There’s a big groundswell of interest in siting nuclear plants near data centers to provide what we’re told is insatiable energy demand for new AI applications.
Does that mean corporate clients will be stepping up to finance a new generation of modular reactors? That would solve the funding problem, which has always landed in the lap of taxpayers or ratepayers.
But no, more likely deep pocketed tech companies will want to buy power from existing reactors, or even rehabilitated older reactors, competing with other demands on an increasingly stressed grid.
Tech companies are planning a wave of new data centers to support artificial intelligence and looking to buy emissions-free electricity directly from nuclear power reactors — potentially driving up utility bills for power customers and undermining the reliability of the nation’s power system.
The spread of power-guzzling data centers is a big reason behind forecasts showing U.S. electricity consumption will surge in the coming years after more than a decade of virtually no growth. That has sent power companies scrambling to secure new electricity production capacity even as they battle severe weather, wildfires and sharp swings in seasonal demand that pose rising risks to the stability of the grid.
Experts warn that if deep-pocketed tech companies — many of which have aggressive net-zero carbon goals — buy up carbon-free electricity from large nuclear baseload power plants and take that power off the grid too quickly, they will exacerbate the reliability risks now facing the broader network.
“While this demand narrative could be oversold, or likely not translate into corresponding supply additions because of infrastructure constraints, there is no denying that demand is increasing for the first time in nearly two decades,” S&P said. “Recognizing the demand surge, power prices in almost all markets are higher,” compared with 2023.
Those higher prices are creating opportunities for nuclear operators to serve data center loads that co-locate nearby. The nuclear facility can book a long-term power purchase agreement with pricing above wholesale market rates, while data centers “will save transmission and distribution grid charges,” S&P said.
Talen Energy’s deal with Amazon Web Services may provide a model for such opportunities, S&P said. Talen constructed a data center near its Susquehanna nuclear energy plant in Pennsylvania and subsequently sold the facility to Amazon, along with a 10-year power supply contract.
“We think it is reasonable to expect that this will be replicated,” S&P said, pointing to Constellation Energy, PSEG Power and Vistra as possible candidates with their own dual-unit sites.
Public Service Enterprise Group is in talks to supply data centers with capacity from the Hope Creek and Salem nuclear power plants in southern New Jersey, President, Chair and CEO Ralph LaRossa said in April.
“We think that nuclear complexes such as the Salem and Hope Creek generation stations are potential candidates. They have adequate interconnection, significant generation redundancies, and are ideally located to provide edge computing near load centers,” S&P said.
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