Why Tech Companies Are Seeking Nuclear Power for Data Centers

Tech companies are increasingly looking to directly connect data centers to nuclear power plants in a race to secure clean energy to power artificial intelligence, prompting pushback from some utilities over the potential impact on the electric grid.

Data centers, the computer warehouses that handle the Internet, in some cases now require a gigawatt or more of power, comparable to the capacity of an average nuclear reactor in the United States.

Data centers are essential to U.S. economic competitiveness and national security as the country competes with adversaries like China for supremacy in the race to develop artificial intelligence, said Joe Dominguez, CEO of Constellation Energywhich operates the largest nuclear fleet in the United States

“When we talk about greats [demand] cargo that also wants to use zero-emissions energy, you’re going to bring it very close to nuclear power plants,” Dominguez said during Constellation’s second-quarter earnings conference call Tuesday. Baltimore-based Constellation operates 21 of the 93 reactors in the U.S.

Constellation shares have risen 58% this year, the sixth-best performing stock in the S&P 500, as investors place greater value on the company’s nuclear power capacity to accommodate data center growth. Shares of View Corp., based outside Dallas and owning six reactors, has doubled this year, the second-best performing stock in the S&P after the AI ​​chipmaker Nvidia.

Tech companies are building data centers at a time when energy supplies are increasingly constrained by coal-fired power plant retirements and demand is rising due to expanding domestic manufacturing and the electrification of vehicles.

The largest grid operator in the United States, PJM Interconnection, warned in late July that energy supply and demand are tightening as new generation construction lags demand. PJM covers 13 states primarily in the Mid-Atlantic region, including the world’s largest data center hub in Northern Virginia.

Constellation’s Dominguez argued that connecting data centers directly to nuclear power plants, what the industry calls co-location, is the fastest and most cost-effective way to support data center construction without burdening consumers with the costs of building new transmission lines.

“The idea that you can store enough energy somewhere on the grid to power a gigawatt data center is frankly ridiculous to me, that you can do it anywhere that doesn’t start decades in the future,” Dominguez said. “That’s a huge amount of energy to use and try to concentrate.”

But the location of data centers next to nuclear power plants is already controversial.

In March, Amazon Web Services has purchased a data center powered by the 41-year-old Susquehanna nuclear power plant in Pennsylvania Talk about energy for $650 million. But the deal to sell energy directly to the AWS data center from the nuclear plant is already facing opposition from utilities American Electricity AND Exonwho have filed complaints with the Federal Energy Regulatory Commission (FERC).

AEP and Exelon argue that Amazon’s deal with Talen sets a precedent that will result in less energy availability in the PJM grid area, as resources “flee to serve a load that uses and benefits from the transmission system, but does not pay for it.”

“This will hurt existing customers,” the utilities told FERC in a June filing. Talen Energy dismissed the objections as “demonstrably false,” accusing the utilities of stifling innovation.

“The rapid rise of artificial intelligence and data centers has fundamentally changed energy demand and is leading to an inflection point for the energy industry,” Talen said in a June statement. “Talen’s colocation agreement with AWS provides a solution to this new demand, with rapid time to customer service.”

FERC requested more information about Talen’s service agreement with AWS. The regulator will hold a conference this fall to discuss the challenges of connecting large electrical loads directly to power plants.

“This is really a great opportunity for stakeholders and commissioners to interact in an informal setting like a conference, rather than in a litigation setting,” Kathleen Barrón, chief strategy officer at Constellation, said of the utility’s recent earnings conference call, referring to FERC’s fall meeting.

Constellation and Vistra have backed the AWS-Talen deal in their FERC filings; in earnings conference calls this week, both CEOs said that meeting demand will require colocation and traditional grid connectivity.

Barrón told Vscek that Constellation has “seen interest from a lot of” technology companies in co-locating a data center at one of its facilities.

Vistra is having numerous conversations with customers about colocation and is “in due diligence on a number of sites,” CEO Jim Burke said Thursday. With the PJM region wrangling over colocation, data center developers may want to 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 on the company’s second-quarter earnings conference call, referring to one of Vistra’s nuclear plants. Comanche Peak, about 50 miles from Fort Worth, Texas, has two reactors with a capacity of 2.4 gigawatts, enough to power 1.2 million homes under typical conditions and 480,000 homes during peak periods, according to Vistra.

AND Energy Domain has indicated it is willing to connect a data center to the Millstone nuclear power plant in Connecticut. Dominion’s service region includes Northern Virginia, the epicenter of the data center boom.

“We continue to explore this option,” CEO Robert Blue said on Dominion’s second-quarter earnings conference call. “We recognize that any colocation option will have to make sense for us, our potential counterparty and stakeholders in Connecticut.”

Kelly Trice, president of Holtec International, a private nuclear company based in Florida, said the U.S. needs to start thinking more about how to balance the energy needs of data centers with those of all consumers. Holtec is working to restart the Palisades nuclear plant in Michigan and has also had conversations with technology companies about nuclear power.

“Essentially, the hyperscalers and the data centers can take all the power and the consumer gets none of it unless we’re careful,” Trice told Vscek. “So the balance there, where consumers actually get what’s rightfully theirs, is a factor.”

“The United States has not yet begun to fight [with] “It’s not there yet,” Trice said. “But I think we’re getting close.”