

= 83,000 gallons/day, or ~2.5M gallons/month

Diesel prices vary, but a defensible placeholder is around $5/gallon. Using the 2.5M gallons/month from above, that's $12.5M/month. At this level of consumption, it's wise to have a fuel supply contract in place.

Note that generators are spread across several acres. One option to get the fuel from the fuel tank to the generators is to pay a guy to drive around all day and do it, a serious operation at this scale. Another option is an actual fuel delivery system. That includes pumps and smaller tanks that sit near each generator called "day tanks." When those day tanks get low, a level controller will fill them up from diesel sitting in a "bulk tank" where most of it is sitting.

One detail worth mentioning at this point: diesel isn't shelf-stable. Bacteria and algae or whatever will grow if the diesel is just sitting around. There's usually some filtering system in place to prevent that. All-in, the fuel delivery system will cost around low six-figures/year, which is a rounding error compared to the diesel itself.

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