US clean power investors see strong outlook despite gas plant rush
The rapid uptake of AI and cloud computing is rapidly increasing U.S. electricity demand and raising the need for 24/7 power supply solutions.
Solar, wind and battery storage have dominated new power installations but data centers need a steady supply of power both day and night, requiring either dispatchable power plants or a combination of generation technologies. The growing use of electric vehicles will also require more overnight power supply as owners take advantage of lower power prices.
Power demand from data centers is predicted to reach 325 to 580 TWh in 2028, compared with 176 TWh in 2023, the U.S. Department of Energy (DOE) said in December. Data centers are representing a growing share of power demand, shifting the overall shape of demand and opening up new opportunities for power generators.
Virginia has the greatest concentration of data centers, hosting 536 facilities of which the vast majority are in a tiny area just west of Washington DC, according to the Data Center Map website. By 2030, data centers will require 50% of Virginia's power generation, compared with 26% in 2023, the Electric Power Research Institute (EPRI) said.
Solar and wind are the cheapest form of power in many parts of the U.S. but the rising need for 24/7 power has spurred a flurry of new gas-fired power generation projects. In one example, Entergy plans to build its first gas-fired plant in Mississippi for half a century and the 754 MW facility is set to supply Amazon data centers from 2028.
CHART: US planned power generation installations in 2025
For renewable energy developer RWE Clean Energy, the fundamentals of the U.S. market remain unchanged, Andrew Flanagan, CEO of RWE Clean Energy, told Reuters Events. RWE group owns gas-fired capacity in Europe but is yet to invest in U.S. gas plants.
Broad-based demand growth in the coming years will "require the deployment of all available energy resources 'as part of an all-of-the-above energy strategy," Flanagan said.
U.S. power demand is set to grow by at least 1.5 to 2.5% per year over the next 15 years, 'driven by data center demand, the relocation of industry and manufacturing back to the U.S. and broad-based electrification,' he said.
Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025, opens new tab.
In one example, Arizona utility Salt River Project (SRP) aims to double the generating capacity on its power system over the next ten years to meet growing demand in the Phoenix metropolitan area, in part due to new data centers, an SRP spokesperson told Reuters Events.
SRP has committed to cut carbon emissions by 82% by 2035 in its Integrated System Plan, by adding renewables, energy storage and gas-fired capacity, while retiring 1,300 MW of coal capacity.
Dispatchable power
Utilities and developers are seeking to build gas-fired plants to supply data centers as 'firm capacity is valued more than intermittent capacity," Patrick Finn, Senior Analyst, North America Power Markets at Wood Mackenzie, told Reuters Events.
Blackstone Energy Transition Partners announced in January that it would acquire Potomac Energy Center, a 774 MW gas plant in Loudoun County, Virginia to supply local data center requirements. The plant is close to 130 existing data centers.
Virginia utility Dominion Energy recently lowered its renewable energy forecast to 80% of power production within 15 years, down from 95% previously, and the company is now building a new 1,000 MW gas-fired power plant in Chesterfield County.
MAP: Change in US commercial sector power demand by state
Despite the surge in gas plant activity, 'renewables are still a valuable piece of the puzzle' so it makes sense for clean power developers to identify areas with large load growth, Finn said.
The need for 24/7 supply boosts the business case for battery storage, although the deployment of batteries will face tariff and supply chain challenges as most are imported from China or other Asian countries, Tom Atkinson, Portfolio Manager, AXA Investment Managers, told Reuters Events.
Many Big Tech companies have ambitious zero carbon goals but several are also looking to develop new nuclear plants as they seek dispatchable power capability.
Anything that provides 'firm and clean capacity would be ideal', including long duration energy storage and nuclear small modular reactors, Finn said.
Deployment speed
While some utilities are seeking gas-fired power capacity, overall the outlook for clean power developers remains positive as solar and wind are faster to develop, have fewer supply chain constraints, and are cheaper than new gas capacity in much of the U.S., Atkinson said.
Tech groups are seeking fast deployment of power resources to meet soaring AI demand and solar and wind can be built faster than gas-fired plants. Some companies are even partnering with power developers to co-locate power generation and data centers and speed up development. To minimise development times, solar and wind developers must find suitable land areas and navigate bottlenecks in grid capacity that can delay grid connections. A lack of skilled labour can also be a challenge.
Surging demand from tech groups is accelerating clean power activity - download our exclusive report, opens new tab.
President Donald Trump has injected fresh uncertainty into the clean energy sector by freezing federal funds pending a review and issuing policies that promote fossil fuel development, but years of cost reductions in clean power have bolstered the underlying fundamentals. Trump has also thrown his support behind a $500 billion pledge by tech groups and investors to develop infrastructure for AI facilities.
Meanwhile, a lot of clean power deployment is being driven at state level, through Renewable Portfolio Standards (RPS) that require energy providers to supply a stated minimum of zero carbon power.
The RPS directives 'remain binding and instruct the technology mix of new capacity," Atkinson said.
"We do not think they are vulnerable to federally led change," he said.
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Reuters
13-05-2025
- Reuters
US nuclear builders tight for time in race to power AI
May 13 - The selection of 16 sites located on Department of Energy (DOE) lands for the rapid construction of data centers and energy generation underlines the rising importance of AI demand for the U.S. energy sector. The sites offer "in-place energy infrastructure with the ability to fast-track permitting for new energy generation such as nuclear," the DOE said in a statement. Renewable energy can be deployed rapidly and energy storage can offer more flexible dispatch capabilities than solar and wind alone, but data center owners are keen to secure power day and night and the Trump administration has thrown its support behind fossil fuels and the burgeoning advanced nuclear sector. Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025. Several of the DOE sites already host nuclear facilities and could be strong contenders for co-location of data centers and new nuclear generation. However, the exact details of land lease terms, environmental review requirements, and conditions for potential public-private partnerships (PPP) will be crucial to ensure plants can be developed cost-effectively, energy experts told Reuters Events. Importantly, the DOE has set a target of operating the data centers by the end of 2027 and it is unlikely new nuclear power plants can be built by then. The DOE held a request for information (RFI) from developers until May 7 and cited small nuclear reactors (SMRs), enhanced geothermal systems, fuel cells, energy storage and carbon capture as innovative energy approaches that could be installed at the sites. These technologies align with the administration's shift in energy policy away from a focus on renewables to prioritizing more reliable and resilient power sources, said Sidney Fowler, energy attorney at Pillsbury Winthrop Shaw Pittman law firm in Washington, DC. The Solar Energy Industries Association (SEIA) believes solar farms coupled with storage can be deployed cost-effectively and more quickly than other technologies, due to a well-established supply chain and a track record in providing reliable power to big techs and data centers. Meta, Amazon, Google, and Apple are the top four corporate solar users in the U.S., according to a SEIA report released in November 2024. CHART: US planned power generation installations in 2025 The DOE is yet to determine the types and sizes of power generation at the sites as well as the details about potential PPPs. "We are eager to hear ideas from industry, academia, communities and regional consortia. This will build on the long history of partnership between DOE's National Laboratories and the private sector," a DOE spokesperson told Reuters Events. Nuclear sites Expedited permitting on the DOE sites could help developers minimize timelines, especially in areas where site characterization works have already been done, Fowler said. Shorter timelines help lower development costs. As well offering existing grid connections, some of the sites are away from highly populated areas, reducing project risks. "Some of the sites have a lot of space where a data center or a power plant could easily locate without running a risk of community opposition," said Mary Anne Sullivan, senior counsel at Hogan Lovells law firm in Washington, DC. Sites selected by the DOE include the Idaho National Laboratory, where the department has performed extensive site characterization and permitting activities for new nuclear reactors. The site is located in a region supportive of atomic energy and 'offers ample opportunity for development and scaling,' it said. Also on the list is the Pacific Northwest laboratory in Richland, Washington, located in a region with a growing presence of data centers and planned nuclear deployment. In October 2024, Amazon announced a partnership with Energy Northwest to develop an SMR project near the Columbia Generating Station nuclear power plant. Elsewhere, the DOE's Oak Ridge National Laboratory site in Tennessee is located five miles from Tennessee Valley Authority's proposed Clinch River Small Modular Reactor (SMR) project and has readily available water resources, which could attract more nuclear development in the future. CHART: Small modular reactor projects by country Supportive host communities with a long-standing nuclear history, along with high security standards at some of the sites, could favor nuclear power development, according to the Nuclear Energy Institute (NEI). "There is already a natural inclination for data centers to seek nuclear power. Bringing, now, DOE land and encouraging that matching is going to be a catalyst to speed up (deployment) but also lead to new projects being pursued," said Marc Nichol, executive director of New Nuclear at NEI. Timing tight While the DOE is clearly keen to support new nuclear, the initial target timelines it has set out for the sites may favour gas-fired plants or combinations of renewable energy technologies. DOE wants the construction of AI and associated infrastructure to start later this year so the facilities become operational by the end of 2027. For exclusive insights on the energy transition, sign up to our newsletter. Solar and storage are the 'fastest and cheapest forms of energy to develop and deploy' and are the best way to meet the demand for colocated generation, Ben Norris, vice president of Regulatory Affairs for the SEIA, told Reuters Events. Developing a utility-scale solar project typically takes 1.4 years, and batteries take 1.7 years, SEIA said in a letter sent to the DOE in response to the RFI. In comparison, large conventional nuclear power plants take years to develop and build and many SMRs under development are based on new designs and are not expected to be approved and ready for commercial use until the end of the decade. In a bid to accelerate deployment, the DOE recently reissued a tender for $900 million of federal funding to help de-risk the construction of the first SMR reactors based on existing light water reactor (LWR) technologies and announced it would supply high-assay low-enriched uranium (HALEU) to five companies that are developing SMRs based on a range of technologies. Even if SMRs are licensed earlier than 2030, a lack of domestic fuel enrichment capabilities will limit deployment. Nuclear is more likely to play a larger role in serving rising AI demand from the 2030s onwards, experts say. "The only bottleneck that is going to hold the U.S. back in terms of global AI leadership and dominance is speed to firm, reliable power," Hilary Lane, senior director for Strategic Partnerships at the Nuclear Energy Institute (NEI), said. "So given that this is the most important factor here, time and schedule, I can see them looking at gas as an option that could be coming online fairly quickly." "To roll out many reactor systems that could deliver power at that timeframe is a bit unfeasible," said James Walker, chief executive officer at Nano Nuclear Energy, a company developing microreactors. "In the future, nuclear will certainly be the bulk supplier of power for tech centers, but that will be post-2030."
Reuters
02-05-2025
- Reuters
Federal funding for first small reactors survives cuts
Summary The U.S. Department of Energy (DOE) has reissued a tender for $900 million in federal funding to help de-risk SMR deployment without any requirements for community engagement but developers should still seek community support, experts told Reuters Events. April 28 - While the fate of DOE funding for renewable energy projects remains uncertain under President Donald Trump, the reissue of a nuclear tender on March 24 indicates that the new administration will back the rollout of advanced reactor technology. The solicitation is part of federal efforts to unleash a " nuclear energy renaissance ' to meet rising power demand from large load customers, including data centers, the DOE said. The tender includes $800 million for up to two consortia of 'utility, reactor vendor, constructor, and end-users/off-takers' to deploy a first Generation III+ light-water small modular reactor, or Gen III+ SMR for short. Three groups with projects in Arizona, New York and Tennessee that previously expressed interest in this funding are expected to submit new proposals, industry sources told Reuters Events. The remaining $100 million is to support the development chain for Gen III+ SMRs such as Westinghouse's AP300, NuScale's SMR 3 and Holtec's SMR-300. The DOE dropped mandatory community benefit plans from the evaluation criteria, in line with efforts by the Trump administration to accelerate federal approvals of energy projects. This decision will allow the DOE to 'streamline the award process' noted ClearPath, a conservative clean energy non-profit. But lawyers and executives told Reuters Events that SMR companies will continue to seek support among local communities. Nuclear project developers 'recognise that to be successful they will want to address local needs such as workforce and community planning whether or not a specific community benefits plan is required,' said Joseph Greenberg, Senior Policy Advisor at law firm Holland and Knight. Join us at Reuters Events SMR and Advanced Reactor 2025, and network with over 600 utilities, developers, financiers, technology suppliers and regulators. Most near term deployment, including by the three consortia that are expected to apply, will likely take place at current or former nuclear sites where communities already know the benefits of nuclear, noted Patrick O'Brien, Director, Government Affairs and Communications at Holtec International. 'The reality is that [SMR projects] should already have support from the area,' O'Brien told Reuters Events. 'A responsible developer will work with the local community to ensure success' and Holtec already has strong local support for its plan to build two SMR-300s at the Palisades nuclear plant in Michigan, O'Brien said. Expected bids Applicants in the original October 2024 solicitation must resubmit their proposals, while new bidders are also welcome. Applications close on April 23, giving interested parties just a month to prepare proposals, in comparison with three months first time around. CHART: Small modular reactor projects by country Arizona's bid is led by Arizona Public Service (APS), Salt River Project and Tucson Electric Power, who are assessing potential sites, such as retiring coal plants, for SMR development. They also appear to have state backing, as the Arizona Legislature is considering waiving environmental reviews for SMR projects located near data centers or existing power plants. An APS spokesperson said they would continue to work with local communities. Strategies to overcome cost hurdles for new nuclear - download our webinar. The second group is utility Constellation Energy backed by the New York State Energy Research and Development Authority. They aim to develop advanced reactors at the Nine Mile Point Clean Energy Center in Oswego, New York. Finally, Tennessee Valley Authority (TVA) is leading a coalition working to deploy the GE Hitachi BWRX-300 SMR, alongside GE Hitachi, Bechtel, BWX Technologies, Duke Energy, Sargent and Lundy and others. TVA has an early site permit from the Nuclear Regulatory Commission for the construction of SMRs at its Clinch River Nuclear Site in Tennessee, where the DOE grant could help finance the first of four SMRs. It is currently completing the Construction Permit Application and Draft Supplemental Environmental Impact Statement. If awarded, the funding would bring forward the project's commercial operation by two years to 2031 and help establish a domestic supply chain 'that can be exported to our allies,' TVA spokesperson Scott Fiedler told Reuters Events. 'TVA can help companies that are a part of nuclear energy engineering, licensing, and infrastructure locate, invest and bring jobs to the Tennessee Valley,' Fiedler said. TVA also plans to deploy BWRX-300 technology in Canada by 2029 via a partnership with Ontario Power Generation. Consortium development The tender's focus on consortia can help de-risk SMR deployment by 'bringing together a more comprehensive team to help manage and deliver the project' that can capitalise on each member's resources, skills and expertise, Jill McWhirter, Partner at law firm King and Spalding told Reuters Events. This may also make SMR projects more attractive to investors 'as they may be seen as increasing the likelihood of success of deployment and execution,' said McWhirter, who co-leads her firm's co-Nuclear Working Group. For exclusive nuclear insights, sign up to our newsletter. A preference for a wide-ranging consortium is not uncommon for DOE-backed research, development and demonstration projects, as 'it helps to strengthen projects and align the supply chain,' Greenberg told Reuters Events. It also helps to de-risk projects through commitments from each of the partners and 'could help to lower costs by more effectively reducing project risks,' Greenberg said. Partnering with SMR developers, their major industrial customers, and hyperscalers or other financial partners 'will be part of the business model moving forward,' said Fiedler.
Reuters
30-04-2025
- Reuters
US carbon capture storage hit by inflation, Trump
Summary Investment in large U.S. carbon capture storage facilities has been dented by inflation and Trump's spending freeze, impeding greener pathways for cement and other industries. April 30 - Carbon capture utilisation and storage (CCUS) is seen as a key tool to reduce carbon emissions from industrial operations and power plants, but making the leap to larger commercial projects is proving challenging. CCUS allows CO2 to be captured from burning fossil fuels and either stored or utilised in other industrial processes. Carbon capture technology is particularly useful in hard-to-abate sectors, such as cement, steel and chemical production. Tax credits introduced by the Biden administration helped to spur early projects but the future of support under President Donald Trump is uncertain. CCUS must be widely deployed at scale to become more economical and larger commercial projects are few and far between. Most operational CCUS projects are based on enhanced oil recovery in the oil industry. CHART: Sources of US CO2 emissions in 2022 While some customers are prepared to pay a premium for decarbonised products, CCUS requires large investments and attracting investors is difficult. Many companies have funded first of a kind projects from their own balance sheets, a spokesperson for energy technology firm Baker Hughes told Reuters Events. 'There is an established investment infrastructure and fundraising capability for traditional oil and gas and LNG projects, but for CCUS, clean power and other new technologies — it is far more challenging,' the spokesperson said. 'For unproven technology at scale, external funding is simply not there except for in very rare circumstances.' Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025. Soaring power demand for AI and data centers may offer some additional pathways for CCUS projects. Last month, Baker Hughes signed a partnership with Frontier Infrastructure to develop integrated CCUS, gas-fired power and data center projects across the United States. "By integrating gas-fired energy with the potential for permanent carbon storage, we are creating a direct, reliable power solution tailored to evolving industrial needs," Frontier CEO Robby Rockey said in a statement. Tax credits The Biden administration boosted investment in CCUS projects by issuing 45Q tax credits and direct grants to encourage investment. The credits offer $85 per ton of CO2 sequestered providing wage and apprenticeship standards are met and they spurred the announcement of more than 270 projects that "span the carbon management value chain" and are at different levels of technology readiness, Christian Flinn, Public Policy Manager for the Carbon Capture Coalition, told Reuters Events. However, inflation has eroded the value of the tax credits and pushed up project prices. Developers face roughly 30% higher capital costs due to post-pandemic inflation, high interest rates and permitting difficulties, Howard Herzog, Senior Research Engineer with the MIT Energy Initiative, said. 'The optimism that the Bipartisan Infrastructure Bill and the Inflation Reduction Act generated is all but gone,' he said. Credits alone do not offer enough support for many projects, including most of the 90 U.S. cement plants in operation, according to Peter Findlay, Director, CCUS Economics at Wood Mackenzie. Wood Mackenzie forecasts U.S. CCUS capacity will double to 104 million tonnes a year by 2034. 'Increased and more certain incentives to decarbonise would spur this number higher," Findlay said. Funding unclear The Biden administration's Infrastructure Investments and Jobs Act has already spurred $1.7 billion of federal and private investment in CCUS projects, said Flinn. The act provides funding for CCUS power generation and industrial demonstration projects, CO2 pipelines and four regional Direct Air Capture Hubs. In December 2024, the Department of Energy (DOE) opened applications for $750 million of funding for commercial scale projects at one coal-fired plant or two industrial facilities; $450 million for large-scale CCUS pilot projects; and $100m for the design of CO2 transport and storage infrastructure. DOE said it had begun negotiations with Calpine over part financing the addition of 2 million tonnes a year CCUS capacity at its 896 MW gas combined heat and power facility in Baytown, Texas. However, the fate of the support announced in December is uncertain as a result of the Trump administration's spending review. For exclusive insights on the energy transition, sign up to our newsletter. State initiatives can also drive investment, such as California's low carbon fuel standard, and pressure on large companies by shareholders also plays a role, Herzog noted. The Trump administration may opt to keep the 45Q credit as many CCUS projects are in Republican states and the financing required is relatively small, Findlay said. DOE grant programs may be more at risk, he warned. Cement leaders CCUS is playing a growing role in decarbonising the global cement industry. The technology is essential for the cement industry to meet net zero, a spokesperson for German multinational Heidelberg Materials told Reuters Events. CCUS could account for 36% of global carbon reduction towards net zero carbon concrete by 2050, according to a roadmap set out by the Global Cement and Concrete Association. Heidelberg Materials has proposed a CCUS project at its Mitchell cement plant in Indiana that would supply 2 million tonnes of CO2 a year for storage or use from 2030. Test well drilling began in January with $8.9 million funding from the DOE's CarbonSAFE project. Heidelberg will open its first large scale CCUS facility this year at its Brevik plant in Norway in Northern Europe. The project will be able to capture 400,000 tonnes/year of carbon and was made possible by strong government support, the availability of co-funding and social acceptance for CCUS technology in Norway, the company spokesperson noted. The public sector plays an important role 'in ramping up green markets and accelerating the shift to climate-friendly products by adapting its procurement procedures," the spokesperson said. U.S. federal legislation over the past decade laid the groundwork for CCUS deployment but this must 'mark the beginning, not the end, of necessary efforts to build the portfolio of available federal policies for carbon management technology deployment," Flinn said.
