Data center energy demand is expected to increase over the next five years, with U.S. consumption likely to rise from 17 GW in 2022 to 35 GW in 2030. AI-specific data centers will be the main driver of this growth, as each requires more than 80 MW of energy capacity, compared to 32 MW for standardized centers.
However, with most major operators setting ambitious net-zero emissions targets for their operations, the balance between securing more energy while also ensuring emissions reduction has become a major concern. As a result, data center operators are increasingly exploring the possibility of new energy sources, with nuclear power emerging as a possible solution.
Why Nuclear Power? Data center companies have been continuously investing in low-carbon energy in recent years. Amazon Web Services (AWS) has been the largest corporate buyer of renewable energy globally since 2020, while companies such as Microsoft, Google, and Meta have invested in gigawatts of renewable energy. However, renewable energy is often intermittent and location-dependent, calling into question its viability as a primary power source for data centers. Nuclear energy has emerged as a potential solution to these challenges, as it offers a consistent and reliable source of energy that does not depend on a specific geographic location to provide power. James Walker, CEO of microreactor company Nano Nuclear, says data centers are “consuming more and more energy and can no longer rely solely on the grid.”
Walker says they have to generate their own power. “However, many zero-carbon energy systems are location-dependent, making nuclear power a viable option,” he adds. “Even if coal or gas plants have been used, they are also location-dependent. “Nuclear power is the best solution because it is not tied to specific locations and provides the most consistent power generation.”
This reliability has already pushed hyperscalers towards nuclear solutions. In March 2024, AWS signed a deal with Talen Energy to acquire a 960 MW data center powered by the Susquehanna Nuclear Power Plant in Pennsylvania, reflecting the industry’s growing confidence in nuclear power.
An Amazon spokesperson, commenting on the deal, said it was intended to “complement our wind and solar projects, which rely on weather to generate power.” Our carbon-free energy deal with Talen Energy is a blueprint for that.”
The hyperscaler’s plans to expand the campus suffered a setback earlier this month when the Federal Energy Regulatory Commission (FERC) rejected an interconnection request that would have allocated an additional 180 MW of power to the site. Energy companies had complained that the proposal would unfairly advantage both AWS and Talen. Elsewhere in Pennsylvania, Microsoft revealed in September that it was backing the restart of the dormant Three Mile Island nuclear power plant, signing a PPA that will allow it to use the facility’s total 837 MW of output to power its data centers in the state, as well as Chicago, Virginia, and Ohio.
This renewed interest has led traditional power producers in the U.S. to seek to extend the life of their nuclear assets or restart them. Companies like Vistra have announced in their third-quarter earnings that the data center industry is increasingly interested in acquiring nuclear power supplies, demonstrating the growing interest.
In addition, NextEra CEO John Ketchum reported that the U.S. utility is considering restarting the Duane Arnold nuclear power plant in Iowa due to strong data center interest. “Given all the demand we’re seeing for data centers and the shrinking supply and available sites that are ready to go, it’s creating an even bigger premium for other industries outside of data centers that are looking to get low-cost renewable energy,” Ketchum said.
The interest hasn’t been limited to the U.S. market. Taiwan, home to chipmaking giant TSMC, has indicated it is “very open” to using nuclear power to meet the country’s growing energy demand from chipmakers, accelerated by the growth of artificial intelligence.
These measures are an example of an approach that considers that there is no single solution for the transition to carbon-free energy. All feasible means are explored and tested to determine which is most applicable for each data center site. Following the FERC decision, it will be interesting to see how utilities and data centers navigate this volatile regulatory environment. However, despite concerns, most companies are optimistic about the industry’s growth and believe nuclear power will remain a key energy source for data centers going forward. Is large-scale nuclear power a solution?
Nuclear power is particularly suited to the needs of data centers because it provides the constant power they need to stay online. Aaron Binkley, vice president of ESG at Digital Realty, sees a clear synergy between nuclear power and the energy consumption profile of data centers. “The hope and promise of nuclear power is 24/7, carbon-free generation that matches the load profile of a data center quite well,” Binkley says.
Nuclear power also addresses three critical issues for data centers: cost efficiency, emissions reduction, and energy security. Although nuclear power plants are expensive and time-consuming to build, large-scale plants are profitable once operational. Extending the life of existing nuclear power plants can help maintain energy supplies, especially in Western countries. The International Energy Agency (IEA) estimates that expanding these plants will cost between $500 and $1,100 per kW in 2030, resulting in electricity costs of less than $40 per MWh, making nuclear power competitive with solar and wind in many areas.
“Providing a clean, direct and permanent supply of energy makes sense for these growing needs,” says Patrick O’Brien, director of government affairs and communications at Holtec International, which provides nuclear power equipment and services. The problem would arise if they did not try to implement small modular reactors (SMRs) and tried to acquire power from the grid, which would put a strain on the system. From the developer’s point of view, the possibility of purchasing clean energy at a fixed cost could benefit the needs of both parties in terms of stability of construction and operating costs and ensure the energy needs for the significant investment made by both parties from a cost perspective. As a result, especially in Europe and the United States, where investment in large-scale nuclear power has been limited in recent years, SMRs have emerged as a promising business case for the growing data energy demand.
While traditional nuclear plants are a good option for large-scale energy needs, SMRs are emerging as an attractive alternative, especially for data centers. SMRs offer a more flexible and scalable solution, with an average capacity of 300 MW, ideal for single data centers or small clusters.
Nano Nuclear’s James Walker notes: “SMRs can be placed virtually anywhere and offer an exceptional capacity factor, a key measure of energy consistency, that even surpasses that of gas or coal. Given these advantages, it is not surprising that technology companies have identified nuclear power as the preferred solution.”
A key advantage of SMRs is their innovative design, which does not rely on ordinary water to moderate and cool neutrons. Instead, they use high-temperature gases or molten salt, which improves safety and efficiency. Additionally, SMRs require much less space and do not require the 10-mile emergency planning zone required by traditional nuclear power plants. This theoretically makes them more acceptable to communities because they pose fewer safety concerns and may require less regulatory oversight, although because the technology is still in its infancy it has yet to be tested. Clayton Scott, chief commercial officer of SMR company NuScale, says, “SMR technology offers a scalable, safe and cost-competitive solution compared to renewable energy sources and traditional nuclear power.”
The development of CGOs depends on strong partnerships and supply chain capabilities. Scott notes, “As we manufacture our modules, our relationships with our long-term supply chain partners, many of whom are strategic investors, are a major source of strength. “These partnerships are critical to providing high-quality, cost-competitive components, and we remain committed to developing a global supply chain to meet the growing demand for NuScale technology.”
This approach ensures the reliability and cost-effectiveness of SMR technology and enables data center operators to deploy SMR quickly and efficiently.
Holtec’s O’Brien highlights the potential of SMRs to meet a variety of energy needs: “I think SMRs will play a key role,” he says. “The small size of a steady-state generator of clean energy will allow many industries to consider a new source of energy for their needs that can provide an opportunity for growth. Additionally, the ability to deploy in any region and condition will enable developing regions of the world to have clean, stable energy like never before.”
The SMR industry has recently been boosted by several announcements from data center hyperscalers that they have committed to deploying their solutions at their sites.
From April to October, several major hyperscalers have signed SMR agreements, including PPAs signed by Equinix and Prometheus, with Sam Altman-backed Oklo. Google has also joined the initiative, acquiring 500 MW of energy from Karios Power across six reactors.
AWS has made the largest commitment, signing three separate agreements in the sector. Signed supply agreements with Energy Northwest and Dominion in Washington and Virginia. Also invested directly in X-energy, an SMR developer, to support the construction of over 5 GW of new nuclear power projects through 2039. In turn, SMRs will be deployed as part of AWS’s agreement with Energy Northwest.
For Ivan Pavlovic, an energy and transition specialist at Natixis, it’s a marriage of convenience. According to him, “there is a stellar alignment between data center operators and SMR developers, as data centers require constant, low-carbon electricity and SMRs can provide reliable baseload power.”
As a result, SMR companies are looking at data centers as a pioneering option, spurring more customized solutions for the industry. One example of this is startup Deep Atomic, which announced an SMR concept directly tailored to the data center industry in October. “We are differentiated by size… many competitors are in the high-end SMR space and, in our view, are too large for an off-grid, off-grid power solution for data centers,” a company spokesperson said. As a result, it appears that SMRs have found a partner in the data center space that could fuel their growth. Concerns remain about the scalability and financial viability of SMRs for widespread use in the data center industry. Therefore, substantial financial support is essential to avoid project financing pitfalls. Currently, no bank will support SMRs as they require proven and reliable technology with offtake agreements in place to mitigate project cash flow risks. Therefore, the role of data centers is critical in supporting the expansion of these technologies and providing certainty in cash flow generation, which is critical for project financing eligibility without government support mechanisms. Challenges and Opportunities
Despite the promise of SMRs, several challenges remain. Like “traditional” nuclear power, the sector faces potential delays and cost overruns that could undermine its competitiveness against renewable energy sources. Additionally, the diversity of SMR designs currently in development creates uncertainty about which technologies will succeed.
Digital Realty’s Binkley highlights this issue, stating, “There are a variety of reactor technologies being promoted in the SMR space. I think there is also a market acceptance curve that allows us to ask, “Is this as good as promised?”
The industry is also suffering from an erosion of the nuclear supply chain following a lull in nuclear construction during the 1980s and 1990s, making it necessary to rebuild capacity and form strategic alliances for early SMR projects.
Public acceptance is another critical factor. Nuclear power’s association with disasters like Chernobyl and Fukushima fuels fears about the technology. However, companies like Nano Nuclear say they are safe and are addressing conceptual concerns by forming closer alliances with stakeholders. “Our approach is not just to provide solutions, but also to build closer partnerships to understand the specific needs of our customers. This allows us to adapt our technology to meet the specific requirements of various industries,” Walker says. Governments also play a role in the success of nuclear data center solutions. Policies that simplify the regulatory framework support the construction of new nuclear power plants and the expansion of existing ones, which is crucial. However, concerns remain about the regulatory wait time, with Binkley believing that “some of the timelines that are available are probably a little aggressive in terms of how long it takes.”
Both Nano Nuclear and NuScale face accusations from short seller Hunterbrook Media that their timelines are unrealistic and that their products may not live up to their lofty claims. NuScale canceled a project in 2023 due to lack of demand. Neither the company nor competitors such as Oklo and Rolls Royce have implemented a functional SMR.
As data center power needs continue to grow, nuclear power, especially SMRs, is an attractive option, provided it can be proven to work. While traditional nuclear power plants provide cost-effective, low-carbon power, they face challenges such as high upfront costs, stringent regulations, and public concerns. “Nuclear power can be deployed anywhere”
James Walker, Nanonuclear
SMRs offer a potential alternative with lower rates, faster development, and improved safety features, making the promised version perfect for data centers that need reliable, scalable power. “Nuclear power can be deployed anywhere,” Walker summarizes. “It is location-independent and has the most consistent energy output. “That reliability is why tech companies have turned to nuclear solutions.”
For small-scale nuclear power to become a key energy source for data centers, a concerted effort by policymakers, industry stakeholders and the public is needed to overcome economic, regulatory and social challenges. First, however, doubts about the ability of SMR companies to actually deliver projects on time and on budget must be overcome, which would be a first for the nuclear sector.
