Why the AI Energy Crisis is Driving Us back to Coal and Nuclear Energy
When I was an undergrad in Eastern Washington, my Physics professor and Geology professor, both had strong links to energy companies. With a strong coal industry in the region and the Hanford Nuclear facilities within field-trip distance, there were always lectures on the benefits of coal and nuclear energy.
The Three-mile Island accident in 1979 started to turn the table on nuclear power plants with many projects canceled due to either economics or public concerns over safety and nuclear waste. Coal also had challenges from environmentalists on issues such as acid rain and particulate emissions, which raised the costs of energy production with coal due to scrubbers and abatement systems. However, coal power remained strong until the 2010-time frame, when some of the first concerns of greenhouse gas emissions began to emerge. At that time, natural gas — which is cleaner and sometimes cheaper than coal — started to be used for power production.
In the United States, after 2010 both coal and nuclear energy fell out of favor and were being replaced with natural gas and renewables. That was until recent power requirements at AI and hyperscale data centers started to grow, and it became challenging for any power source to meet the skyrocketing demand.
I have written previously on how power usage at Meta, Google, Amazon, and Microsoft have doubled almost every 2 years, and how that rapid growth would likely cause challenges for these companies to meet their net zero goals, and for energy companies to generate enough power. According to Google’s 2024 Environmental Report, the company’s GHG rose 48% since 2019 driven mostly by data center energy demands.
Recently, Eric Schmidt the former Google CEO stated “We’re not going to hit the climate goals anyway because we’re not organized to do it — and the way to do it is with the ways that we’re talking about now — and yes, the needs in this area will be a problem. But I’d rather bet on AI solving the problem than constraining it and having the problem if you see my plan.”
This insatiable demand for energy has caused the pendulum to swing back the other way. Instead of shutting down, or progressing towards closing or refurbish dates, coal-fired plants are continuing to operate to provide power for the data centers, as well as consumers. It is getting tougher, at least in the short run. to reduce GHG, as coal use stops its decline in the United States.
Many companies, such as Google, that run data centers have been buying up the available renewable power through power purchase agreements (PPA). In early October, Google signed a 435-MW agreement with energy-Re, which is enough to power 56,000 homes. So, Google gets to be green, but a homeowner, or small business looking for green power might be out of luck unless other sources of green power are rapidly brought online.
One partially green solution that the data center companies are driving is nuclear power. AWS is nearing a deal with Constellation Energy to be supplied with power from an operating nuclear plant. This will add to a previous deal where AWS already receives nuclear energy power. Older Nuclear plants that have been shut down are being funded to start back up. Microsoft is looking at getting the 3-mile Island reactors running again. The 805-megawatt Palisades Nuclear Generating Station in Covert Township has received funding to restart its decommissioned reactor, and the Duane Arnold nuclear plant is looking at restarting operations. Getting these reactors up and operational will take considerable effort and dollars, which shows how desperate the data centers are for non-carbon energy. The reactors are expected to start delivering power in the 2028 timeframe if permitted and the recommissioning goes as planned.
The advantage nuclear power provides is a consistent reliable source of power 24×7. Renewables with battery backup for nights are not as reliable, and due to the nature of renewables there are peak periods and no energy-producing periods. Nuclear power comes with its own baggage, such as obtaining fuel, radioactive waste, and safety concerns.
Another emerging nuclear option is small modular reactors (SMR). Google signed an agreement with Kairos Power and expects the reactors to be online by 2030. The initial purchase is expected to add 500MW to the grid. Amazon Web Services (AWS) is working with Dominion Energy to explore SMR use at their Virginia Facility. Bill Gates has also invested in small modular reactors and TerraPower is building a small modular reactor in Wyoming. TerraPower is expected to launch in 2030 as well. The TerraPower SMR is not specifically designated for data centers, but if they are successful there is a high probability they will start building SMR near data centers.
One of the challenges for both these startups is obtaining fuel, which is currently only manufactured in Russia. So they will either need to negotiate with the US Government to purchase fuel or restart those capabilities in the United States.
Nuclear power using SMR is now in the spotlight and are being viewed as a positive solution to create carbon-free energy for data centers, as well as other industries. Several hurdles need to be crossed such as getting or making fuel and successfully ramping up, but for now, the pendulum is swinging back, and at least for the moment nuclear power is once again being viewed as a positive energy source. Coal, not so much.
