Shuttered nuclear plants get a new lease on life thanks to power demands of data centers
Energize Weekly, October 9, 2024
Aging – and even shuttered – nuclear power plants are getting a new lease on life, thanks to the growing demand for electricity from data centers and artificial intelligence.
In March, Amazon Web Services signed a contract with Talen Energy for 960 megawatts (MW) of generation from the merchant power producer’s nuclear-powered Susquehanna Steam Electric Station in Berwick, Pa.
Microsoft data centers and Constellation Energy announced a 20-year power purchase agreement in September to supply data centers with electricity from the 835-MW Unit 1 reactor at the Three Mile Island nuclear power plant near Harrisburg, Pa.
Constellation Energy is seeking a $1.6 billion federal loan guarantee to reopen the closed nuclear plant. On Sept. 30, the U.S. Department of Energy awarded Holtec International a $1.52 loan guarantee to restart its 800-MW Palisades nuclear plant in southwest Michigan.
Data centers and nuclear power are a good pairing, according to the U.S. Energy Information Administration (EIA), because the character of nuclear generation fits with data center needs and goals.
“Data center electricity demand doesn’t fluctuate during the day in the same way as demand from residences or many other businesses,” the EIA said. “Instead, data center operators typically require a consistent and steady supply of electricity at all hours.”
At the same time, while nuclear power plants operate continuously, they have difficulty ramping up and down to match variable demand.
The steady need for electricity year-round makes data center demand “a constant peak that leads to higher overall peak power demand across the grid,” according to a Barclays Investment Bank analysis.
Nuclear power plants also have no carbon dioxide emissions – as coal and natural gas plants do, which make them attractive to technology companies that also have emissions-reduction goals and want to invest in energy-intensive data centers.
Microsoft, for example, is committed to being carbon negative by 2030.
“The consistent generation from nuclear power plants will ensure that a data center has access to sufficient electricity around-the-clock, while also providing access to a large source of CO2 emission-free power,” the EIA said.
The combined benefits can fetch a premium in the market. A Morgan Stanley analysis estimates that Constellation will sell electricity to Microsoft for $98 a megawatt-hour compared to wholesale power market prices of $50 a megawatt-hour. Constellation will also be in line for a federal clean-energy tax credit of about $30 a megawatt-hour.
After decades of flat U.S. electricity demand, the boom in artificial intelligence is expected to almost triple data center electricity needs by 2030, according to Barclays’ research.
Based on an analysis of available disclosures from technology companies, public data center providers and utilities, and data from the EIA, Barclays estimates that data centers currently account for 3.5 percent of U.S. electricity consumption, that could increase to 5.5 percent in 2027 and more than 9 percent by 2030.
“The possibility of hooking data centers up directly to existing nuclear power stations ‘behind the meter’ are being explored, but has raised concerns for other consumers’ power costs, reliability and emissions,” Barclays said.
While nuclear power maybe a good match with data centers, Barclays said that the country’s nuclear fleet is already operating at about 96 percent capacity, and new nuclear reactors “can’t be built fast enough.”
Since 2012, more than a dozen U.S. nuclear plants have been closed, leaving 54 operating plants with 94 reactors. That has led to interest by data centers in corralling existing nuclear capacity and reviving shut plants.
There are, however, challenges in restarting old nuclear plants. Constellation Energy said restarting Three Mile Island Unit 1 will require significant investment at the plant, including upgrades to multiple systems and equipment.
In the Sept. 20 agreement, Constellation said it is aiming to reopen Three Mile Island Unit 1, now called the Crane Clean Energy Center, sometime in 2028.
The U.S. Nuclear Regulatory Commission (NRC) and state and local authorities will need to approve permits for the restart. Safety checks, inspections and reloading nuclear fuel will have to be done.
While the Susquehanna power plant will send its electricity directly to the Amazon data center – a “behind the meter arrangement” – the Constellation plant will also need approval from the PJM Interconnection, the regional grid operator, to connect to the grid.
“Given the lengthy review process for new projects, it is imperative that shovel-ready resources like the Crane Clean Energy Center be allowed to come online as quickly as possible rather than waiting in the [Interconnection] queue as if they were an entirely new development,” Pennsylvania Gov. Josh Shapiro, a Democrat, said in a letter to PJM on Sept. 20.
