In recent months, it hasn’t been just the announcement of breakthrough new generative AI models from big tech companies like Microsoft, OpenAI, Google, Amazon, and Anthropic. We’ve also heard that many of these big tech companies that have already spent hundreds of billions on United States data center infrastructure in recent years are now aggressively pursuing nuclear power to scale AI compute demand.
Why nuclear power, and why now?
Suppose big tech can’t secure enough power to sustain AI’s growth over the next decade (a valid concern). In that case, the U.S. will fall behind international markets and competition with superior energy grids.
Indeed, according to CNBC, energy consumption in the U.S. is expected to grow by 20% within the next ten years. Other estimates from Goldman Sachs anticipate 40% of energy consumption growth in the same period. Nuclear power is only 20% of the U.S.’s total grid today.
Nuclear power, considered too environmentally controversial and uneconomical even five years ago, has suddenly become en vogue as existing U.S. energy grids can’t sustain AI’s escalating power demands. It also marks a strategic shift in U.S. energy independence, as increasing and unstable oil and gas energy prices have become too volatile amidst international wars and conflicts across Russia and the Middle East.
Nuclear energy is a carbon-free electricity resource that can run at a steady output 24 hours a day, whereas wind and solar energy are both inherently variable.
Financial Times10x. It takes 10 times the amount of energy to serve a generative AI chat interaction vs. a traditional Google search.
The rise of Small Modular Reactors (SMRs)
Small modular reactors (SMRs) are smaller, more efficient, and easier to build than the large nuclear power plants of decades ago. This new type of nuclear reactor is gaining attention for its ability to provide round-the-clock power with minimal emissions–crucial to providing efficient, adequate power production and an environmentally safe and scalable approach.
SMRs are typically capable of providing 300 MW of nuclear power, far exceeding existing energy grid production. However, SMRs will only partially answer the energy demands of big tech data centers with nuclear power delivery and modernization in the United States.
Traditional-scale commercial nuclear power plant construction–and existing plant refurbishing–will be required to meet long-term U.S. nuclear power and clean energy targets. A typical large nuclear power plant can produce 1,000 MW of nuclear power, compared to 300 MW from an SMR.
Constellation Energy and Microsoft enter deal to re-open Three Mile Island
Utility companies across the U.S. also benefit from the renaissance in nuclear energy. Constellation Energy and Microsoft came together on September 20, 2024, announcing on an investor call that they would re-open its two-reactor Three Mile Island Unit 1 to restart its power plant there. This would provide a 20-year power purchase agreement between Microsoft and Constellation Energy and give Microsoft 835 MW of power.
The deal is worth $1.6 billion and will produce enough energy to power the equivalent of 700 homes. All energy produced will power Microsoft’s data centers, including its GovCloud regions. Unit 1 will be renamed the Crane Clean Energy Center as part of the deal.
The adjacent but separate Unit 2 reactor involved in the 1979 site disaster will remain closed. Ironically, the two-reactor Unit 1 that Constellation Energy and Microsoft agreed to reopen was just shuttered in 2019 due to financial reasons.
The Financial Times reports that Microsoft agreed to a power purchase agreement of $110-115 per MW per hour, approximately double the terms of a typical power purchase agreement. The agreement gives the utility company confidence to invest in a specific power source.
Three Mile Island anticipates a 2028 reopening
Three Mile Island is an attractive choice for Constellation Energy and Microsoft to leverage, as it’s significantly cheaper to restart and refurbish an existing power plant than to construct a new one. However, restarting the plant to full operation will still require enormous engineering. According to the Financial Times, which received a walkthrough at Unit 1, over 16,000 pipes alone are within the reactors and must all be inspected.
Nuclear energy is one of the most highly regulated industries in the world. To satisfy all safety benchmarks, countless inspections and audits will be required before fully restoring Unit 1.
Between refurbishing and audits, this can easily delay the intended plant restart date of 2028. Pennsylvania governor Josh Shapiro has asked for this deal and overall plant reopening “to be fast-tracked” and re-connected to the grid.
Amazon, Google also enter nuclear power deals
Not to be outdone by Microsoft, other big tech members such as Amazon and Google have entered into their own nuclear power deals since Microsoft’s September 2024 news splash.
Amazon has agreed to a $650 million deal with Talen Energy, who has a 90% ownership stake in the Susquehanna Nuclear Power Plant in Northeastern Pennsylvania. The deal allows Amazon to consume approximately 480 and 960 MW of capacity from the 2,500-megawatt plant.
In October 2024, Google announced it entered an agreement to purchase nuclear energy from multiple small modular reactors to be developed by Kairos Power.
The announcement states, “The initial phase of work is intended to bring Kairos Power’s first SMR online quickly and safely by 2030, followed by additional reactor deployments through 2035. Overall, this deal will enable up to 500 MW of new 24/7 carbon-free power to U.S. electricity grids and help more communities benefit from clean and affordable nuclear power.”
While the new demand for nuclear power and restarting plants is undoubtedly controversial, billions of dollars from big tech, energy companies, and taxpayer dollars seem to point towards an inevitable revival. The x-factor may not be if, but when, Microsoft and Constellation Energy reopen Unit 1 amidst an ambitious 2028 deadline.
