Big Tech is going all-in on nuclear power. This week, Amazon inked new agreements to build small-scale nuclear reactors known as SMRs to provide clean power for the energy-hungry data centers used to support artificial intelligence programs in its Amazon Web Services division. The technology giant’s cloud-computing platform is a major government contractor. Amazon also led a $500 million Series C-1 round in X-energy, a nuclear energy reactor and fuel company in Rockville, Md. Ares Management, Citadel Founder and CEO Ken Griffin, private equity energy investor NGP in Dallas and the University of Michigan also participated.
X-Energy’s designs will be used in a project announced by Amazon and state-run utility consortium Energy Northwest to construct four SMRs near the power agency’s 40-year-old nuclear facility in Richland, Wash. The new reactors will come on line in the early 2030s and provide up to 960 megawatts of energy—enough to power the equivalent of more than 770,000 US homes.
Amazon also signed an agreement with publicly traded utility Dominion Energy to explore development of an SMR project near Dominion’s North Anna nuclear power station 60 miles northwest of Richmond, Virg. (Northern Virginia is the world’s largest data center hub.)
Separately, Google announced a deal to buy energy from SMRs with 500 megawatts of new capacity that startup Kairos Power in Alameda, Calif., plans to bring online in the US by 2030, with additional deployments through 2035. Google plans to spend more than $100 billion developing AI through its data centers.
“This agreement helps accelerate a new technology to meet energy needs cleanly and reliably, and unlock the full potential of AI for everyone,” Google said. The company called the arrangement “the world’s first corporate agreement” to purchase nuclear energy from multiple SMRs.
Nuclear demand
The demand for power by global data centers, whose servers require intense cooling, could reach 71 gigawatts by 2027, FTI Consulting projects. In the US, data centers could gobble up 9% of the nation’s electricity generation annually within six years—more than double 2023’s level. Just 40% of existing and planned data centers now operate or plan to do so using carbon-free energy energy. (“See, “AI data centers tackle the sustainable energy challenge”).
Because SMRs are smaller, safer, more efficient, cheaper and faster to build than traditional reactors, data center-focused companies see them as key to fighting global warming. Microsoft sealed an arrangement last month to restart Three Mile Island, whose partial meltdown in 1979 is America’s worst nuclear accident.
“One of the fastest ways to address climate change is by transitioning our society to carbon-free energy sources, and nuclear energy is both carbon-free and able to scale—which is why it’s an important area of investment for Amazon,” said Matt Garman, the CEO of Amazon Web Services.
Some technology executives think AI created in data centers can help solve the climate crisis. Ex-Google CEO Eric Schmidt reportedly said recently that “My own opinion is that we’re not going to hit the climate goals… I’d rather bet on AI solving the problem.”
Right now, AI is helping fuel the problem: Data center hyperscalers— large companies like Amazon— “are looking for any and every available power that’s out there,” Dan Thompson of S&P Global Market Intelligence told a webinar held by the ratings agency on Wednesday.
Addition, not replacement
Global fossil fuel demand is set to peak by the end of the decade, according to the International Energy Agency’s annual World Energy Outlook report released Wednesday (though oil companies beg to differ). And a record amount of clean energy came online across the globe last year.
But rising global demand for electricity—from data centers as well as air conditioners, EVs and other electric appliances—is boosting capacity, which in turn pushes the hurdles needed to meet climate targets higher. Meanwhile, growth in renewable power and nuclear power isn’t displacing fossil fuels just yet. Amid the data center boom, US utilities are adding more natural gas to their mixes.
“We’ve seen sort of a pivot back towards natural gas interest in the last year or so on the heels of this AI data center energy demand,” S&P Global Market Intelligence’s Adam Wilson told the webinar. Around 40% of US electricity is generated using natural gas.
“‘Time to power’ is the most important KPI at this point, said Jan Vesely of private equity firm EQT at the FT Moral Money conference this week. “These data centers are willing to pay a lot to get power quick.”
Meanwhile, technology companies with data centers are also locking in on a bigger portion of nuclear, solar and wind power, through 20-year offtake contracts called purchase power agreements. With solar and wind being “intermittent” and variable energy sources due to weather patterns, the deals aren’t always to secure clean power as the sole energy source for data centers.
In August, Facebook parent Meta signed a deal to procure the output of two solar farms in Illinois and Louisiana. It will use the offtake agreements as part of its “commitment to match 100% of the electricity use of our data centers and offices with renewable energy,” Meta’s Urvi Parekh said at the time.