English
Español
عربي
Français
中文
日本語
Soaring power demand for data centers is prompting Big Tech to seek a reliable 24/7 electricity supply from zero-emission sources to keep their green pledges intact. One source in America fits that bill—nuclear power generation.
Some large technology corporations have already secured supplies from nuclear power plants in behind-the-meter agreements. And they are looking for more.
The increased contracting of nuclear power from plants could strain the power grid and jeopardize its reliability at a time when electricity demand in the U.S. is rising – after decades of stagnation – thanks to data centers, manufacturing, and growing electrification, including in transportation.
The technology giants that consume more and more electricity to power AI advancements first turned to renewables for their growing power needs. Big Tech, with its net-zero pledges, prefers to power its AI development centers with solar and wind. But the need to get these data centers built and powered fast often clashes with reality as connecting these resources to the grid could take years.
Then, of course, there is the issue of reliability. And that is why tech giants turn to nuclear power, inadvertently raising additional concerns about the grid's reliability. The development is also laying the foundations for increased natural gas use – America's single-largest power source now – to ensure reliable baseload in a greener grid in which part of one of the zero-emission sources is being diverted to power AI.
Big Tech Seeks Nuclear Power Deals
Amazon Web Services (AWS) signed in March an agreement with Talen Energy Corporation to buy its 960-megawatt Cumulus data center campus in northeast Pennsylvania for $650 million.
Under the deal, Talen will supply direct-connect, carbon-free power to AWS data center campus through fixed-price power commitments and will receive additional revenue from AWS related to sales of carbon-free energy to the grid.
Related: Argentina Prepares to Dump Tons of Lithium on an Oversupplied Market
The data center campus will be directly connected to the Susquehanna nuclear facility, the sixth largest U.S. nuclear facility with dual units and 2.5 GW gross capacity. The units at the power plant were commissioned in 1982 and 1984, licensed through 2042 and 2044, and are now beginning work on additional 20-year extensions, Talen says.
Amazon, for its part, said that it began diversifying in 2024 its clean energy portfolio by procuring nuclear power as an additional source of carbon-free energy.
Now AWS is also close to reaching a deal for electricity supplied directly from a nuclear plant on the East Coast with the biggest owner of U.S. nuclear power plants, Constellation Energy, sources with knowledge of the matter told The Wall Street Journal this week.
Reliability and Ratepayer Cost Issues
The AWS deal in Pennsylvania raised alarms with the state's Consumer Advocate Patrick Cicero, who told the Journal that if "massive consumers of energy kind of get first dibs", this could raise costs to consumers and intensify pressure on grid reliability.
The Amazon-Talen agreement also led to a complaint from Exelon and American Electric Power (AEP) that are protesting the proposal, which, they say, would allow the data center to take advantage of PJM's transmission system without paying for it. Exelon and AEP asked for a hearing at the Federal Energy Regulatory Commission (FERC) to address their concerns.
Talen responded to the objection, saying last week that "Exelon and AEP's protest of the Susquehanna ISA is a misguided attempt to stifle this innovation by interfering with an ISA amendment agreed to and supported by all impacted parties – which Exelon and AEP decidedly are not. The factual recitations in the protest are demonstrably false."
Natural Gas Could Benefit from AI-Driven Data Centers
While utilities and grid operators hash out the details about nuclear-powered data centers, electricity demand in the U.S. is soaring thanks to said data centers and reshoring of manufacturing with the incentives in the Inflation Reduction Act (IRA).
Data centers and electric vehicles are expected to add 290 terawatt-hours (TWh) of new electricity demand in the U.S. by 2030, after total demand had remained relatively stable at around 4,000 TWh since 2010, Rystad Energy said in research last month.
"This growth is a race against time to expand power generation without overwhelming electricity systems to the point of stress," said Rystad Energy analyst Surya Hendry.
ADVERTISEMENT
U.S. power demand is "likely to experience growth not seen in a generation," according to a Goldman Sachs report from April.
U.S. demand for electricity will rise roughly by 2.4% each year by 2030, and around 0.9 percentage points of that figure will be tied to data centers, Goldman Sachs Research estimates.
Goldman Sachs expects data centers will use 8% of U.S. power consumption by 2030, compared with 3% in 2022. Data center power demand is set to jump by 160% by 2030—and to be driven by AI, the investment bank said.
Goldman expects incremental data center power demand to drive about 3.3 billion cubic feet per day (bcf/d) of new natural gas demand by 2030. This estimate assumes gas provides around 60% of the roughly 28.7 GW of total data center power demand expected through the rest of the decade and implies a 10% increase in the amount of gas consumed in the power market compared to today.
"More notably, this represents a ~50% increase vs. our prior growth expectations for power demand for gas - and adds to the broader constructive backdrop for gas demand growth alongside new LNG export capacity, coal plant retirements, and renewables backstopping," Goldman Sachs analysts said.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- U.S. Drivers Could See The Lowest July 4 Gasoline Prices Since 2021
- OPEC’s Oil Production Continues to Rise Despite OPEC+ Pledges
- Talent Shortage Threatens Europe’s Nuclear Renaissance
