MEMPHIS, Tenn. — xAI could use up to 150 megawatts of power at peak times at its new Memphis supercomputer facility, but the leader of Memphis Light, Gas & Water says they are working to make sure it doesn’t impact the local utility.

To accommodate xAI’s electricity needs, MLGW will increase the capacity of a nearby electric substation to 50 megawatts by Aug. 1, at a cost of $760,000, MLGW CEO Doug McGowen told city council members Tuesday.

“We did all of our work to protect the rest of the customers, to make sure that everybody has the power they need, and clean water,” McGowen said.

The artificial intelligence company plans to build another electric substation with 150 megawatts of capacity by 2025. xAI will be reimbursed for construction with a monthly “margin allowance” worth about $24 million total, McGowen said.

The new substation will require approval by the board of the Tennessee Valley Authority.

xAI will consume about 1 million gallons a day of water for two water systems: a closed-loop chilled water system to cool the computers, and an evaporative cooling tower to chill the recirculating cold water. The all-time record demand for MLGW was 342 million gallons a day.

The company paid for its own tap and will pay commercial water rates, McGowen said.

They are exploring other options for cooling water, specifically by using treated wastewater, called graywater, McGowen said. MLGW hopes to build a graywater plant that could serve many industries in the city.

MLGW’s normal peak electrical demands are 2,000 MW in winter and 3,000 MW in summer. The all-time record demand was 3,533 MW in 2007.

xAI’s project will add about 150 MW to the local grid’s capacity, McGowen said.

City Council members said they were excited about the project’s potential but were cautious to make sure the deal was in the best interest of local ratepayers and constituents.

“This needs to be a good deal for Memphis so we are not looking back and being regretful,” Pearl Eva Walker said. 

McGowen said xAI is not applying for tax incentives, meaning the project will result in a significant impact on local property tax revenue.

The Greater Memphis Chamber announced to the public on June 5 that xAI, founded by Elon Musk, planned to build the world’s largest supercomputer in Memphis, following days of rumor and speculation.

xAI is building out the former Electrolux plant in far southwest Memphis. The building, which closed in 2020, was built in 2010 with a $97 million grant from the state of Tennessee, a $3.1 million state training grant, and 15-year local property tax abatement of 75%, with no clawback provision.

Gwen Fisher, chief economic development officer with the Greater Memphis Chamber, said the Electrolux building was officially decommissioned in late 2023 and had been in high demand before xAI moved in.

“It was one of the most sought-after buildings in the country, 750,000 square feet of really, really great manufacturing space, and we’d been showing it to a lot of companies,” she said, adding that xAI has a “very, very aggressive timeline.”

“These guys really wanted to be up and running by June 1. This was March 3. No city in America had been able to do it,” she said. “Memphis is unique. When we want to hustle, we can hustle.”

MLGW’s ability to provide the electricity sealed the deal, Fisher said.

xAI’s career page currently lists seven open jobs in Memphis, along with others in London and Palo Alto. The Memphis jobs range from Superintendent, with a salary range of $165-240 per hour, to Protective Intelligence Lead at $90,000-120,000 annually.