A cooling tower at the Constellation Nine Mile Point nuclear power plant in Scriba, New York, USA, on Tuesday, May 9, 2023.
Lauren Petracca | Bloomberg |
In the race to provide clean energy for artificial intelligence, technology companies are increasingly trying to connect data centers directly to nuclear power plants, but this is facing resistance from some utilities because of the potential impact it could have on the power grid.
Data centers, the computer warehouses that run the Internet, now require in some cases a gigawatt or more of electricity, comparable to the average capacity of a nuclear reactor in the United States.
The data centers are critical to the economic competitiveness and national security of the United States as the country competes with adversaries such as China for dominance in the race to develop artificial intelligence, said Joe Dominguez, CEO of Constellation Energywhich operates the largest nuclear fleet in the USA
“When you talk about big [demand] If the energy load wants to use emission-free energy, you're going to get it very close to nuclear power plants,” Dominguez said Tuesday at Constellation's second-quarter earnings call. Baltimore-based Constellation operates 21 of the 93 reactors in the United States.
Constellation shares have risen 62% this year, making them the sixth-best performing stock in the S&P 500, as investors place greater value on the company's nuclear power capacity, which needs to accommodate growth in the data center space. Vistra Corp., based outside Dallas and owner of six reactors, has doubled this year and is the second best performing stock in the S&P after AI chipmaker NVIDIA.
Technology companies are building their data centers at a time when electricity supplies are becoming increasingly constrained due to the closure of coal-fired power plants and demand is rising due to the expansion of domestic manufacturing and the electrification of vehicles.
The largest grid operator in the US, PJM Interconnection, warned in late July that supply and demand for electricity were tightening as construction of new power generation lagged behind demand. PJM covers 13 states, mainly in the Mid-Atlantic region, including the world's largest data center in northern Virginia.
Constellation's Dominguez argued that connecting data centers directly to nuclear power plants (known in the industry as co-location) is the fastest and most cost-effective way to support data center expansion without burdening consumers with the costs of building new transmission lines.
“The idea that you could collect enough power anywhere on the grid to run a gigawatt data center is, frankly, ridiculous to me – that you could do that anywhere that doesn't take decades,” Dominguez said. “That's an enormous amount of energy that you have to get out there and concentrate.”
Amazon's nuclear deal
But the location of data centers near nuclear power plants is already controversial.
In March Amazon Web Services purchased a data center operated by the 41-year-old Susquehanna Nuclear Power Plant in Pennsylvania from Talk about energy for 650 million dollars. But the agreement to sell electricity from the nuclear power plant directly to the AWS data center is already facing resistance from energy suppliers American electricity And Exelonwho have filed complaints with the Federal Energy Regulatory Commission (FERC).
AEP and Exelon argue that the Amazon-Talen deal sets a precedent that will result in less available power in the PJM grid area as resources are “diverted to serve loads that use and benefit from – but do not pay for – the transmission grid.”
“This will harm existing customers,” the utilities told FERC in a letter in June. Talen Energy dismissed the objections as “demonstrably false” and accused the utilities of stifling innovation.
“The rapid emergence of artificial intelligence and data centers has fundamentally changed electricity demand and is leading to an inflection point for the energy industry,” Talen said in a statement in June. “Talen's co-location agreement with AWS provides a solution to this new demand, within a timeframe that serves the customer quickly.”
FERC has requested additional information regarding the service agreement between Talen and AWS. The regulator will hold a conference in the autumn to discuss issues related to the direct connection of large electricity loads to power plants.
“This is really a great opportunity for an exchange between the stakeholders and the commissioners in an informal setting like a conference, as opposed to a court case,” said Kathleen Barrón, chief strategy officer at Constellation, during the energy company's recent conference call ahead to the fall FERC meeting.
Purchasing nuclear power
Constellation and Vistra supported the AWS-Talen agreement in their filings with FERC, and each of their CEOs said on this week's quarterly earnings calls that co-location and traditional grid connectivity will be necessary to meet demand.
Barrón told CNBC that Constellation has “received interest from many technology companies” about potentially hosting a data center at one of its locations.
Vistra is currently having numerous discussions with customers about colocation and is “carefully evaluating a number of locations,” CEO Jim Burke said Thursday. Given the dispute in the PJM region over colocation, data center developers may take a closer look at Texas, which operates its own grid called ERCOT, Burke said.
“We're seeing some interest in Comanche Peak,” Burke told analysts at the company's second-quarter earnings call, referring to one of Vistra's nuclear power plants. Comanche Peak, about 50 miles outside Fort Worth, Texas, has two reactors with a capacity of 2.4 gigawatts, Vistra said, which could power 1.2 million homes under normal conditions and 480,000 homes during peak periods.
And Dominion Energy has indicated it is open to connecting a data center to the Millstone Nuclear Power Plant in Connecticut. The Dominion service area includes Northern Virginia, the epicenter of the data center boom.
“We continue to evaluate this option,” CEO Robert Blue said during Dominion's second-quarter earnings call. “We recognize that any co-location option must make sense for us, our potential counterparties and Connecticut shareholders.”
Kelly Trice, president of Holtec International, a private nuclear company based in Florida, said the U.S. needs to think more about balancing the power needs of data centers with those of all consumers. Holtec is working to restart the Palisades nuclear power plant in Michigan and has also had discussions with technology companies about nuclear power.
“Basically, the hyperscalers and the data centers can take over all the power and the consumer gets none of it if we're not careful,” Trice told CNBC. “The balance, where consumers actually get what they're entitled to, is a factor.”
“The United States has not yet really begun to wrestle [with] “It's not clear yet,” Trice said. “But I think we're close.”