Nuclear deals may ease AI’s real electricity bottleneck, but who pays for data center demand?

Tech turns to existing reactors

Constellation plans to spend more than $4.3bn upgrading 11 reactors in Illinois, Pennsylvania and New Jersey. Neither company’s deal involves building a new reactor; both rely on generating more power from existing plants.

Microsoft has contracted to buy electricity for 20 years from the undamaged reactor at Three Mile Island, which is being brought back into service. The US Department of Energy is offering up to $4.4bn in loans to support restarting three closed plants, with a goal of restoring about 2.25 gigawatts.

More demand despite efficiency

For much of the past decade, the industry focused on efficiency, including improved chips, smaller models and better cooling. Modern AI chips can perform more computation per unit of electricity than earlier generations.

But efficiency may not lower total energy use if cheaper computing leads to more demand. In 1865, William Jevons noted that more efficient steam engines led Britain to burn more coal as new uses for power emerged. The International Energy Agency estimates global data center electricity demand will more than double to about 945 terawatt-hours by 2030, even with continued efficiency improvements.

Nuclear power takes time

A new large reactor can take a decade or longer to move from a decision to producing electricity. Technology companies are investing in small modular reactors for data centers, but many projects are not expected to deliver power until the early 2030s, and few such reactors have been built worldwide.

Who pays for capacity?

Capacity prices hit the regulatory cap in three consecutive auctions. PJM’s independent market monitor attributed about $29.4bn in capacity costs across the four latest auctions to data center demand. In the most recent auction, about $6.3bn was linked to that demand, including forecasts for facilities not yet built.

The Natural Resources Defense Council estimates that, if current trends continue, a typical PJM household could pay an additional $70 a month by 2028. Virginia has created a separate electricity rate class for data centers, Ohio has introduced minimum billing requirements, and Illinois is debating legislation.

Rules and responsibility debated

Public dissatisfaction with data centers is growing in recent US polling, with electricity bills among the leading concerns. The contrast between rising household costs and projected demand from facilities that may never operate has sharpened the debate over who should bear the expense.