SpaceX Chooses Natural Gas for $16.8 Billion Texas Terafab
SpaceX plans gas plants and batteries for its $16.8 billion Texas Terafab, backed by tax breaks, as pollution and turbine costs raise risks for consumers.
Summary
On August 7, 2026, SpaceX said its planned Terafab semiconductor factory in Texas would use company-built natural gas plants and very large battery arrays, Bloomberg reported. Riley Trettel, SpaceX’s energy and data center development leader, told a public meeting Wednesday that SpaceX would bring its own power. Tesla is a project partner and solar developer, but neither the report nor SpaceX’s Terafab announcements mention terrestrial solar. SpaceX and Tesla CEO Elon Musk has expanded his gas investments: xAI’s Memphis data centers run almost entirely on the fuel, he recently bought a gas-plant specialist, and SpaceX plans to purchase $2.8 billion of gas turbines within three years.
Terafab’s initial fab phase in Grimes County, about 45 miles northwest of downtown Houston, is expected to cost $16.8 billion, compared with SpaceX’s previous $55 billion estimate. It will make chips for data centers operated by SpaceX and subsidiary xAI. Following an IPO that raised $87.5 billion, SpaceX secured a 100% county tax abatement by committing at least $5 billion through 2030 and 1,800 full-time jobs by 2035; Texas will provide another $30 million.
AI demand has lifted gas-plant costs 66%, while Google, Meta and Microsoft have announced large projects. Texas has more than 70 gigawatts of proposed bring-your-own-power data center capacity. Such systems aim to accelerate construction and limit consumer electricity-price pressure, but turbines produce substantial pollution, and xAI faces a lawsuit over allegedly unpermitted units in one of the country’s most polluted areas.
Positives
- SpaceX’s recent IPO raised $87.5 billion as the company pursues the Terafab project.
- Grimes County’s 100% tax abatement requires SpaceX to invest at least $5 billion by 2030.
- At least 1,800 full-time jobs must be created in Grimes County by 2035.
- Texas will provide $30 million in incentives for the semiconductor factory.
- Very large battery arrays will accompany SpaceX’s on-site natural gas generation.
Risks & concerns
- Terrestrial solar is absent from disclosed Terafab plans despite solar developer Tesla’s participation.
- Natural gas power-plant costs have risen 66% amid demand from AI data centers.
- Gas turbines can release substantial pollution and extend Terafab’s dependence on fossil fuel.
- xAI faces a lawsuit over allegedly unpermitted gas turbines in one of the country’s most polluted areas.