In the hills above Colón, Querétaro, Mexico, a new Microsoft data center is doing something that giants of the internet have mostly stayed away from: running on natural gas generators full time — not just to provide backup if the power goes out.
The work-around highlights a stark reality in Mexico’s expanding cloud corridor: digital demand is running ahead of the grid’s capacity to deliver.
Why a Hyperscale Site Went With Gas Power
While it awaits full interconnection to the grid and transmission upgrades, Microsoft received government permission to run a series of gas generators from now until 2024, Rest of World reported. Backup gensets are common at data centers; using them as primary source of energy is not. It’s an expensive, carbon-heavy crutch designed to maintain service levels while utilities rush to increase capacity.
The decision is a simple block in the way: There are hundreds of megawatts at high reliability drawn by hyperscale campuses, and the lines and substations needed to serve them often show up long after a building is built. In fast-growing industrial zones, the grid infrastructure build clock seldom keeps time with that required to install the cloud.
A Grid Buckling Under AI-Era Demand in Mexico
Querétaro has become a hub for cloud and AI infrastructure, with global platforms such as Google and Amazon expanding in the region. But the problem is a familiar one in Mexico: Transmission development lags investment in industry and data centers. The Guardian has recorded pressure on the grid and local services in central Mexico as new load clusters come online.
It’s not only a Mexico story. PJM Interconnection, which oversees the country’s largest power market, has said that data centers are squeezing reserve margins and reshaping transmission plans. The trajectory is evident: the digital infrastructure sector is emerging as one of the most consequential forces shaping power planning today in North America.
Water Stress Makes the Buildout Trickier
Energy is only part of the story. Data centers also guzzle a lot of water in cooling, particularly if they use evaporative systems that trade electricity for water to improve efficiency. The area around Querétaro is prone to periodic droughts, and local media and environmental groups have sounded the alarm that large campuses could exacerbate the scarcity.
Such was the scale, according to the BBC, even Microsoft’s facilities in the area were estimated to have used tens of millions of litres of water.
Similar tensions have emerged in the United States; The New York Times noted cases in Georgia where local water pressure sank as a new campus ramped operations. Still, the pattern is clear: jobs and tax base increase, along with competition for resources.
Emissions Math: Gas vs. Diesel vs. the Grid
If generators are going, natural gas is cleaner than diesel for both carbon and local air pollutants. According to U.S. EPA emission factors, compared with diesel sets, gas-fired engines generally produce about a third less CO₂ per kilowatt-hour and significantly reduced amounts of sulphur dioxide and nitrogen oxides. However, running large gensets as base power can result in emissions far greater than a somewhat decarbonized grid mix.
That a data center can be decarbonized, the International Energy Agency has said, relies on three levers: siting in cleaner grids, contracting new renewable capacity and shifting load with storage and demand response. On-site gas can provide more reliable use, but it also pressures companies to speed up clean power deals and energy efficiency so they don’t end up locking in emissions.
The Policy and Corporate Playbook for Mexico’s Grid
For Mexico, the near-term swing factors are interconnection timing, transmission investment additions and clear permitting from the CRE.
Quicker buildout of high voltage into the Bajío and complementary grid-scale storage would lower the requirement for temporary fossil solutions. Local water agencies can also mandate or offer incentives for using reclaimed wastewater for cooling and impose seasonal operating plans that protect household supply.
For cloud operators, the to-do list is just as tangible: buy more renewable energy in your grid region to match real consumption, install non-evaporative or hybrid cooling when water stress is severe and build battery systems that let campuses ride through short grid disturbances without starting engines. Some operators are already testing heat reuse and using artificial intelligence for workload shifting toward off-peak; those tools will matter here.
A Test for the AI Infrastructure Boom in Querétaro and Beyond
Microsoft’s gas-fed stopgap in Querétaro is a harbinger. It is a sign of a lag between the rate at which AI-ready capacity is being demanded and the rate at which public infrastructure can supply it. The Guardian, the BBC and other outlets have documented this collision of regions and providers, and the outlines are strikingly similar.
The eventual road is not mysterious: more transmission, more clean generation close to load, smarter cooling and tighter utility-cloud co-ordination. Until those parts come, more projects are likely to rely on temporary local generation. The question for policymakers and providers is whether those “temporary” measures remain temporary — and whether communities see shared benefits worth the trade-offs.