Microsoft is taking significant steps to meet its escalating energy demands by announcing a groundbreaking deal with Constellation Energy to revive a nuclear reactor at Three Mile Island. This move coincides with the start of the football season and the new academic year, reflecting the urgent need for reliable energy sources as the data center industry continues to expand.
Over the past decade, the U.S. has seen the decommissioning of seven nuclear reactors, while only two new ones have been activated. In contrast, the number of data centers has skyrocketed, surpassing 10,000 globally, with half located in the U.S. As cloud computing continues to grow, the Electric Power Research Institute (EPRI) projects that energy demand from the sector could surge between 29% and 166% by 2030.
Currently, data centers account for approximately 4% of U.S. electricity consumption, a figure that could rise to 9% by the end of the decade, even as overall energy demand increases. Hyperscale data centers—operated by companies like Microsoft, Google, and Amazon, and relied upon by startups like OpenAI and Anthropic—are responsible for a staggering 60% to 70% of data center energy consumption, according to EPRI.
For Microsoft, which aims to achieve carbon neutrality by 2030, the rapid growth in cloud computing and artificial intelligence presents a formidable challenge. The company's carbon emissions have surged by 40% in the past four years, primarily due to expanding data center operations. Similarly, Google has reported a 48% increase in emissions over the last five years, while Amazon claims that its data centers match energy consumption with an equivalent amount of renewable power.
In this context, nuclear energy presents an attractive option for companies striving to balance rapid data center growth with their net-zero commitments. Fission reactors offer a continuous power supply, operating at maximum capacity over 90% of the time and allowing for planned maintenance outages. This reliability explains Microsoft’s decision to enter a 20-year agreement with Constellation.
In addition to this new partnership, Microsoft has been investing in nuclear technology, including participation in a Series A funding round for Last Energy, a company planning to develop small modular reactors. Nearby, Amazon has acquired a hyperscale data center connected to a nuclear plant and is actively seeking to hire a nuclear engineer to enhance its AWS division's nuclear power initiatives.
Investors tied to Big Tech are also showing interest in nuclear energy. Bill Gates co-founded TerraPower and has invested over $1 billion, while former Microsoft CTO Nathan Myhrvold has backed the venture through Intellectual Ventures. Sam Altman has similarly supported the small modular reactor startup Oklo before its merger with a special-purpose acquisition company.
However, Microsoft’s partnership with Constellation may indicate a more immediate need for power than anticipated, suggesting that the current wave of nuclear startups may not be ready to deliver electricity in the short term. The complexity of nuclear reactor construction, combined with many startups still in their infancy, poses significant hurdles.
More established companies have faced challenges as well; for instance, the Nuclear Regulatory Commission rejected Oklo’s application to build a reactor for the Department of Energy in Idaho, and the Air Force recently rescinded a $100 million contract with them. NuScale Power, another startup in the nuclear sector, also lost a major contract in 2023.
Even if these startups navigate their engineering and regulatory challenges, finding locations for new reactors remains a critical issue. Nuclear energy continues to grapple with public perception. The announcement of Microsoft’s deal to reopen Three Mile Island may raise eyebrows, despite the reactor operating as recently as 2019. While support for nuclear power has increased among Americans, it still lags behind wind and solar acceptance. Furthermore, this support can wane when specific projects emerge, as people often oppose nuclear power developments in their communities.
In contrast, the cost of renewable energy has become increasingly competitive, even when factoring in the expense of batteries for 24/7 operations.
In the short term, reviving dormant nuclear power plants may allow tech companies to meet rising energy demands while mitigating climate impacts. However, the number of available mothballed nuclear facilities is limited. To ensure sustainable energy solutions, cloud computing and AI companies must begin exploring alternative power sources now.
