The arrival of xAI’s “gigafactory of compute” in Southwest Memphis could hasten the arrival of a gray water treatment plant in the city. It could pose new challenges and opportunities for the region’s electric grid. 

The new supercomputer will add about 5% to Memphis, Light, Gas and Water’s daily electric load, according to MLGW. It will also add about 1% to the utility’s daily freshwater consumption.

Environmental groups expressed concern about the project Wednesday. They asked the company be transparent about carbon dioxide emissions and consider a binding community rights agreement. 

Leaders, lawmakers applaud xAI plans for Memphis as ‘historic’

 MLGW CEO Doug McGowen and Greater Memphis Chamber CEO Ted Townsend said in interviews that xAI will use water from the Memphis Sand Aquifer in its early years but the company helped accelerate plans for a facility that would convert wastewater to coolant. 

McGowen also addressed Memphians’ concerns about how much energy the site will use and if it would negatively affect the grid.

Gray water plant being planned

The potential plant would purify wastewater for industrial cooling.

It would take the wastewater from Memphis’ TE Maxson Wastewater Treatment Plant and make it pure enough for cooling not only xAI’s supercomputer but also the TE Maxson plant, the Tennessee Valley Authority’s Allen Combined Cycle Plant and other area facilities. 

McGowen said the supercomputer's arrival accelerated talks among the city, TVA and MLGW about how to fund and design a gray water facility. 

Memphis sits on an aquifer system, a massive freshwater source that stretches across several states. Locally, the aquifer is known as the Memphis Sand. 

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McGowen said he expected the xAI facility to draw up to 1 million gallons of water daily from the aquifer. The city-owned utility draws about 100 to 150 million gallons of water each day. 

“Water from this facility will be used to help TVA with their cooling, the city of Memphis with their cooling, this company with their cooling and then to have some additional capacity for future economic development prospects,” McGowen said. 

Electric load a consideration

Over the past two years, events raised questions about Memphis’ power supply. In December 2022, the Tennessee Valley Authority instituted rolling blackouts across its footprint during a deep freeze. A similar cold front brought energy conservation orders from TVA in January but no blackouts. 

The xAI facility will require about 150 megawatts of load. When usage peaks during the hottest days of the summer or winter, MLGW’s load can be more than 3,000 megawatts. 

When presented with news of a heavy electric user scouting a site in Southwest Memphis, McGowen considered what it would mean to the electric grid. 

“They are not approaching this from a posture of taking, taking and taking. They have a corporate responsibility to the environment and to the communities in which they embed their operations.”

Ted Townsend
Greater Memphis Chamber CEO

“We knew we were looking at two things,” McGowen said. “One, at the macro level, can we serve it? And at the micro level in that area, were there going to be any impacts?”

There is an existing MLGW substation nearby that draws from TVA’s nearby Allen Combined Cycle Plant. 

xAI is building out capacity at that substation, McGowen said. First, it will build out the substation to 50 megawatts and then 150 megawatts.

In the short term, the company is generating its power through gas turbines. TVA will provide 150 megawatts by 2025.

If the grid runs into trouble, xAI, like other large users, will be asked to curtail power. How exactly that will work is still being negotiated, McGowen said. 

“They’re working on that with Tennessee Valley Authority and our team to determine how much off-peak they can come when the demand gets high, and what the terms of that will be,” he said.

Environmental groups question impact

Three environmental groups questioned the impact of xAI on the Memphis environment and neighboring communities. 

Protect Our Aquifer, Memphis Community Against Pollution and Young Gifted and Green put out a joint statement Wednesday evening that asked for local hiring, a study of air contaminants, binding community commitments and disclosure of emissions. 

“xAI should immediately consider the inclusion of binding community benefits agreements that enshrine its obligations to the local community, including targeted hiring, apprenticeship programs, and funding for neighborhood revitalization efforts,” the groups said. “We encourage Elon Musk and xAI to build solar for the site and invest in a gray water-reuse facility to reduce the strain on the water supply and electric grid, along with hiring from low-income and disadvantaged communities to boost the local economy.”

Local leaders said that xAI’s arrival comes with sustainability in mind. 

“They understand how significant their energy consumption is going to be. They want to be good stewards. And so I know that they are committed to exploring sustainable resources as a part of the portfolio long-term,” Memphis Mayor Paul Young said. “I think they will be a great partner in that way.”

Elon Musk-founded xAI to build ‘gigafactory of compute’ in Memphis

As a company founded by billionaire Elon Musk, xAI also likely has access to Tesla Megapack batteries, the type of energy storage MLGW included funding for in its most recent budget. 

McGowen said the utility could purchase the battery packs, which are in short supply, to add more resiliency to its electric system. 

Nimbleness key; company forgoing incentive 

xAI plans on being an MLGW customer, not a direct customer of TVA, which is how several significant power-users operate. 

A direct-serve TVA customer typically has lower electric rates than an MLGW customer because it cuts out one step in the electricity supply chain.

And if xAI did not receive power from MLGW, it would not give the utility revenue. It would add to the region’s electric load but not pay into the local grid. 

Ted Townsend, the Greater Memphis Chamber CEO, noted the company’s plans to not burden the grid. 

“From day one, that’s what’s so refreshing about this, is the company has been focused on resiliency and being good stewards. When you think about Elon himself, I mean he revolutionized the automobile industry, creating electric vehicles because he wanted to save the planet,” Townsend said. “They are not approaching this from a posture of taking, taking and taking. They have a corporate responsibility to the environment and to the communities in which they embed their operations.”

When he announced the project Wednesday, June 5, Townsend noted MLGW’s role, saying there was no greater partner in getting the deal done. 

McGowen said the organization found it needed to move quickly. 

“When we talk about economic development, your utility can be either an anchor on economic development, or it can be a catalyst,” McGowen said. “And in this case, we have to be a catalyst here and show that MLGW is able to respond quickly.”

 Sophia Surrett contributed to this story.