SpaceX plans $24B data center with gas generation ahead of proposed moratorium

SpaceX announced Nov. 12 plans for a $24-billion data center with behind-the-meter natural gas-fired generation near Texas' southern tip, which may sidestep Governor-elect Gina Hinojosa's proposed moratorium on data center development until new state laws protect consumers.

However, industry observers offered diverse views on the impacts of the SpaceX project and Hinojosa's data center agenda.

"In the Rio Grande Valley, SpaceX is planning to invest more than $24 billion in new supercomputing infrastructure, building on more than $15 billion already invested in Starship and related infrastructure at Starbase," SpaceX said in a Nov. 12 email.

Starbase is the newly incorporated town adjacent to Brownsville, Texas. Elon Musk has a controlling interest in SpaceX and serves as CEO.

"We're also committing $220 million to expand Brownsville's water and wastewater infrastructure, helping create 20 million gallons per day of additional water capacity, strengthening long-term water security, and avoiding hundreds of millions of dollars in potential costs to local ratepayers," SpaceX said. "The facility will generate its own electricity without drawing power from the public grid."

SpaceX did not say how much power the new supercomputer would use nor how much natural gas-fired capacity would be installed. Responses to requests for more information were not received in time for publication.

Project's impact mixed

Cyrus Reed, legislative and conservation director of the Lone Star Chapter of the Sierra Club, said the SpaceX proposal creates jobs but is harmful to the local population's health and to the grid overall.

"The local population is saddled with the pollution, but the resources that are built can't even serve the larger population," Reed said in a Nov. 12 email. "With cleaner energy options available, it's disappointing to see this approach. ... In addition, they seem to be seeking tax abatements, meaning the property tax benefits are significantly less than they would be without the abatement. The fact that the richest man in the world needs a tax break seems outrageous."

Hinojosa has promised a data center moratorium until the legislature sends her a bill that increases community involvement in approving facilities and setting operating conditions.

Dan Thompson, a senior analyst at S&P Global Energy Research, said the SpaceX project likely would be "beholden to the same moratorium as all the other data centers."

However, Hinojosa has indicated willingness to work with Musk, Thompson said, on the proposed $100-billion Terafab advanced chip manufacturing project in Grimes County, about 70 miles northwest of Houston.

"Presumably, she would also be interested in working with them on their Space Center project," Thompson said.

Tax bite could grow

But Hinojosa also favors repealing tax incentives, which could have a big impact on the Electric Reliability Council of Texas' large load interconnection queue, said Stefanie Williams, associate director for data centers at S&P Global Energy's 451 Research unit.

"We're looking at roughly $1 million per megawatt saved with those tax abatements, give or take," Williams said.

ERCOT's latest estimate for its large-load interconnection queue includes projected load of about 440 gigawatts by 2032, but 451 Research estimates the actual total may be about 32 GW, Thompson said.

In August, Texas Governor Greg Abbott directed ERCOT and the Public Utility Commission of Texas to halt data center interconnections, pending audits of each project's community, environmental and fiscal impacts, before approving interconnection. ERCOT has said it is on track to complete that task by Dec. 10.

All statewide offices went to Democrats Nov. 3. Texas Agriculture Commissioner-elect Clayton Tucker supports a two- to three-year moratorium on AI data center construction, as the facilities pose significant threats to land and water if not built responsibly. However, Tucker acknowledged he has limited power to limit development.

"We have the ability to issue what's called agricultural impact studies, which we will be doing," Tucker said, and those studies will be public.

Interconnection queue to thin

Asked whether data center developers might withdraw their applications, given the election results, Williams said, "We expect to see primarily newer entrants to the industry and prospectors pulling out of projects going forward, as many will not be able to meet the increasing requirements."

However, she said she could not quantify how much combined load might be reduced.

Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, an interdealer commodity broker, said he expects "at least a pause on data center development" as a result of the election "so that firms can assess the feasibility of their prospective builds."

"Projects with final investment decisions will certainly go ahead, but siting and planning for earlier development-cycle projects might now take a harder look given the proposed scrutiny across the broader industry," Faulkner said. "Much of this is driven via the populist backlash against data centers and their developers. Whether fair or not, the growing skepticism and scrutiny of these projects and their effects on rate payers has become a hot-button topic for Texans and politicians alike."