SpaceX, Tesla's $16.8B Terafab Bets on a Retired Coal Plant's Grid

SpaceX and Tesla have confirmed $16.8 billion in first-phase spending on Terafab, a chip factory targeted at more than 100 million square feet in Grimes County, Texas, a rural county about an hour northwest of Houston. The company’s own framing puts the figure at initial-phase only, with total spending across future phases potentially reaching $119 billion if the site builds out to its full stated target, which remains a planning goal rather than a permitted footprint.

Why it matters

The number developers should model here is not the headline spend, it is the site. Terafab is rising on the former Gibbons Creek Reservoir property, home to a coal plant that shut down in 2018, and the project will draw water from the reservoir rather than local groundwater and tie into infrastructure built for a power plant rather than starting from raw land. For an industrial program aiming at more than 1 terawatt of annual compute, an existing grid interconnection and water allocation is the entitlement that actually moves a megaproject from announcement to groundbreaking, and it is the reason Grimes County, not a metro industrial submarket, is the site. County Judge Joe Fauth said construction could begin before the end of the year.

The numbers

Grimes County commissioners approved the project’s incentive package 4-1 in June, granting a reinvestment zone designation and a 100% property tax abatement in exchange for payments in lieu of taxes totaling roughly $700 million over 35 years. Against the county’s current tax base of about $11 billion, county officials project that base growing by as much as 500 percent. The project is expected to bring at least 3,000 jobs, with local hiring emphasized, a figure county officials say could represent more than 10 percent of Grimes County’s entire workforce. For a rural county, that is a construction and permanent labor draw with no comparable local precedent.

What’s next

Watch two things: whether the $16.8 billion first phase breaks ground on the timeline Fauth described, and whether the 100 million square foot target holds as a real program rather than a ceiling that gets revised as phases are funded. Both will tell national industrial land buyers more about how much power-and-water-ready rural sites are worth than the headline investment figure does.