With two separate announcements this year that a nuclear power plant owner has agreed to supply a data center with dedicated power, it begs the question: what do data center operators see in nuclear power?
Last month, Constellation Energy announced a 20-year power purchase agreement (PPA) to provide electricity to Microsoft data centers from the Unit 1 reactor at the Three Mile Island nuclear power plant in Pennsylvania. In March, Amazon Web Services (AWS) signed a contract for 960 MW of capacity from Talen Energy’s Susquehanna nuclear power plant in Pennsylvania. Both plants are in the PJM transmission organization’s territory.
The U.S. Energy Information Administration (EIA) conducted an analysis of the relationship between data centers and nuclear power plants, examining why the power source seems particularly enticing to data centers.
Although historically costly to build, nuclear power plants usually generate power at relatively low operating costs, with a single reactor generally having a capacity of 800 MW or more. Nuclear power plants also produce electricity without directly emitting carbon dioxide, a consideration for technology firms investing in energy-intensive data centers that are trying to meet self-imposed emissions reduction goals.
Additionally, data center electricity demand doesn’t fluctuate during the day in the same way as demand from residences or many other businesses. Instead, data center operators typically require a consistent and steady supply of electricity at all hours. Likewise, nuclear power plants operate continuously, as they have difficulty ramping up and down to match variable demand.
The consistent generation from nuclear power plants will ensure that a data center has access to sufficient electricity around-the-clock, while also providing access to a large source of CO2 emission-free power, EIA said.
However, EIA cautioned about reading too much into the recent power purchase agreements. Although the two agreements may underscore that data center operators are in search of large sources of emissions-free electricity, future electricity demand from data centers is subject to several uncertainties, including how much data center capacity will be built, how long it will take each data center to reach its peak demand capacity, and how energy efficiency will improve as data center technology and design evolve, EIA said.
EIA argues the PPA between Talen and AWS partly reflects this uncertainty. Rather than immediately taking on the fully contracted 960 MW from the Susquehanna plant, AWS will increase its share of capacity in 120-MW increments over multiple years. The company also has a one-time option to cap its commitment at 480 MW.
Typically, requests for electricity capacity by data center owners do not obligate the owner to use the full capacity. The PPAs signed by generators and purchasers often specify the amount of potential peak demand capacity required but not the total energy to be used.
When a data center is directly connected to a generating source, as has been proposed in the agreement between AWS and Susquehanna, it can receive electricity directly from the power plant instead of through the larger transmission network. Proponents of co-locating a data center at the site of a power plant argue doing so can lower overall grid costs by having increases in demand directly offset by generation sources. At the same time, concerns have been raised, especially by electric distribution companies, about co-location of demand and generation potentially avoiding fees to cover costs to maintain the electric grid.
Susquehanna Unit 1 has been in operation since 1983 and delivers about 1,257 MW. Unit 2, which has the same power capacity, was commissioned two years later.
Three Mile Island was shut down in 2019. Owner Exelon decided to end operations after a financial rescue package did not come from Pennsylvania legislators.
According to the International Energy Agency (IEA), electricity consumption from data centers, artificial intelligence (AI) and the cryptocurrency sector could double by 2026. Data centers project to be significant drivers of growth in electricity demand in many regions.
In the U.S. alone, data center demand is expected to reach 35 GW by 2030, up from 17 GW in 2022, McKinsey & Company projects.
