Big Tech contracts inject life into new nuclear

Reuters

19-02-2025

Summary
Nuclear developers are benefitting from long-term power purchase agreements (PPAs) with Big Tech companies racing to secure 24/7 clean energy supply for large data centers.
February 19 - Big Tech interest is helping to restart mothballed reactors and driving investment in small modular reactors (SMRs). Constellation Energy plans to restart the 837 MW Three Mile Island Unit 1, which had been idle for five years, to support a 20-year PPA with Microsoft announced in September to supply data centers in the mid-Atlantic region.
Amazon Web Services and Talen Energy Corporation signed a 10-year PPA in March 2024 to take power in 120 MW increments from the latter's 2.5 GW Susquehanna nuclear plant in Pennsylvania to supply a planned 960 MW data center campus.
Amazon is also among a consortium investing $500 million in X-energy with the aim of installing 5 GW of SMR capacity in the U.S. by 2039. As a first step, Amazon and Energy Northwest will develop four SMRs with combined capacity of 320 MW in Washington State.
In May 2023, Helion Energy agreed a PPA with Microsoft for at least 50 MW from its first fusion power plant, scheduled for completion in Washington State by 2028. Unlike traditional water-cooled fission reactors, fusion has not yet been commercially used for power generation.
U.S. power demand from data centers is forecast to double within five years, rising from 176 TWh in 2023 to between 325 and 580 TWh in 2028, government data shows.
Big Tech companies favour adjacent dedicated power generation to ensure a steady supply of energy around the clock. In October, Google signed an agreement with Kairos Power to develop 500 MW of SMRs close to data centers from 2030.
Some PPAs have flexible terms because of uncertainty over the scale of data center demand and the potential development of new technologies that make AI more energy efficient, several industry sources told Reuters Events.
Including non-binding capacity targets provides 'protection for both parties in case the plant cannot be built on time or if indeed the electricity demand does not end up materializing,' said Tanguy de Bienassis, an Investment and Finance Analyst at the International Energy Agency (IEA).
Impact of the PPAs
Thanks to hefty investments from Big Tech, SMR developers including Oklo, NuScale, X-energy and TerraPower are competing to develop the first U.S. commercial SMRs but the technologies must first be proven through demonstration reactors.
The PPAs show that net zero energy procurement is a strategic priority for large load energy consumers but 'investing in SMRs will involve a higher level of investment risk compared to a PPA offtake for an existing asset,' David Brown, Director, Energy Transition Practice at Wood Mackenzie, told Reuters Events.
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Nuclear supply chains have atrophied because of the lack of new reactor development, Benton Arnett, said Senior Director of Markets and Policy at the Nuclear Energy Institute (NEI).
However, the completion of Vogtle 3 & 4 by Southern Company in Georgia in 2023-24 was a huge step forward in revitalizing these supply chains and 'bringing down the construction risk' for future projects, he said. They were the first new nuclear units in the U.S. for more than 30 years.
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In addition, growing tech industry interest has led to new investments that have also benefitted 'uranium miners, fuel processors and enrichment companies,' Brandon Rakszawski, VP, Director of Product Management at asset manager VanEck, told Reuters Events.
Investment in the nuclear energy ecosystem has increased exponentially, said Rakszawski. 'Assets and net flows into our VanEck Uranium and Nuclear ETF are both up substantially [year-on-year],' he said.
The recent PPAs will have 'a strong signalling effect to the industry and finance community,' as they highlight confidence in the ability of nuclear to supply reliable power to data centers, thereby addressing the offtake risk that can potentially thwart the development of large scale nuclear 'conventional' plants, noted de Bienassis.
Rising tech demand
Typical data centers need 5 to 10 MW but new hyperscale centers to power AI can require more than 100 MW. According to the IEA, data centers account for 2 to 4% of current U.S. electricity demand but this figure surpassed 10% in five states in 2023, according to the Electric Power Research Institute: Virginia (25.6%), Nebraska (11.7%), Oregon (11.4%), Iowa (11.4%) and Wyoming (11.3%).
Given that large tech companies including Microsoft, Google and Amazon have ambitious decarbonization targets, much of this new power will likely come from renewables and nuclear.
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The Department of Energy (DOE) calculates that U.S. nuclear capacity could triple to 300 GW by 2050, driven by Big Tech load growth, coupled with a desire for 24/7 low-carbon power. However, future sector demand is uncertain because of rapid efficiency gains.
Developers would benefit from aligning the length of PPAs with the life of nuclear assets to improve project economics, while variable pricing would help project owners and offtakers share early mover risk, said Arnett.
Change of government
President Trump, who took office on January 20, is yet to officially unveil his energy strategy but has instructed the DOE to review support for nuclear energy within 90 days of his inauguration.
New Energy Secretary Chris Wright – a former Oklo board member – has highlighted the benefits of SMRs, while Trump himself has voiced concern over the cost of large, traditional reactors.
Private financial institutions consider government support a crucial factor in deciding whether to finance nuclear projects, de Bienassis told Reuters Events.
Government backing could ensure that mothballed reactors are brought back online within five years but developing new reactors will take at least a decade, said Brown.
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Although it is unclear how many mothballed reactors could be brought back online in the short term, according to the Center for Climate and Energy Solutions, 13 reactors were retired over 2013-2022 with combined capacity of 10.5 GW.
'Now is a golden window of opportunity for policymakers to leverage the immense interest in advanced reactors that we are seeing from the private sector,' said Arnett.
As more PPAs come to fruition, they provide 'additional confidence that this nuclear resurgence we are seeing is real,' he said.