Elon Musk's New AI Data Center Raises Energy and Water Concerns in Memphis

In a July 22 post on his social media site X, Elon Musk congratulated staff at his artificial intelligence company, xAI, for quickly getting its newest facility up and running to train his AI chatbot, named Grok.

"Training started at 4:20 a.m. local time," Musk wrote in a cheeky nod with a "420" marijuana reference that has become part of his style.

Musk called the data facility installed in a former Electrolux manufacturing building in southwest Memphis, Tennessee, a "supercluster" and said it will eventually hold 100,000 high-powered, liquid-cooled graphic processing unit, or GPU, chips made by Nvidia.

"It's the most powerful AI training cluster in the world!" Musk wrote in his post.

With AI booming, tech companies are racing to build larger data centers that can provide the computing power needed to train and operate generative AI systems.

That rapid data center build-out is also creating an energy crunch, with some electric utility companies projecting huge increases in demand for both energy and the new transmission lines to carry electricity to data centers.

Musk and xAI are asking the local utility, Memphis Light, Gas and Water, or MLGW, for 150 megawatts of electricity, enough to power roughly 25,000 to 30,000 average homes.

To get that kind of power, the facility will first need a new electricity substation and improvements to a transmission line. Musk didn't want to wait for that, so he found a workaround to power his AI center in the meantime. Industry observers who tracked the Memphis facility's progress via satellite found that the aerial images show a fleet of tractor trailer-sized electric generators parked along the facility's perimeter. The generators burn natural gas to produce electricity on-site. (A fact sheet from MLGW confirmed the site is connected to a 16-inch gas main.)

Local boosters such as the city's chamber of commerce cheered the arrival of xAI and touted the revenue the supercluster will generate.

But the speed with which the facility was announced and installed and the lack of public process around the decision have raised concerns from local civic leaders and activists. They worry about potential effects on the city's power system, water supply and nearby residents who already bear a disproportionate pollution burden due to other heavy industry in that part of the city.

"People want to know, what's going to happen?" Memphis City Council member Pearl Walker told Newsweek. "Is water going to be used up or contaminated, is energy going to be used up, will we have rolling blackouts?"

In its fact sheet, MLGW said the xAI facility will have no effects on other power customers, but power supply has been a concern in Memphis in the recent past. In late 2022, for example, a temporary power shortage subjected large parts of the area to rolling blackouts that left hundreds of thousands without power.

Walker has organized an informational town hall event for Saturday morning to try to get more basic information for her constituents about the xAI project.

"We can't be all starry-eyed just because it's Elon Musk," Walker said.

But she and some regional clean-energy advocates also see the potential to leverage Musk's new presence in Memphis for an environmental win by pushing for infrastructure improvements to enhance the city's energy and water.

Boxtown and the Unequal Burden of Pollution

The part of southwest Memphis that Musk selected for the xAI facility is largely industrial, bordered to the west by the Mississippi River. A steel facility is nearby, as are the city's wastewater treatment plant, an oil refinery and the polluted remains of an old coal-fired TVA power station recently converted to burn natural gas.

A little farther east, the industrial areas give way to a residential neighborhood with a curious name: Boxtown.

"It started from freed slaves who built their homes out of box cars," KeShaun Pearson explained in an interview with Newsweek. "Historically, you have a resilient people who after Reconstruction were finding their way and building something for the first time that is their own."

Pearson is the president of a citizens' group called Memphis Community Against Pollution, or MCAP. (His brother, Justin Pearson, is a state representative and was one of the "Tennessee Three" lawmakers who gained national attention last year when they were punished for staging a protest against gun violence.)

Pearson described how Boxtown became the place that would bear most of the city's industrial pollution. "Right down the road, unfortunately, is where you have 16 toxic release facilities," he said. "We have seen our life expectancy continue to plummet."

Data from the U.S. Environmental Protection Agency shows that southwest Memphis has among the highest rate of toxic releases into the air in the country, placing it in the 98th percentile. In a 5-mile radius from the industrial center where xAI is now located, the average life expectancy, according to the EPA, is just 63 years, nearly 15 years shorter than the national average.

Pearson said that context is important to consider when placing another energy-intensive facility in the area. He also had questions about short-term emissions from the natural gas generators xAI is using before it is fully connected to the electric utility system. While the type of generators in use generally have a lower emissions profile compared to those that burn diesel fuel, burning natural gas does generate local air pollution and greenhouse gas emissions. Pearson said he is not aware of any emissions monitoring.

"There is no permitting process, no tracking, no documentation for what's happening," he said. "And we know what community is going to have to deal with the fallout."

XAI and Musk's associated company, Tesla, did not respond to multiple requests for comment, and MLGW declined an interview request for this story.

Other activists have raised concerns about xAI's water use. Memphis does not pull its drinking water from the Mississippi because it is fortunate to sit atop an aquifer that supplies groundwater.

Sarah Houston is the executive director of Protect Our Aquifer, a group working to make sure that water stays clean. MLGW said in its fact sheet that it expects the xAI facility to consume a million gallons of water a day, and Houston said she has concerns about how that type of water demand might affect the aquifer and the nearby residential wells that draw from it.

"The drinking water supply, the well field, for that neighborhood is known to have potential arsenic contamination seeping toward it," Houston told Newsweek. "This additional water use by xAI really continues to draw down that arsenic and puts our drinking water infrastructure at a greater risk."

As with the air emissions, Houston said, there has been little in the way of public information or input regarding xAI's water use, and the lack of public engagement in such a major development is a point of contention in the community, according to LaTricea Adams, founder and president of the environmental justice organization Young, Gifted and Green.

"It seems really sketchy," Adams told Newsweek. "It does appear that because this is Elon Musk, and this is a billionaire, that there was not transparency around what permitting took place."

Pushing for Extras From xAI

As Memphis citizen groups and council members mull over the challenges from the xAI facility they also see a means to use Musk's presence in the city to mitigate the data center's environmental impact and help address some longstanding needs in local infrastructure.

"They can do it right or they can do it wrong, and jury is still out," Southern Alliance for Clean Energy Executive Director Stephen Smith told Newsweek.

Smith has three decades of experience working on Tennessee's energy issues. He said doing the xAI project "right" would include drawing on another of Musk's companies, Tesla, and its engineering expertise on clean-energy storage.

The EV maker also makes large batteries for industrial-scale energy storage, a product Tesla Energy calls the Megapack, and Smith thinks a large installation of Megapacks in Memphis could jumpstart lagging progress toward adding clean energy and decarbonizing the region's largest power company, the Tennessee Valley Authority, or TVA, which supplies MLGW's electricity.

"They've been hesitant to embrace renewables because of intermittency," Smith said. The timing of abundant solar and wind energy doesn't always match with peaks of energy demand, causing problems for electric utilities. A large bank of Musk's Megapacks could store renewable energy and give the electric companies more versatility and more confidence to add additional clean-energy sources.

"That is a phenomenal opportunity for Memphis," Smith said.

Houston, at Protect Our Aquifer, said she sees a similar "lemons to lemonade" opportunity in xAI's water use. Her group has long advocated for the addition of a recycled water facility at the city's wastewater treatment plant to supply industrial water uses and reduce pressure on the aquifer.

"The city's wastewater treatment plant is literally next door to xAI," Houston said. "The location is what makes this the perfect opportunity to reduce aquifer usage."

In its fact sheet, MLGW indicated that both the energy storage additions from Tesla Energy's Megapacks and a recycled water facility are in discussion.

City Council member Pearl Walker said she has been pushing for those developments to try to make the xAI development as good a deal as possible for the city.

"We've had some deals in the past that weren't so good for us," she said. "I'm looking at how this can help us as we carve out our sustainability path."