Energy provider Constellation's plans to restart a nuclear reactor on Three Mile Island in Pennsylvania reflects increasing data center power needs from artificial intelligence — and analysts say it signals how that industrial real estate could prompt consideration of more use of nuclear power.
The Baltimore-based energy producer signed a 20-year power purchase agreement with technology giant Microsoft to spend $1.6 billion to restart Three Mile Island Unit 1 that had been closed since 2019 as high operating costs made it unprofitable. The deal will add 835 megawatts of nuclear power to the grid, or enough to power about 700,000 houses.
The agreement calls for Microsoft to buy the energy from the plant near Middletown, Pennsylvania, as part of its goal to power its data centers with carbon-free energy. Nuclear is seen as a potential alternative to fossil fuel-based power generated from oil and coal because it doesn't produce carbon emissions that contribute to climate change. Nuclear energy is considered to be more reliable than windmills and solar farms because it isn't reliant on the weather.
There is a significant need for alternative energy sources as power demands rise throughout a number of industries, including data centers, with the U.S. upping its semiconductor chip manufacturing and more electrical vehicles hitting the road, said Bo Bond, a Dallas-based executive managing director in brokerage Cushman & Wakefield's global data center advisory group.
"There are a number of people and experts that believe nuclear energy will be very important to the future of U.S. power and data centers have a significant need for it," Bond told CoStar News. "Finding alternatives to fossil fuels is at the forefront of everyone's minds. They are already here, and we need to expand them."
Data center operators are having to wait between two and five years for power to become available in some markets, according to Cushman & Wakefield's Americas Data Center Update for the first half of 2024. As a result, some data center operators are signing deals directly with power companies for different types of electricity.
Amazon Web Services, a subsidiary of Amazon, is on track to power 100% of its operations with renewable energy by 2025. Earlier this year, AWS acquired a 1,200-acre data center campus powered by nuclear energy in northeast Pennsylvania from Houston-based Talen Energy for $650 million. AWS is planning to expand its data center operations at the site.
The site is adjacent to Talen Energy's Susquehanna Steam Electric Station, a nuclear power station that generates nearly 2.5 gigawatts of power — or enough electricity to power about 2 million houses. The deal includes a long-term agreement for AWS to purchase the power wholesale from Talen before it hits the grid with transmission fees.
Nuclear history
The use of nuclear power has faced public opposition since an accident at Three Mile Island in 1979 raised concerns about the danger, and the explosion of a nuclear reactor at Chernobyl, Ukraine. Federal incentives for emissions-free energy, like nuclear, are causing some watchdog groups to be concerned on the use of taxpayer funds. Eric Epstein of the watchdog group Three Mile Island Alert recently told StateImpact Pennsylvania the market has decided against nuclear energy. Meanwhile, a Constellation official told CoStar News no state or federal aid will be used for this project.
The United States generates more nuclear energy than any other country with nuclear power plants generating 20% of the nation's electricity, according to data from the U.S. Energy Information Administration. The nation has 54 operational nuclear power plants as of April 30, and 94 nuclear reactors. The oldest nuclear reactor still in operation is Nine Mile Point Unit 1 in Scriba, New York, that began commercial operation in the late 1960s, while the newest reactor to enter service got underway in July 2023 in Georgia.
The Unit 1 reactor at Three Mile Island is adjacent to Unit 2, the portion shuttered in 1979 after it suffered a partial meltdown that was one of the nation's biggest industrial accidents in history. Unit 2 is in the process of being decommissioned. Unit 1 is independent of Unit 2 and was not impacted by the accident.
Constellation acquired Unit 1 at Three Mile Island in 1999. To make way for the reactor's restart, Constellation plans to make significant upgrades to the turbine, generator, main power transformer and cooling and control systems, the company said.
“Powering industries critical to our nation’s global economic and technological competitiveness, including data centers, requires an abundance of energy that is carbon-free and reliable every hour of every day, and nuclear plants are the only energy sources that can consistently deliver on that promise,” said Constellation President and CEO Joe Dominguez in a statement.
Microsoft, meanwhile, plans to continue to collaborate with energy providers to develop carbon-free energy sources to meet the grids' capacity and reliability needs, said Bobby Hollis, vice president of energy for Microsoft, in a statement about the company's partnership with Constellation in Three Mile Island.
To restart a nuclear reactor, the U.S. Nuclear Regulatory Commission, as well as state and local agencies, must approve the plans. Constellation expects to have approval from the Nuclear Regulatory Commission by 2027 and to restart the plant in 2028 or possibly sooner, according to a spokesperson for Constellation. Constellation is also pursuing a license renewal to extend the plant operations to at least 2054.
Local impact
Constellation, in citing a recent economic impact study by the Pennsylvania Building & Construction Trades Council, said the new plant is expected to create 3,400 direct and indirect jobs. The plant is being renamed the Crane Clean Energy Center after Chris Crane, who was CEO of Exelon, Constellation's former parent company. Terms of Constellation's deal with Microsoft weren't disclosed.
Restarting the plant is expected to generate more than $3 billion in state and federal taxes and add $16 billion to the state's gross domestic product, according to the study.
In the next five years, Constellation plans to commit $1 million to philanthropic efforts supporting workforce development and other community needs in the region.
Prior to it closing in 2019, the plant's annual payroll was about $60 million and it employed more than 600 full-time workers, with 1,000 additional employees supporting the plant's biennial refueling outages.
Gov. Josh Shapiro said Pennsylvania's nuclear energy industry will play a "critical role," in providing safe, reliable and carbon-free electricity to help reduce emissions and grow the state's economy.