Nasdaq-listed Cipher Digital said Thursday it has begun developing lateral pipelines at multiple sites to deliver natural gas for on-site electricity generation.

The lateral pipelines will connect Cipher’s sites to nearby natural gas supplies, enabling the development of up to 2.5 gigawatts of on-site generation capacity. The company will work with power providers to develop and operate the generation infrastructure, with the goal of bringing new power online at the sites before the end of next year.

Cipher, which was previously a pure-play bitcoin miner before shifting its focus to high-performance computing and artificial intelligence, plans to use the additional power capacity to develop and lease industrial-scale data center space to tenants running HPC workloads.

The company said the sites’ proximity to significant natural gas resources provides an “excellent opportunity for the Company to expand its leasing portfolio.”

“Securing and delivering power is the foundation of everything we do and bringing our own electricity generation allows us to unlock significant new capacity quickly,” Cipher CEO Tyler Page said in a statement. “By developing these lateral pipelines, we are taking a decisive step toward adding up to 2.5 GW of power to our portfolio, and we plan to seek grid connection for this generation capacity, in an effort to proactively contribute to greater grid stability in the communities in which we build our data centers.”

Matthew Sigel, head of digital asset research at VanEck, said the strategy “could be” a smart move given Cipher’s facilities are located near natural gas fields and the relatively low cost of transporting gas by pipeline compared with the generation capacity it can support.

“Presumably someone else would operate the generators like SEI,” Sigel wrote in a post on X. “Which is where the questions start, since SEI-type deals are fixed-fee rental with the customer taking fuel risk. So the main one is what capital gets committed before a lease is signed, and who bears the fuel. It helps that CIFR is in the Permian, where gas is a byproduct and a producer takes that risk for almost free.”

Sigel added that he is “betting” the company’s generation technology could involve fuel cells rather than turbines.