Microsoft made headlines last week when it announced it had signed a deal with Constellation Energy to restart the Three Mile Island nuclear reactor to meet surging power demand for its data centers, bucking the decline that is seen as the end of the power source.
Over the past decade, the United States has retired seven nuclear reactors and put only two new ones online. Meanwhile, the number of data centers has exploded, with more than 10,000 worldwide, half of them in the United States. And as cloud computing becomes more widespread, power industry research institute EPRI predicts that energy demand in this sector will grow 29-166% by 2030.
Currently, data centers consume about 4% of electricity in the U.S. In 10 years, as overall demand increases, data centers may consume 9%. According to EPRI, hyperscale data centers operated by Microsoft, Google, and Amazon, and relied on by startups like OpenAI and Anthropic, account for 60% to 70% of all data center energy use.
The growth of cloud computing and AI poses particular challenges for companies like Microsoft, which has ambitions to become carbon neutral by 2030. The company's carbon footprint has grown about 40% over the past four years, mostly due to the expansion of its data center operations. Google's carbon footprint has also grown about 48% over the past five years. (Amazon says all of its data center energy usage is covered by an equal amount of renewable electricity.)
This has companies turning to nuclear power as a way to balance rapid datacenter growth with their commitment to reaching net zero. In that sense, it's easy to see why nuclear power is attractive: fission reactors can run for years without interruption, operating at full capacity more than 90% of the time. Maintenance outages are often planned months or years in advance, giving datacenters plenty of time to prepare. It's no wonder Microsoft signed a 20-year deal with Constellation.
In addition to this new deal, Microsoft also invested in a Series A round for Rust Energy, a company planning to build small modular nuclear reactors.
Not far from Three Mile Island, Amazon recently purchased a hyperscale data center directly connected to a nuclear power plant and is hiring nuclear engineers to help AWS develop and acquire nuclear power.
Investors with ties to big tech companies are also investing: Bill Gates co-founded TerraPower and has personally invested more than $1 billion in the company, as has former Microsoft CTO Nathan Myervold through his Intellectual Ventures, and Sam Altman, who backed small modular reactor startup Oklo before it merged with Special Acquisition Company.
But Microsoft's deal with Constellation suggests the company is trying to avoid risk: The rapid growth of its data centers may have forced it to secure power sooner than expected, or the company may have realized that the current wave of nuclear startups won't be producing power anytime soon.
The latter isn't surprising, as nuclear reactors are not necessarily simple, and many startups are still relatively young and have only produced plans or concept drawings.
But even more mature startups have stumbled: Two years ago, the Nuclear Regulatory Commission rejected Oklo's application to build a reactor for the Idaho Department of Energy, and last year the Air Force revoked a $100 million cost-plus contract. Rival NuScale Power, another nuclear fission startup that went into a SPAC, lost a major contract in 2023.
Even if fission startups could overcome the technical and regulatory hurdles, they would still have to find a place to build them. I would argue that that remains the biggest challenge. It’s no secret that nuclear power has an image problem. How many of us cringed a little when Microsoft announced it was going to restart Three Mile Island, even though the reactor in question had been operational as recently as 2019? And while a majority of Americans currently support nuclear power, the technology is less readily accepted than wind or solar. Moreover, that support may evaporate once concrete plans emerge. People may like nuclear power in the abstract, but what about in their own backyard?
Meanwhile, the cost of renewable electricity is becoming increasingly attractive, even when you add in the cost of batteries that enable 24/7 operation.
In the short term, restarting old nuclear plants could help technology companies meet growing electricity demands while minimizing their impact on the climate. But there are only a limited number of idle nuclear plants waiting for a savior. Cloud computing and AI companies will eventually need alternative sources of power. Now is the time to start looking.