How AI is reviving the nuclear industry

Lewis Strauss, the first chairman of the US Atomic Energy Commission (played by Robert Downey Jr in the film Oppenheimer) predicted in 1954 that his children would be able to enjoy electricity that was “too cheap to meter”, thanks to advances in nuclear power.

It has not quite worked out that way, but 70 years later nuclear plays a significant part in the global energy mix, generating about 9% of the world’s electricity. And the recent reassessment of the outlook for electricity demand growth, especially in developed economies, has led to a renewed upsurge of interest in nuclear power this year.

A new ‘Pathways to commercial liftoff’ report on advanced nuclear technologies, published by the US Department of Energy on Monday, suggests that the nation’s nuclear generation capacity has the potential to triple from its current 100 gigawatts to 300 GW by 2050.

For Big Tech companies wanting to hit demanding targets for cutting emissions while also securing 24/7 power to keep their data centres running, there are not that many possibilities. Fossil fuels with carbon capture, low-carbon hydrogen, wind and solar with storage, and geothermal energy are the leading options in quite a small set of technologies. Nuclear power is another. All have their different strengths and weaknesses, and no one technology is going to dominate at all times in all places.

As the new possibilities opened up by advances in artificial intelligence drive expectations of a surge in demand for data centre capacity, tech companies have been making moves to secure nuclear power as part of their supply mix.

The first such deal, in March, involved a nuclear plant already in operation. Amazon bought a 960 megawatt data centre campus that is directly powered by the nearby Susquehanna nuclear plant, owned and operated by Talen Energy. Amazon has signed a power purchase agreement (PPA) with Talen, with prices fixed for ten-year periods and volumes that ramp up over the next four years and possibly beyond.

Then this month, Microsoft went a step further, announcing an agreement that will add additional nuclear generation capacity to the grid. It has signed a 20-year PPA with Constellation Energy that will support the restart of Unit 1 at the Three Mile Island plant in Pennsylvania. Unit 2 at the plant was shut down after the famous accident in 1979, but Unit 1 remained in operation until being closed for economic reasons in 2019.

Now it is scheduled to re-enter service in 2028, with the site renamed the Crane Clean Energy Center. Constellation is seeking a license renewal that will allow the plant to remain in operation until at least 2054. NextEra is similarly looking at the possibility of restarting its Duane Arnold nuclear plant in Iowa, which was taken out of service in 2020. The Palisades nuclear plant in Michigan, which ceased operations in 2022, said on Monday it had closed on a US$1.5 billion loan guarantee from the US Department of Energy’s Loan Programs Office to help finance its restart. It is aiming to re-enter service by the end of 2025. Restarts seem to be viewed positively by investors: Constellation’s shares are up about 23% since the Microsoft deal was announced.

However, the real breakthrough will come when the private sector is prepared to build and finance new plants. At Plant Vogtle in Georgia, the second of two new AP1000 reactors came into operation this year, but the delays and cost overruns were so great that they have deterred other utilities from committing to new nuclear capacity.

Small modular reactors (SMRs) hold out the promise of reducing those development risks, but the first commercial SMR project in the US was cancelled last November.

So an announcement about nuclear financing at Climate Week in New York last week was a particularly noteworthy event. A group of 14 financial institutions, including Bank of America, Barclays, Morgan Stanley and Guggenheim, announced their backing for the expansion of the nuclear industry. At COP28 in Dubai last December, 22 countries signed a pledge to triple global nuclear energy capacity by 2050, and the 14 financial institutions aim to support that growth.

James Schaefer, senior managing director of Guggenheim, said the “huge” expected increases in power demand for data centres and AI made it essential to accelerate the development of new nuclear projects. Achieving that would require close cooperation between the nuclear industry, tech companies, banks and other financial institutions, he added.

Wood Mackenzie view

In Wood Mackenzie’s base case forecast, as shown on our Lens Power platform, global nuclear generation capacity grows steadily over the next 25 years, but still falls well short of the goal of tripling by 2050. We are forecasting more like a doubling, with total capacity going from 323 GW this year to about 669 GW in 2050. In the US, we expect much slower growth: from 100 GW today to about 111 GW in 2050.

The surge in power demand for data centres and AI could change that outlook. Nuclear power plants fit most of the tech companies’ requirements for electricity supply, in that they are almost always available and have zero carbon emissions. The biggest drawback of nuclear – that on a levelised cost of energy basis it is much more expensive than wind, solar or gas generation – is less of a concern for deep-pocketed tech companies that are typically not competing mainly on price.

There is another issue with nuclear power that is more of a problem: speed of deployment. In a rapidly evolving AI industry, tech companies are in a race to offer new capabilities and applications first. “Time to power” is a key consideration when data centre operators seek to add new capacity.

It could easily take 15 years or more to design, permit, build and bring into operation new nuclear power plants in the US, which means they are irrelevant to strategies for AI development in the 2020s.

That said, if the best time to build a new nuclear plant is 20 years ago, the second-best time is now. And although the future of AI and its demand for power remain highly uncertain, prudent risk management would point to the need to invest in securing future supplies.

Given those advantages, it is reasonable to think that the tech companies could catalyse a new wave of investment in nuclear, in the US and around the world. There has been plenty of talk about the idea in the industry, and some potential projects have started to break cover. Oracle’s chairman Larry Ellison said recently that the company was planning a 1 GW data centre, powered by three new SMRs.

There are still significant hurdles for the nuclear industry to surmount. The execution risks inherent in new nuclear construction remain high, and the new generation of advanced reactors, including SMRs, carries technology risk as well. There are not many recently-closed reactors in the US that would be suitable for a restart like Unit 1 at Three Mile Island. So adding significant nuclear capacity will mean new reactors at brownfield sites, or completely new greenfield sites, with all the attendant risks of delays and cost overruns.

The sheer size of nuclear projects – Units 3 and 4 at Vogtle cost more than US$30 billion – also means that the number of companies and investors able to take on those risks is small.

That means that government support for new nuclear plants, at both a state and federal level, will be crucial. In Wood Mackenzie’s Horizons report, The nuclear option, published last year, we set out some of the key principles for governments. Clear rules for planning, permitting, regulation and safety are vital, along with tax incentives and other subsidies.

The bipartisan enthusiasm for nuclear power in the US suggests the current tax credits and other supports are likely to remain in place, even if control of Congress and the White House changes following the elections on 5 November. But US policymakers will need to take active steps to expedite new nuclear projects if the current upsurge of interest is to be translated into actual investment.

Hurricane Helene raises supply chain concerns

On Monday morning Americans were still trying to assess the extent of the devastation caused by Hurricane Helene, a Category 4 that made landfall in Florida and then moved up through Georgia and into South and North Carolina. At least 91 people are known to have died in the storm, and the toll is expected to rise.

More than 3.5 million customers across those states were without electricity at one point, although utilities were restoring power to many on Sunday. Duke Energy said that as of Sunday night, about 904,000 customers were still without power in the Carolinas.

The threat of lasting disruption to electricity supplies in the region was raised by Chuck Edwards, a Congressman representing a district in western North Carolina. He said 360 substations had been knocked out, many of them having been completely flooded. There was a “high likelihood” that these substations would not be reparable, and the equipment would have to be replaced, but Duke Energy was unable to assess the damage until the flooding had receded, he added.

Strains in the supply chain for electrical equipment mean that replacing destroyed substations could be challenging.

Another supply chain issue emerging in the wake of the hurricane is the impact on the Spruce Pine quartz mines in western North Carolina. The mines produce the world’s highest quality quartz, which is essential for making semiconductors and solar photovoltaic cells. It is used to make the tools and crucibles that contain molten silicon during the manufacturing process, and the highest grades are needed to avoid contaminating the product with impurities.

As of Monday morning there was no official word on the condition of the mines, but the damage to the community of Spruce Pine and the surrounding area appears to be extensive.

In brief

The OPEC+ group of countries is sharpening its focus on ensuring that members comply with their oil production limits, CNBC reported. Oil prices fell again last week, with Brent crude trading at about US$72 a barrel on Monday morning. The Financial Times reported last week that Saudi Arabia was “ready to abandon its unofficial price target of $100 a barrel for crude” in order to win back market share.

Sweden will start construction of its first planned new nuclear reactor by 2026, the country’s prime minister has said. The country’s last new reactor entered service in 1985.

Britain’s last coal-fired power plant is closing down after its final day of operations on Monday. The closure brings to end the 142-year history of using coal for power generation in the UK. A recent report sounding the alarm about the UK’s lack of international competitiveness has highlighted the fact that its industrial electricity prices are among the highest in the developed world, while energy use per unit of GDP is the lowest among the Group of Seven leading economies.

Other views

Taking the pulse of the global LNG industry – Simon Flowers and others

What’s driving the upstream revival in Southeast Asia? – Simon Flowers and others

Will gas fuel Asia’s data centre boom? – Fadhlullah Omarali and others

Five options to address the looming lithium surplus – Allan Pederson and Mamta Jaswal

Stepping on the gas: the state of global methane policies and regulations – Stephen Vogado

Carbon removal projects need to ramp up massively to meet future needs

Infographic: How the steel industry is reducing its carbon footprint

China’s accelerating green transition – Edward White

Why one developer won’t quit fighting to connect the US’s grids – James Temple

Quote of the week

“We made an agreement in Dubai to transition away from fossil fuels… The problem? We aren’t doing that. We’re not implementing. The implications for everybody, and life on this planet, is gigantic.”

Speaking at Climate Week in New York, John Kerry, former US climate envoy, warned of a widespread failure to act on the commitment agreed at COP28 last year for the world to transition away from fossil fuels.

Chart of the week

This comes from our latest Horizons report: Carbon removals: the 'net' in net zero. It shows the volumes of carbon removals that we expect in our three key scenarios: our base case forecast, a delayed transition case, and a net zero scenario. It includes the three key routes: nature-based solutions such as reforestation, bioenergy with carbon capture and storage (BECCS) and direct air capture with carbon storage (DACCS). The key point is in the right-hand column in each group: in a credible scenario for net zero emissions by 2050, large volumes of carbon removals will be needed.

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