How AI's Economics Drove Microsoft To Reopen Three Mile Island Nuclear Plant

AI requires a lot of energy. A whole lot. To the point where its energy consumption is becoming yet another argument against use of the technology based on the cost and contribution to global warming of the pollution such energy consumption generates. 

So the big tech companies like Microsoft and Amazon which see AI as a means to ensuring their chokehold on technology - and on the broader economy - hit upon the idea of bringing old nuclear plants back on line because a) they provide relatively clean and cheap energy and b), oh yeah, there turns out to be a handsome federal tax credit in the Inflation Reduction Act which would substantially reduce the cost to big tech of buying the energy generated by those plants. That some see Microsoft's embrace of the site of the worst nuclear accident in US history as a metaphor for AI's future impact on humanity does not appear to be discouraging the company. JL

Casey Crownhart reports in MIT Technology Review:

Three Mile Island nuclear power plant's Unit 2 reactor, suffered a meltdown in 1979 in the most significant nuclear accident in US history. The site, in Pennsylvania, is also home to Unit 1, which generated electricity for decades. The owner announced last week that it plans to reopen the plant, signing a deal with Microsoft which will purchase the plant’s entire electric generating capacity over the next 20 years to run the company’s data centers in the region. Federal tax credits in the Inflation Reduction Act for existing nuclear plants are key.  An 835-megawatt plant running at 96.3% capacity (the plant's owner's figure) and a $15-per-megawatt-hour tax credit adds up to $100 million each year.  Big tech companies need lots of energy. Bringing old nuclear plants onto the grid seems a way to meet demand.
Nuclear power is coming back to Three Mile Island. That nuclear power plant is typically associated with a very specific event. One of its reactors, Unit 2, suffered a partial meltdown in 1979 in what remains the most significant nuclear accident in US history. It has been shuttered ever since.

But the site, in Pennsylvania, is also home to another reactor—Unit 1, which consistently and safely generated electricity for decades until it was shut down in 2019. The site’s owner announced last week that it has plans to reopen the plant and signed a deal with Microsoft. The company will purchase the plant’s entire electric generating capacity over the next 20 years.  

This news is fascinating for so many reasons. Obviously this site holds a certain significance in the history of nuclear power in the US. There’s a possibility this would be one of the first reactors in the country to reopen after shutting down. And Microsoft will be buying all the electricity from the reactor. Let’s dig into what this says about the future of the nuclear industry and Big Tech’s power demand.  

Unit 2 at Three Mile Island operated for just a few months before the accident, in March 1979. At the time, Unit 1 was down for refueling. That reactor started back up, to some controversy, in the mid-1980s and produced enough electricity for hundreds of thousands of homes in the area for more than 30 years.

Eventually, though, the plant faced economic struggles. Even though it was operating at  relatively high efficiency and with low costs, it was driven out of business by record low prices for natural gas and the introduction of relatively cheap, subsidized renewable energy to the grid, says Patrick White, research director of the Nuclear Innovation Alliance, a nonprofit think tank. 

That situation has shifted in just the past few years, White says. There’s more money available now for nuclear, including new technology-agnostic tax credits in the Inflation Reduction Act. And there’s also rising concern about the increased energy demand on the power grid, in part from tech giants looking to power data centers like those needed to run AI.

In announcing its deal with Microsoft, Constellation Energy, the owner of Three Mile Island Unit 1, also shared that the plant is getting a rebrand—the site will be renamed the Crane Clean Energy Center. (Not sure if that one’s going to stick.)  

The confluence of the particular location of this reactor and the fact that the electricity will go to power data centers (and other infrastructure) makes this whole announcement instantly attention-grabbing. As one headline put it, “Microsoft AI Needs So Much Power It's Tapping Site of US Nuclear Meltdown.”

For some people in climate circles, this deal makes a lot of sense. Nuclear power remains one of the most expensive forms of electricity today. But experts say it could play a crucial role on the grid, since the plants typically put out a consistent amount of electricity—it’s often referred to as “firm power,” in contrast with renewables like wind and solar that are intermittently available.

Without guaranteed money there’s a chance this reactor would simply have been decommissioned as planned. Reopening plants that shuttered recently could provide an opportunity to get the benefits of nuclear power without having to build an entirely new project. 

In March, the Palisades Nuclear Plant in Michigan got a loan guarantee from the US Department of Energy’s Loan Programs Office to the tune of over $1.5 billion to help restart. Palisades shut down in 2022, and the site’s owner says it hopes to get it back online by late 2025. It will be the first shuttered reactor in the US to come back online, if everything goes as planned. (For more details, check out my story from earlier this year.)

Three Mile Island may not be far behind—Constellation says the reactor could be running again by 2028. (Interestingly, the facility will need to separately undergo a relicensing process in just a few years, as it’s currently only licensed to run through 2034. A standard 20-year extension could have it running until 2054.)If Three Mile Island comes back online, Microsoft will be the one benefiting, as its long-term power purchase agreement would secure it enough energy to power roughly 800,000 homes every year. Except in this case, it’ll be used to help run the company’s data center infrastructure in the region.

This isn’t the first recent sign Big Tech is jumping in on nuclear power: Earlier this year, Amazon purchased a data center site right next to the Susquehanna nuclear power plant, also in Pennsylvania.

While Amazon will use only part of the output of the Susquehanna plant, Microsoft will buy all the power that Three Mile Island produces. That raises the question of who’s paying for what in this whole arrangement. Ratepayers won’t be expected to shoulder any of the costs to restart the facility, Constellation CEO Joe Dominguez told the Washington Post. The company also won’t seek any special subsidies from the state, he added.

However, Dominguez also told the Post that federal money is key in allowing this project to go forward. Specifically, there are tax credits in the Inflation Reduction Act set aside for existing nuclear plants. 

The company declined to give the Post a value for the potential tax credits and didn’t respond to my request for comment, but I busted out a calculator and did my own math. Assuming an 835-megawatt plant running at 96.3% capacity (the figure Constellation gave for the plant’s final year of operation) and a $15-per-megawatt-hour tax credit, that could add up to about $100 million each year, assuming requirements for wages and price are met.

It’ll be interesting to see how much further this trend of restarting plants might go. The Duane Arnold nuclear plant in Iowa is one potential candidate—it shuttered in 2020 after 45 years, and the site’s owner has made public comments about the potential of reopening. 

Restarting any or all of these three sites could be the latest sign of an approaching nuclear resurgence. Big tech companies need lots of energy, and bringing old nuclear plants onto the grid—or, better yet, keeping aging ones open—seems to me like a great way to meet demand.

But given the relative rarity of opportunities to snag power from recently closed or closing plants, I think the biggest question for the industry is whether this wave of interest will translate into building new reactors as well.