Galaxy Digital Plans 74 MW McGregor AI Data Center
Texas developer privately funds grid upgrades to secure power for Project Merlin
In a major shift for the AI infrastructure sector, Galaxy Digital has acquired 500 acres in McGregor, Texas, to construct a new artificial intelligence and high-performance computing campus. Known as "Project Merlin" during local city council deliberations, the project's first phase targets a 74-megawatt capacity. Under a new "beneficiary proves" model, the developer will privately finance and build an on-site electrical substation and fund local grid and water upgrades rather than relying on utility-funded infrastructure.
Key details
The new AI campus represents a significant milestone in how high-density computing loads integrate with local utility resources.
- Massive Financial Commitments: The project represents over $400 million in planned capital investment, adding at least $130 million to McGregor's property tax base and generating $7.5 million in land-sale revenue for the city without seeking any property tax abatements.
- Privately Funded Grid Upgrades: Rather than passing grid expansion costs onto residential ratepayers, Galaxy Digital will privately fund the construction of its on-site substation and provide financial guarantees to secure power, collaborating with the Heart of Texas Electric Cooperative and McGregor Economic Development Corporation.
- Strict Resource Limits: The developers have negotiated strict environmental protections, including a closed-loop cooling system, a strict water-use cap of approximately 3,000 gallons per day per powered shell, and property line noise limits of 65 dBA.
- Innovative Noise Mitigation: To meet noise limits, the campus will feature six to eight data center buildings constructed using a multi-layered "box within a box within a box" design, complete with 11-inch precast concrete walls.
- Precedent of Scale: Galaxy Digital is leveraging its experience from its existing 1.6-gigawatt Helios development in Dickens County, Texas, which currently delivers 200 MW of gross power.
Why this matters
As utility companies and regulators struggle with the unprecedented power demands of AI factories, a "beneficiary proves" model is replacing traditional funding frameworks. Instead of requesting public infrastructure, AI developers are now expected to self-finance grid upgrades, demonstrate committed demand durability, and accept strict municipal resource caps before gaining grid access.
Context
This project aligns with recent policy directives from Texas Governor Greg Abbott, who ordered the Public Utility Commission of Texas and the Electric Reliability Council of Texas to establish rules forcing data center developers to pay for their own electrical infrastructure. In McGregor, many of these provisions—including the water limits and closed-loop cooling—were proactively negotiated prior to state mandates, signaling that developers are treating early community engagement and resource protection as a key competitive advantage.
Risks and open questions
The primary open question is how quickly the Heart of Texas Electric Cooperative can energize the site, with the first phase of power not anticipated until 2028. Additionally, while the 3,000-gallon daily water cap per powered shell is low, the ultimate impact of a multi-hundred-megawatt expansion by 2030 on local groundwater tables remains a key concern for the agricultural community along the Highway 84 corridor.
What happens next
With the land sale approved and the grid-funding agreements finalized, Galaxy Digital will begin site preparation inside the McGregor Industrial Park, northeast of SpaceX's rocket testing facility. The development will serve as a prominent test case for whether self-funded utility models can successfully accelerate high-density AI infrastructure while shielding rural residential ratepayers from rising energy bills.
Source: ETDatacenters Published on AI Usage Global, author: AUG Bot
