Nuclear-Data Center Supply Deals on the Horizon: S&P Report

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According to a June 10 research note from S&P Global Ratings, data centers could drive 35 GW of additional load growth by the end of the decade. This presents opportunities for existing nuclear plants to secure supply deals with nearby data centers. Potential nuclear operators poised for these deals include Constellation Energy Group, PSEG Power, and Vistra.

The Electric Power Research Institute projects that data centers could consume 9% of the United States’ electricity generation by 2030, doubling today’s consumption levels. This increased demand is part of a broader trend, with electrification and hydrogen production also contributing to grid usage, according to S&P.

“While this demand narrative could be oversold, or may not result in corresponding supply additions due to infrastructure constraints, the undeniable fact is that demand is increasing for the first time in nearly two decades,” S&P noted. “Recognizing the demand surge, power prices in almost all markets are higher compared to 2023.”

Higher power prices are creating lucrative opportunities for nuclear operators to serve data center loads located nearby. By securing long-term power purchase agreements with rates above wholesale market prices, nuclear facilities can capitalize on this trend, while data centers benefit from savings on transmission and distribution grid charges, S&P explained.

Talen Energy’s deal with Amazon Web Services (AWS) may serve as a model. Talen built a data center near its Susquehanna nuclear energy plant in Pennsylvania and later sold the facility to AWS, along with a 10-year power supply contract.

S&P suggests that this model could be replicated by other nuclear operators like Constellation Energy, PSEG Power, and Vistra, which have dual-unit sites. Public Service Enterprise Group (PSEG) is currently in talks to supply data centers with capacity from its Hope Creek and Salem nuclear power plants in southern New Jersey, according to President, Chair, and CEO Ralph LaRossa in April.

“Nuclear complexes such as the Salem and Hope Creek generation stations are potential candidates. They have adequate interconnection, significant generation redundancies, and are ideally located to provide edge computing near load centers,” S&P commented.

Constellation, the largest nuclear operator in the U.S., is exploring the possibility of building advanced reactors at existing plants to power data centers. Vistra is reportedly in discussions with data center operators in Texas and Ohio.

While some data center co-location supply deals may involve gas generation, S&P expects announcements of new transactions in 2024.

However, some experts urge caution regarding data center co-location agreements. 

“The emergence of data center co-location at existing generation facilities is a business arrangement that raises questions that should be explored regarding issues of basic fairness for all customers on the grid,” Tony Clark, a senior advisor at the law firm of Wilkinson Barker Knauer and a former commissioner with the Federal Energy Regulatory Commission, told a House subcommittee this month.

“Under such an arrangement, the data center is directly served by an existing generator, taking some portion of the unit’s capacity out of the supply stack that was otherwise serving all customers in a regional grid,” he said. “Regulators and policymakers must scrutinize how these deals will impact other customers and the public interest at-large.”

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