SpaceX’s Terafab to Rely on Natural Gas Power Plants, Not Solar

SpaceX plans to build natural gas power plants to supply electricity to the Terafab semiconductor factory it is developing in Texas, according to Bloomberg. The project will also include what SpaceX energy executive Riley Trettel described as “very large battery arrays.”

Trettel said at a public meeting Wednesday that SpaceX would be “bringing our own power” for Terafab. Notably, SpaceX has not announced plans for terrestrial solar power at the facility, despite Tesla being a partner and a major solar and battery developer.

The decision reflects Elon Musk’s growing reliance on natural gas to power his AI infrastructure. xAI’s data centres in Memphis run largely on natural gas, while Musk recently acquired a company specialising in gas power plants. SpaceX has also said it plans to purchase $2.8 billion worth of gas turbines over the next three years.

Terafab will be located in Grimes County, about 45 miles northwest of Houston. SpaceX recently received a 100% county tax abatement in exchange for investing at least $5 billion by 2030 and creating at least 1,800 full-time jobs by 2035. Texas is providing another $30 million in incentives.

The initial phase of Terafab is expected to cost $16.8 billion, down significantly from SpaceX’s earlier estimate of $55 billion. The facility will manufacture chips for data centres operated by SpaceX and its xAI subsidiary.

AI boom drives natural gas demand.

SpaceX’s approach mirrors a wider trend among companies building AI data centres. Growing electricity demand has fueled a surge in plans for new natural gas power plants, pushing their costs up by 66%. Google, Meta and Microsoft have all announced major energy projects in recent months.

Texas has become a major centre for “bring your own power” data centres, with more than 70 gigawatts of potential capacity identified. The strategy can help companies build projects faster and reduce pressure on the existing grid, but natural gas turbines also produce significant pollution.

SpaceX subsidiary xAI has already faced a lawsuit over its use of unpermitted natural gas turbines at its data centre operations. Terafab’s reliance on gas generation could therefore bring renewed scrutiny as SpaceX builds out the energy infrastructure needed for its growing AI ambitions.