Big Tech Is Betting on Nuclear Energy to Fuel A.I. Ambitions—But There’s One Problem

A new generation of nuclear producers, called small modular reactors (SMRs), are attracting the attention of Big Tech companies as they scramble to balance climbing power demands stemming from A.I. projects with clean energy goals. These small reactors have a power capacity of 300 megawatts—enough to power roughly 250,000 U.S. homes—and are about a third the size of the traditional nuclear reactor. Ideally, SMRs can be built in a process similar to an assembly line and easily put together at the site. But the cost of spearheading a first-of-its-kind project, coupled with a shaky regulatory environment, threatens efforts to commercialize the technology in the U.S. 

The development of large language models, which demand and consume enormous amounts of energy, has set off a scramble among Big Tech firms to secure more clean power. The U.S. is the fastest growing market for data centers, according to McKinsey, which forecasts demand to more than triple by 2030 to 80 gigawatts annually. 

All this demand is disrupting already strained efforts to move towards a carbon-free grid. The Department of Energy estimates the U.S. will need approximately 700-900 gigawatts of additional clean power generation capacity to reach net-zero emissions by 2050. 

Several Big Tech firms have recently signed agreements with nuclear providers: Microsoft signed a deal to reopen a defunct nuclear plant in Pennsylvania; Amazon (AMZN) has inked three contracts to secure nuclear power in Virginia and Washington state; and Google (GOOGL) has signed an agreement with the startup Kairos Power to bring up to 500 megawatts of clean power to U.S. electricity grids, with the first reactor planned to be operational by 2030. 

Some experts say nuclear has significant potential to contribute to decarbonization in some countries. But it will require overcoming hurdles, from public mistrust to underinvestment, Rafael Mariano Grossi, Director General at the International Atomic Energy Agency (IAEA), said at a conference this week.

“Nuclear technologies are particularly well suited for data centers given their ability to provide resilient, 24/7 electricity,” a Department of Energy (DOE) spokesperson told Observer. 

“A timeline earlier than 2030 just isn’t realistic.”

Experts in the energy industry generally agree that SMRs are far from achieving commercial status. Currently, there are just three operating SMRs in the world; none in the U.S. 

Some small modular reactors are “not going solve anything in the 2020s,” Matt Garman, the CEO of Amazon Web Services, said Monday (Oct. 21) at the WSJ Tech Live event.

“These are going to be the first of a kind, whichever manufacturer is first of the market with their product. It’s still going to be a learning curve. There are going to be technical issues with deployment. There’s going to be supply chain issues,” Steve Piper, Research Director at S&P Global Commodity Insights, told Observer. “The time it takes just to get something new into the generation ecosystem is such that a timeline earlier than 2030 just isn’t realistic.”

For many of the energy providers flirting with SMRs, the cost of managing a first-of-its-kind implementation is a serious obstacle. Last year, an effort by NuScale to deploy SMRs at a site in Idaho was canceled after the cost soared from $5 billion to $9 billion. Also last year, X-Energy was forced to pull a $1.8 billion deal to go public through a special purpose acquisition company due to “challenging market conditions.” 

But the federal government is set on changing that. Last week, the DOE announced that it had opened applications for up to $900 million to support the initial deployments of SMR technologies. Some $100 million of that will be managed by the Office of Nuclear Energy, within the DOE, to spur additional deployments by “addressing key gaps that have hindered the domestic nuclear industry in areas such as design, licensing, supplier development, and site preparation.”

Still, the DOE spokesperson said the agency expect to get these projects operational in the 2030s. Meanwhile, the Nuclear Regulatory Commission (NRC), an independent government agency created by Congress, “has been actively involved in these sorts of reviews and preliminary discussions for years now,” Scott Burnell, a NRC spokesperson, told Observer. 

Burnell said the permitting and review process for SMR projects does not differ greatly from that of larger, traditional nuclear plants. However, there are some major differences in the technology: Several leading SMR developers are exploring alternate cooling systems instead of water. Most companies are applying for permission to test their designs, Burnell said, indicating that commercial implementation is still far away.

“I think that there have been a lot of reforms at the NRC to give them more scope, focusing specifically on the issue of nuclear to approve designs, approve modular designs, issue a construction and operating license at once,” Piper of S&P Global Commodity Insights said. “These kinds of things can expedite the technical aspect once it goes forward. So the regulations might be ahead of where small modular reactors are, but at the same time, since it’s new technology, any hitch in the process might slow things down.”