City council squabbles with utility over Elon Musk’s data center plan
- by power-grid
- Jul 11, 2024
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(Courtesy: Kelly Sikkema/Unsplash)
Plans to bring a data center developed by Elon Musk’s artificial intelligence company, xAI, to Memphis are pitting the local utility against its regulator, the city council.
xAI intends to establish a 150 MW data center at an existing industrial park near the Mississippi River in Southwest Memphis. Doug McGowen, CEO of municipally-owned Memphis Light, Gas & Water shared the plans at a somewhat contentious city council meeting Tuesday.
McGowen described the prospect of the data center as a potential “win for the city,” given that the data center would occupy a vacant industrial park facility and support the buildout of new infrastructure.
xAI would pay $1 million for necessary upgrades to the MLGW distribution system. The data center’s water needs could support additional water treatment facilities to serve the broader community. Because the company will not be receiving any subsidies, McGowen said local communities will benefit from a property tax windfall.
The site currently only has access to 8 MW of power from a nearby substation. MLGW proposes upgrading capacity to 50 MW at a cost to ratepayers of $760,000. That project could be completed by Aug. 1. Additionally, xAI would construct a new, 150 MW substation near the campus for $24 million, believing that they can complete the project cheaper and more quickly than the utility. xAI would receive monthly rebates from MLGW until costs are recouped and the utility would take ownership of the substation.
xAI, an artificial intelligence company founded by Elon Musk, intends to establish a 150 MW data center at an industrial park in Memphis. (Courtesy: MLGW)
McGowen told council members that the xAI data center would not strain the grid or impact reliability for local customers. The added 150 MW load is still well within MLGW’s peak load forecasts, and the utility can buy additional power from the Tennessee Valley Authority. The facility is also likely to participate in a demand response program, cutting power usage during times of grid strain.
Council members said they were “disheartened” by the plan, primarily due to their level of involvement in the arrangement. Several said they had received numerous concerns from the public about the plan, which had been reported by local media but not previously shared with the city council.
MLGW was told of the potential of a data center occupant at the industrial park by the property’s owner in early March. By mid-March, the utility had its first conversations with xAI. The parties coordinated contracts for gas, water, and the initial electric service from April to June. The project still requires TVA board approval due to xAI’s request for more than 100 MW of power, and an agreement is likely to include enrollment in a demand response program.
“We don’t know anything,” Council Member Rhonda Logan said. “This is already here and we don’t know anything.”
Council members requested an executive session with MLGW to review the utility’s feasibility study in order to better understand the project’s community impacts without divulging sensitive utility information.
Elon Musk’s name was not part of the MLGW presentation and council members did not appear to know that he founded xAI, the company planning to set up shop in Memphis. But near the end of the discussion, one council member, Pearl Eva Walker, objected to the planned infrastructure upgrades, proclaiming: “You talk about stress on the grid, we need to get some Megapacks!” in reference to the grid-scale batteries manufactured by Musk-owned Tesla.
“I have received a whole lot of questions and comments surrounding this… This (presentation) was ok, but this is not it. There are other options,” Walker said. She urged McGowen and MLGW to consider innovative solutions, like battery storage, over traditional capacity enhancements.
McGowen made a subtle mention that xAI is affiliated with Tesla and added that MLGW plans to leverage that relationship as part of its effort to invest $120 million in batteries in the coming years.
“We’re going to ask them for batteries to come faster and cheaper than anywhere else because it’s about a 2-3 year lead time if you order it out of the company today,” McGowen told the council.
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