Key Takeaways
The growing demand for reliable electricity by tech companies driven by AI and data centers is creating new opportunities for the U.S. nuclear energy industry.
Tech companies are committing to buy most, or all, of the electricity directly produced at existing nuclear plants in some areas of the country.
Some nuclear facilities are even being purchased outright as tech companies want high quality, reliable, round-the-clock electricity that nuclear provides.
Regulators, politicians and utilities in these areas will be faced with the costs and reliability of replacement power for the diverted nuclear plant output.
Data centers are estimated to consume as much as 9 percent of all electricity by 2030.
It was not many years ago that tech companies indicated they would reach net zero carbon in the not-so-distant future. But they have found that growing electricity demand from artificial intelligence (AI) and data centers has made that goal harder to reach as they need reliable power 24/7 intermittent solar and wind power cannot provide. Instead, tech companies are now looking at nuclear power—a carbon free source of energy. They want not just a quantity of electricity, but a quality of electricity that provides on-demand response, which intermittent generators cannot provide.
The owners of about a third of U.S. nuclear-power plants are in talks with tech companies to provide electricity to new data centers needed to meet the growing demands of an AI boom. These discussions have the potential to remove reliable power generation from the electric grid while new kinds of electricity users, such as AI data centers and electric vehicles, are significantly increasing the demand for electricity. Thus, instead of adding new non-carbon energy to meet its soaring power needs, the tech industry would be effectively diverting existing dispatchable electric power resources to meet its growing demand.
Additional new renewable energy, mostly wind and solar, capacity to meet the electric generation that was diverted to demand centers would still be needed, which would raise electricity prices and/or increase unreliable service for other users. It could also mean more reliance on natural gas that unlike solar and wind power, can provide round-the-clock power and are cheaper and easier to build than new nuclear plants.
The nuclear-tech marriage is fueling tensions over economic development, grid reliability, cost and climate goals in states including Connecticut, Maryland, New Jersey and Pennsylvania. For example, Amazon Web Services is nearing a deal for electricity supplied directly from a nuclear plant on the East Coast with Constellation Energy, the largest owner of U.S. nuclear-power plants. In a separate deal in March, the Amazon.com subsidiary purchased a nuclear-powered data center in Pennsylvania for $650 million supplying up to 960 megawatts of electricity that can power hundreds of thousands of homes.
Amazon’s deal in Pennsylvania that gives first dibs of a plant’s energy to a massive consumer has raised concerns about cost and grid reliability and whether the state currently has the regulatory authority to intervene in such deals. Utilities American Electric Power and Exelon requested a hearing at the Federal Energy Regulatory Commission about Amazon’s deal, arguing that as much as $140 million in costs could shift to other customers and that the data center “should not be allowed to operate as a free rider,” benefiting from a transmission system others pay for. Talen Energy, which built the data center and operates the nuclear plant, called the request a “misguided attempt to stifle this innovation.”
That acquisition also accelerated interest in behind-the-meter deals, in which a large customer receives power directly from a plant. Such arrangements mean data centers can be built faster because little to no new grid infrastructure is needed. In such arrangements, data centers can also avoid transmission and distribution charges that make up a large share of utility bills. Those T&D charges would still be added onto bills for other power users that require replacement generating capacity for the diverted nuclear output.
The new interest in nuclear power by tech companies puts nuclear plants in a new light – an industry that has struggled for decades to compete with wind, solar and natural gas in competitive power markets that prompted a wave of nuclear closures. Constellation Energy is even in talks with Pennsylvania officials about funding to restart a unit at the Three Mile Island nuclear plant. While the company has not made a final decision, it may move forward with plans to bring on-line TMI Unit 1 in southern Pennsylvania–a unit that operated successfully from 1974 until 2019. While it is technically feasible to restart the unit, economic, commercial, operational, and regulatory considerations remain.
Constellation Energy owns 14 U.S. nuclear-power plants and produces more than a fifth of the nation’s nuclear power. According to its president and CEO, Joseph Dominguez, there are still many places, including a swath from Pennsylvania to Illinois, with an oversupply of power that leaves room for data centers. Contracts with data centers willing to pay a premium for reliable electricity would cover the cost of re-licensing, extending nuclear plant life another 20 years and supporting investments that could boost nuclear-power output.
In New Jersey, according to Public Service Enterprise Group (PSEG) CEO Ralph LaRossa, the company has been in talks with data centers, including for direct power sales, which could support New Jersey’s economic-development efforts to create an AI hub. About 40 percent of the state’s power comes from nuclear power, including plants owned by PSEG. New Jersey customers have spent about $300 million a year during the past six years to help keep its plants operating, plus hundreds of millions before that. New Jersey is also requiring 100 percent non-carbon-energy generation by 2035, which would be impossible without nuclear power.
Many of the negotiations are happening within the PJM Interconnection, the regional transmission organization and electricity market serving Washington, D.C., and 13 states from Virginia to Illinois. It is working with both plant and transmission owners, and conducting analyses to avoid reliability issues and other problems.
Estimates of the power that data centers need range from around 4 percent of power consumed last year in the United States to between 4.6 percent and 9 percent by 2030, according to the Electric Power Research Institute.
It is unclear whether and how much data centers located at nuclear plants would need to depend on grid power. Nuclear plants are far more reliable and enjoy a higher capacity factor than other kinds of power generation but also have outages. Before Amazon purchased the Pennsylvania data center, a Talen nuclear reactor had an outage and the data-center campus had to pull power from the grid. The need for grid power was unexpected, and additional system protections have been put in place since then to avoid a repeat.
Conclusion
The interest in nuclear energy is experiencing a resurgence in the United States due to the growing number of data centers. These data centers, needed for artificial intelligence, are expected to consume up to 9 percent of the country’s power supply by 2030. The recent sale of a 960-megawatt data center campus near the Susquehanna nuclear plant in northeastern Pennsylvania to Amazon Web Services exemplifies this trend. According to Amazon, “To supplement our wind- and solar-energy projects, which depend on weather conditions to generate energy, we’re also exploring new innovations and technologies, and investing in other sources of clean, carbon-free energy.”
As the demand for non-carbon, reliable energy continues to rise, closed nuclear plants like Three Mile Island may be restarted as tech companies are willing to pay a premium for reliable, carbon-free nuclear power. Diverting existing nuclear plants to support AI growth, however, will still mean that other generating sources–wind, solar and natural gas–will be needed to supply power to other existing and growing demands for electricity.
