Artificial intelligence has boosted shares of tech companies like Microsoft (MSFT), Amazon (AMZN), NVIDIA (NVDA) and Google (GOOG, GOOGLE) to new heights this year. But the technology that companies promise will revolutionize our lives is driving up something other than stock prices: energy consumption.
AI data centers consume enormous amounts of energy and could increase energy demand by up to 20% over the next decade, according to a Department of Energy spokesperson. Add to that the continued growth of the broader cloud computing market and you have a power shortage.
But tech giants have also set ambitious sustainability goals, focused on using low- or no-carbon sources to reduce their impact on climate change. While renewable energy like solar and wind are certainly part of this equation, tech companies need uninterrupted power sources. And for this, they are relying on nuclear energy.
Tech giants aren’t just planning to move into existing factories. They are working with energy companies to bring mothballed facilities like Three Mile Island, Pennsylvania, back online and are seeking to build small modular reactors (SMRs) that take up less space than traditional plants and, hopefully, , cheaper to build.
But many questions remain about whether these investments in nuclear power will ever pay off, let alone how long it will take to build new reactors.
Even though solar and wind power projects provide clean energy, they are still not the best option for continuous power. According to experts, this is where nuclear energy comes in.
Aerial view of the construction site of Linglong-1 (ACP-100), the world’s first land-based commercial small modular reactor (SMR), on July 4, 2024, in China’s Hainan province. (Wang Jian/VCG via Getty Images) ·VCG via Getty Images
“Nuclear power is effectively carbon-free,” explained Ed Anderson, vice president and distinguished analyst at Gartner. “So it becomes a pretty natural fit given that they need energy and they need green energy. Nuclear (energy) is a good option for this.
The United States currently produces most of its electricity through natural gas plants that emit greenhouse gases. In 2023, nuclear power produced slightly more electricity than coal, as did solar power plants.
Last week, Google signed a deal to buy energy from Kairos Power small modular reactors, with Google saying the first reactor should be operational by 2030, and plants should be deployed in regions to power Google’s data centers, although Kairos did not provide exact locations .
Amazon quickly followed announcing just two days later that it was investing in three companies – Energy Northwest, X-energy and Dominion Energy – to develop SMRs. The plan is for Energy Northwest to build SMRs using X-energy’s technology in Washington state and for Amazon and Dominion Energy to plan to build an SMR near Dominion’s current North Anna power plant in Virginia .
Three Mile Island suffered a meltdown at its other reactor in 1979, but according to the Nuclear Regulatory Commissionthere was no serious impact on nearby people, plants, or animals because the plant itself blocked much of the dangerous radiation from escaping.
In 2023, Microsoft announced that it would source its energy from the group chaired by Sam Altman. Nuclear fusion startup Helion by 2028. Altman also chairs the nuclear fission company Oklo, which plans to build a microreactor site in Idaho. Nuclear fusion is the long-sought process of combining atoms that produces energy without hazardous nuclear waste. No commercial applications of these plants currently exist.
Microsoft founder Bill Gates also founded and currently chairs TerraPower, a company working to develop an advanced nuclear power plant at a site in Wyoming.
Nuclear energy production has stagnated for years. Nuclear power has contributed about 20 percent of U.S. electricity generation since 1990, according to Chris Higginbotham, press secretary for the U.S. Energy Information Administration.
This is partly explained by the fear of meltdowns, such as that of Three Mile Island, as well as those of Chernobyl in Ukraine in 1986 and the Fukushima Daiichi power plant in Japan in 2011.
Chernobyl was the worst meltdown ever, spreading radioactive contamination to parts of Ukraine, the Russian Federation and Belarus, leading to thyroid cancer in thousands of children who drank milk contaminated with radioactive iodine. according to the Nuclear Regulatory Commission.
Plant workers and emergency personnel were also exposed to high levels of radiation at the scene. The Fukushima plant suffered multiple meltdowns following a massive earthquake and subsequent tsunami, which caused significant damage to three of the plant’s six reactors.
An aerial view of the Three Mile Island nuclear power plant. (Chip Somodevilla/Getty Images) ·Somodevilla Chip via Getty Images
Apart from this perception, nuclear power plants are expensive and time-consuming to build.
Georgia Power’s two Vogtle reactors were commissioned in 2023 and 2024, after years of delays and billions in cost overruns. The reactors, called Unit 3 and Unit 4, were originally scheduled to be completed in 2017 and cost $14 billion, but the second reactor did not start up until business operations in April this year. The final price of the work is estimated at $31 billion, according to Associated Press.
The explosion of cheap energy from natural gas has also made it difficult for nuclear power plants to be financially competitive. Nuclear companies now hope that SMRs will pave the way for building new nuclear energy capacity. But don’t expect them to start showing up for a while.
“The SMR conversation is really long-term,” Jefferies managing director and research analyst Paul Zimbardo told Yahoo Finance. “I would say almost all the projections are in the 2030s. The Amazons, the Googles, some of the standalone SMR developers, 2030 to 2035, which is also what some utilities are saying.
Plus, Zimbardo says, electricity produced by SMRs is expected to cost significantly more than traditional plants, not to mention wind and solar projects.
Google Data Center Southland is seen from the air in Council Bluffs, Iowa, U.S. January 4, 2019. REUTERS/Brian Snyder ·REUTERS/Reuters
“Some projections are well over $100 per megawatt hour,” Zimbardo said. “To put things in context, an existing nuclear power plant has a cost profile of around $30 per megawatt hour. Building new wind and solar projects, depending on where you are in the country, can cost as little as $30 per megawatt hour, or $60 to $80 per megawatt hour. It is therefore a very expensive solution.
Not everyone buys the promise of SMRs, either. Edwin Lyman, director of nuclear power safety at the Union of Concerned Scientists, says small-scale reactors are still an untested technology.
“Despite what one might think about all the brain power of these tech companies, I don’t think they’ve done their due diligence,” Lyman told Yahoo Finance. “Or they’re willing to treat this as sort of a side show, just to have all the foundations needed to accommodate this massive expansion and demand for data centers.”
Lyman also disputes the idea that SMRs will be able to get up and running quickly and begin providing reliable, 24-hour power at low cost.
“The historical development of nuclear energy shows that it is a very demanding technology, requiring time, effort, a lot of money and patience,” he said. “So I think the nuclear industry has been trying to make itself look relevant, despite its recent failures to meet its cost and schedule targets.”
Yet as tech companies promise an AI revolution that will require power-hungry data centers, nuclear may be the only realistic green choice until solar and wind can take over permanently.
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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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