Microsoft’s AI-Energy Hunger
AI is an overwhelmingly popular new trend in the technology sector. However, it is even more energy-consuming than previous trends like cloud computing. For example, ChatGPT consumes 25x more energy to create an answer than a classic Google Search.
With ChatGPT already having 180 million users, this is a lot of extra energy consumption. This is a concern for ChatGPT’s creator, OpenAI, and its central partner, Microsoft. This is also a major concern for US-based AI operations, as power generation in the country has been mostly stagnant for decades, contrary to China.
Source: Our World In Data
This is not unique to Microsoft, as for example, Google’s energy demand doubled in the 2019-2023 period. In practice, every new AI chip sold by Nvidia will keep consuming power for many years to come.
Overall, AI is expected to consume a lot of power, as much as a 550% surge by 2026.
Source: Forbes
So, it may not be surprising that Microsoft is seeking a long-term agreement to secure a power supply. What was more surprising was the most recent deal. Microsoft is looking to resurrect the Three-Mile Island nuclear power plant so that its owner, Constellation Energy Corporation (CEG), can guarantee Microsoft a steady supply of low-carbon baseload power to its AI data centers.
Microsoft’s Nuclear Deal
Microsoft would buy out the entire reactor’s output for the next 20 years, making it a sure deal for the utility company. In the process, the facility would be rebranded the Crane Clean Energy Center (CCEC) in honor of Chris Crane, the CEO of Constellation’s former parent company.
The CCEC is expected to be online in 2028, with Constellation pursuing a license renewal that will extend plant operations to at least 2054.
Source: Inspenet
Overall, the project should create 3,400 direct and indirect jobs and add more than 800 megawatts of carbon-free electricity to the grid.
It will also add to the State $16B in GDP and generate $3B in state and federal taxes.
“Pennsylvania’s nuclear energy industry plays a critical role in providing safe, reliable, carbon-free electricity that helps reduce emissions and grow Pennsylvania’s economy.”
Governor Josh Shapiro
Price Premium
The plant was shut down early in 2019 for economic reasons, but Microsoft’s guaranteed purchase of its power changed the equation. Experts calculated that Microsoft seems ready to pay a large premium as long as a stable supply of power is guaranteed. This could be at least $90 per megawatt-hour and maybe as much as $100/MWh.
To this hefty price tag could be added extra cost for the power grid to deliver this power to the Microsoft data center, with an extra $20 to $30/MWh.’
This is a significant premium compared to current average market power prices of $45 to $55 per megawatt-hour in the region.
Of course, this reflects Microsoft’s long-term concern about electric supply availability and reliability. Many other trends are going to compete for power supply as we explained in “Our Future Energy Mix“, including EVs and the electrification of energy systems like heating (heat pump) and industrial production (green hydrogen for steel, ammonia, etc.).
Three-Mile Island Reactor History
What made this announcement surprising and somewhat controversial is that the Three-Mile Island reactor is more famous for being the largest nuclear disaster in US history.
One of its reactors, Unit 2, suffered a partial meltdown in 1979. This resulted in the release of radioactive materials, and the cleanup costs went to up to $1B from 1979 to 1993.
Even if, according to the Department of Energy, “No injuries, deaths or direct health effects were caused by the accident”, the plant is still a symbol of environmentalists’ fears about nuclear power.
Source: History Channel
The reactor that will be restarted for Microsoft is NOT Unit 2.
The reactor in discussion between Microsoft and Constellation is Unit 1, which stayed operational and kept producing power until it was shut down in 2019.
Still, this is a bold move by both companies, as the power plant is somewhat of a symbol of the struggle of the nuclear industry due to incidents like Three-Mile Island, Chernobyl, and Fukushima. Hence the plan to re-brand into the “Crane Clean Energy Center”.
Microsoft, Nuclear & Power Generation
This is not the only link of Microsoft with nuclear energy. Bill Gates has also been the main backer of TerraPower, an SMR (Small Modular Reactor) company. This is a technology we discussed in detail, as well as TerraPower and its competitors in our article “Update on SMRs (Small Modular Reactor) – Still The Future of Nuclear Power”.
Source: CNBC
TerraPower is expecting to open its first reactor in 2030. It is however possible that the company’s reliance on HALEU (High-Assay Low-Enriched Uranium), which was mostly sourced from Russia, could cause significant delays.
Microsoft also established the Global AI Infrastructure Investment Partnership (GAIIP), in partnership with BlackRock, Global Infrastructure Partners (GIP), and MGX, to help meet AI project demand in computing and electrical power.
AI And Nuclear Power
Latest Developments
OpenAI Chairman and most famous leader is also a chairman of Oklo, developing small fast nuclear reactors. It could become the first US nuclear plant powered by nuclear waste.
Fast nuclear reactors are part of the so-called 4th generation of nuclear power plants, which actually encompasses a lot of very different designs, which we covered in “The 4th Generation Of Nuclear Power: Cheaper, Cleaner, Safer”.
Amazon bought a nuclear-powered data center from Talen Energy in March 2024 for $650M, located right next to the Susquehanna Steam Electric Station, the sixth-largest nuclear power plant in the United States.
Source: ANS
Meanwhile, Oracle is also building 3 SMRs to power its 1GW datacenter, and Google might do the same.
AI Boosting Power Generation
While AI will consume a lot of power, it can in turn help boost and optimize power generation. This can be done through multiple applications of AI:
- Cloud-based solutions for more remote and automatized work.
- Smart electrical grid, optimizing the efficiency of the system and reducing loss from transmission and temporary excess renewable energy production.
- IoT to optimize the timing of power usage.
Constellation in particular is hoping to save millions of dollars using Blue Wave AI Labs machine learning (ML) tools in its nuclear plants.
Nuclear Fusion
Using AI to create energy could go even further, with AI likely to be a key contributor if we ever crack the secret of nuclear fusion, from stabilizing plasma in microseconds to creating new alloys.
Other tech companies and founders agree as well. Jeff Bezos and other investors raised more than $130 million in venture capital for General Fusion, a commercial nuclear fusion startup.
Meanwhile, Google kicked off a $250 million fundraising round for TAE Technologies, a nuclear fusion startup.
You can read more about the latest development and promises of nuclear fusion in “Nuclear Fusion – The Ultimate Clean Energy Solution on the Horizon”.
Changing Tides
Tech companies and AI applications embracing a rebirth of nuclear power is a sea of change compared to a few years ago. Even just 5 years ago, nuclear was still viewed as a dangerous technology, with Germany closing its nuclear plants and the future being envisioned solely as powered by renewables.
However, the realization of the need for massive energy storage and the urgency of reducing carbon emissions has changed the image of carbon-neutral nuclear power.
Will It Work?
The change of direction regarding nuclear power is a very quick one. Considering the strategic importance of AI, as well as the very real political influence of mega tech companies, it is likely that policy and regulations are going to change in response.
This is, however, still going to take time.
Regulations
Firstly, from a political perspective, resistance to nuclear power has been a keystone of environmentalist movements for decades. It is unlikely to change instantaneously.
“Securing licenses from the U.S. Nuclear Regulatory Commission could also be tricky for any nuclear project. The NRC currently really has a full plate.”
Sola Talabi – Nuclear engineer & president of energy risk consultancy at Pittsburgh Technical
Industrial Limits
Secondly, the industrial supply chain for nuclear power has been working at a slow pace for decades with almost no new nuclear power plants being built. So the Three-Mile Island restart will likely meet supply and technical issues leading to delays.
“Nobody has done this before. There’s going to be challenges that pop up.”
Kate Fowler – global nuclear energy leader for Marsh, an energy insurance broker and risk advisor
This is also true for nuclear fuel, with a lot of it being supplied until now from Russia and Kazakhstan.
Investing In Nuclear Power
As it undergoes a renaissance, it is increasingly clear that nuclear power will be a keystone of our energy system for the next 2 decades. This is because it provides a technologically ready solution for abundant carbon-neutral power that is also stable and always available.
In the more distant future, it might be slowly displaced by renewables like solar, space-based solar, or wind. However, as this will require massive utility-scale batteries, it is unlikely to happen soon enough.
You can invest in nuclear companies through many brokers, and you can find here, on securities.io, our recommendations for the best brokers in the USA, Canada, Australia, the UK, as well as many other countries.
If you are not interested in picking specific nuclear companies, you can also look into ETFs like the VanEck Uranium and Nuclear ETF (NLR), the Range Nuclear Renaissance Index ETF (NUKZ), or Global X Uranium ETF (URA), which will provide a more diversified exposure to capitalize on the nuclear energy industry.
You can also read our article about the “Top 5 Nuclear Stocks To Invest In”.
Nuclear Companies
1. Centrus Energy Corp.
Currently, Russia produces 14% of the world’s uranium, 27% of the conversion, and 39% of the enrichment. This is because many of the massive Kazakh uranium supplies are refined and enriched in Russia, a legacy of the Soviet Union supply chains.
Source: IAEA
In the recent geopolitical context, this is seen as a major issue that needs to be rectified, with $4.3B per year paid to Russia to keep US nuclear power plants fueled.
Centrus, America’s largest uranium enrichment company, is at the center of the effort to relocate nuclear supply.
It is building the only US plant to produce High-Assay Low-Enriched Uranium (HALEU). This type of enriched uranium is very useful, especially for innovative smaller designs and molten salt reactors. The fuel is so energy-dense that 750g of it is enough to cover a person’s needs for electricity for a lifetime.
Source: Centrus
Centrus is also the only company meeting the US national security requirements for uranium enrichment for HALEU type of fuels, with the company tracing its origins back to the “Atoms for Peace” initiative, as well as the agent in charge of the historical Megatons to Megawatts disarmament program.
The company’s stock price has greatly benefited from the recent ban on Russian uranium.
With Centrus’ HALEU fuel the main solution for most SMRs, microreactors, and advanced nuclear designs, the company should enjoy a quasi-monopoly on the enrichment part of the supply chain.
As HALEU is more concentrated than normal nuclear fuel, making it more dangerous, it will be very difficult for competitors not involved with the US military to acquire the license to compete with Centrus.
So Centrus is a stock for investors looking to improve nuclear power through new designs while capitalizing on the push to bring the fuel supply away from Russia and Central Asia.
2. Mirion Technologies, Inc.
Aside from the reactors and fuel technologies, nuclear power is highly dependent on many captors, parts, and other “minor” equipment that nevertheless need to work perfectly.
One such category is radiation detection, Mirion’s (USA) core business.
Nuclear power regulation requires very tight checkups on radiation exposure of personnel, the environment, and the early detection of any potential leak or contamination. The same applies to medical use of radioactive compounds, like cancer treatment and imagery.
Source: Mirion
The company is also active in physical measurements for scientific analyses and research, as well as decommissioning & decontamination devices for the defense industry, cybersecurity, and training services. The company was IPOed in 2020.
Mirion is a less “glamorous” part of the nuclear supply chain, monitoring and measuring radiation instead of creating new reactor designs, high-density fuel, or military applications. This does not make it less interesting from a financial point of view. Mirion is more of a “pick and shovel” type of stock that will benefit from renewed interest and investments in nuclear.
It will also profit from a still high public skepticism about nuclear power, strengthening the requirements for omnipresent, very efficient, and reliable radiation sensors and monitors provided by tried and tested suppliers like Mirion.
And contrary to companies building new types of reactors like SMR of fast reactors, exposed to regulatory risks, Mirion will benefit from any type of nuclear power plant being built.
