SpaceX's Terafab chip plant will run on natural gas, not Tesla solar

SpaceX said this week it will build natural gas power plants to supply electricity to the Terafab semiconductor factory it plans to build in Texas, according to a Bloomberg report. Riley Trettel, who leads energy and data center development for SpaceX, said in a public meeting Wednesday that the company will be “bringing our own power” for the project, which will also include “very large battery arrays.”

Notably absent from the Bloomberg report — and other SpaceX announcements about Terafab — is any mention of terrestrial solar power for the facility, even though Tesla, which is also a solar developer, is a partner in the project. Elon Musk, CEO of both SpaceX and Tesla, has bet heavily on natural gas lately: the xAI data centers in Memphis run almost exclusively on the fossil fuel, Musk recently bought a company that specializes in natural gas power plants, and SpaceX has said it plans to buy $2.8 billion worth of gas turbines over the next three years.

Terafab will be built in Grimes County, about 45 miles northwest of downtown Houston. SpaceX, which recently went public in an IPO that raised $87.5 billion, received a 100% tax abatement from the county in exchange for spending at least $5 billion by 2030 and creating at least 1,800 full-time jobs by 2035; Texas is also providing $30 million in incentives. The initial phase of the fab is expected to cost $16.8 billion, though SpaceX had previously estimated it would cost $55 billion. The fab is intended to build chips for data centers run by SpaceX and its xAI subsidiary.

The AI data center boom has driven a surge in proposals for new natural gas power plants across the industry, driving up costs for natural gas power plants by 66%; Google, Meta, and Microsoft have all announced massive projects of their own in recent months. Texas has become ground zero for these “bring your own power” data centers, with more than 70 gigawatts of capacity charted out. Such schemes are meant to speed up project development while addressing concerns about rising electricity prices for consumers, but natural gas turbines can release significant pollution — xAI has been sued over its use of unpermitted natural gas turbines in one of the most polluted parts of the country.

Why it matters

SpaceX’s decision to skip solar for its flagship chip plant, despite having a solar-power partner on the project, signals that speed of deployment is outweighing clean-energy considerations across the AI infrastructure buildout — with natural gas turbine costs and local pollution both rising as a result.