Big Tech's Nuclear Gamble Could Change The Course of the Energy Transition
Irina Slav

Microsoft recently struck a deal to restart of the Three Mile Island nuclear power plant. Google partnered with small modular reactor developer Kairos to build 500MW of generation capacity. Amazon bought stock in another SMR developer, X-energy. Big Oil loves nuclear. This could change the course of the energy transition.

Until quite recently, Big Tech was fully dedicated to the energy transition in its original form, envisaging a massive buildout of wind and solar capacity to replace gas and coal as sources of electricity. Then the AI race began, and Big Tech discovered something it should have known all along: it needed a lot of electricity that was available around the clock. Wind and solar couldn’t cut it. So Big Tech turned to nuclear.

“Nuclear plants are the only energy sources that can consistently deliver on that promise,” Constellation Energy’s chief executive Joe Dominguez said in comments on the Microsoft news, referring to the promise of abundant electricity supply with a low emissions footprint.

“This agreement is a key part of our effort to commercialise and scale the advanced energy technologies we need to reach our net zero and 24/7 carbon-free energy goals and ensure that more communities benefit from clean and affordable power in the future,” Google’s senior director for energy and climate Michael Terell said in comments on the deal with Kairos Power.

The tech industry appears to have taken its time in realizing that clean power is not enough for their business ends, and they need power that is both clean and available around the clock—and batteries cannot make wind and solar round-the-clock power sources.

“These large investments show the tech industry does not feel renewables and batteries can provide enough stable or cost-effective power and nuclear will be needed,” the chair of the American Nuclear Society’s International Council and chief executive of nuclear fuel producer Lightbridge Corporation told the FT last week. Indeed, it was high time someone acknowledged the shortcomings of the default energy sources of transition advocates who have not yet felt directly the need for reliable, in addition to non-hydrocarbon, electricity.

In fairness, Big Tech’s big bet on nuclear will take a while to take shape. For example, Microsoft may have agreed with Constellation Energy to restart Three Mile Island, but the restart depends on permits yet to be granted by the relevant authorities—and it is not a done deal in light of anti-nuclear sentiments among the public, Reuters reports.

Small modular reaction technology has not been tested at a commercial scale yet, and the one project that tried to test it ultimately failed, with developer NuScale losing its deal with a Utah utility after it turned out the electricity its reactors would be generating was going to be a lot more expensive than original planned.

Yet, Big Tech has deep pockets and massive electricity needs that are only going to get even more massive in the coming years as the AI race heats up and data centers multiply. Indeed, various forecasts are naming data center proliferation as the top reason for a considerable future increase in U.S. electricity consumption after more than a decade of flat demand. Per Barclays, data centers alone will come to account for 9% of total U.S. demand for electricity by 2030. That would be up from just 3.5%. Per Wood Mac, total electricity demand in the U.S. could swell by up to 15% in the next five years. And it won’t be wind and solar covering this demand if Big Tech is any judge.

The nuclear bet could be a disaster for wind and solar, and not just because nuclear is a direct rival for the love of some huge consumers of energy. That bet could mortally wound wind and solar because of carbon credits.

Right now, Big Tech majors are the biggest clients of companies engaged in the generation of electricity from wind and solar installations, for which generation these companies also receive so-called carbon credits. They are free to sell these credits to companies that want to reduce their emission footprint accumulated from their use of hydrocarbon sources of electricity for lack of comparable non-hydrocarbon alternatives. Microsoft, Amazon, and Google are big consumers of carbon credits. But if those reactors get built, demand for carbon credits will take a plunge—and it will never return.

This is a problem for wind and solar generators because those carbon credits are an important source of income. That source of income could become even more important as negative prices due to overproduction become more frequent. Yet Big Tech with its nuclear plans could put an end to this lucrative carbon credit trade because nuclear generation is zero-emission generation.

Granted, this will take years to happen. There will be challenges as small modular reactor technology proves itself in the field. There will be failures and delays. But with Big GTech’s money and its very urgent need for energy, chances are that nuclear will be making a major comeback. In the meantime, gas and even coal are guaranteed some stable demand growth from the data center world.

By Irina Slav for Oilprice.com

 

 

 

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

 

 

 

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