Big tech companies are driving a nuclear resurgence, bringing shuttered facilities like Three Mile Island back online and announcing plans to build small modular reactors. The new data centers being built today require so much electricity that national power grids can’t keep up with them. Tech firms have worked out that they need to source their own power if they are to build the kind of data centers that will make them competitive in AI. The amount of power generated globally by nuclear power plants peaked in 2006, with new plant construction stagnating in the 1990s. The 2011 Fukushima disaster in Japan led to cancelled projects around the world. In Germany – Angela Merkel – a trained physicist - announced that Germany would phase out nuclear power and Siemens announced that they would withdraw entirely from the nuclear industry to focus on renewables. For a while it seemed that Iran and North Korea were the only countries – with a

suspicious interest in building new nuclear power stations. In most of the rest of the world, projects were delayed or cancelled due to public safety concerns, regulatory hurdles, financing obstacles, and fuel bottlenecks. It is not just the fear of disaster that slowed down nuclear energy, however. The global demand for electricity grew by just 2.2% in 2023, which was slightly less than the 2.4% growth seen the prior year. While there had been strong growth in China, India, and the developing world, advanced economies showed substantial declines in their need for new power stations. For much of the 20th century, America’s electricity demand had grown steadily, and utilities built power stations to keep up with the growing demand. Starting in the mid-2000s, the demand for additional capacity in the developed world flattened out. While the US economy and population continued to grow,

and while we continued to add new electrical devices to our homes, factories, lightbulbs, TVs, computers, and home appliances all became more and more energy-efficient, meaning that there was no real need to build new generation capacity. The growth of data centers over the last few years, driven by working from home, cryptocurrency mining, and now AI, boosted demand for electricity. As a side note – working from home – which increased the need for data centers – also reduced the amount of power being used overall, as the server racks at data centers are more energy-efficient than the office-based servers which businesses had relied on in the past. Other changes, however, like the rollout of electric vehicles in recent years and plans to reshore the semiconductor industry, further boost the demand for electricity in advanced economies. Big tech companies like Microsoft, Amazon, and Google are driving the nuclear revival, as to get new power-hungry data centers built in the US and Europe, they have to solve the problem

of power generation. Their net-zero pledges mean that the sources of power that they have pledged to use have to be low carbon, and they have already invested heavily in wind and solar, but their data centers still need a steady base load, so for big tech, investing in nuclear energy makes a lot of sense. If we look at the pledges that big tech firms have made, almost all of them have promised to reach net-zero carbon emissions by 2040. These pledges often involve transitioning to renewable energy sources, investing in carbon capture technology, and optimizing their operations and supply chains for reduced energy consumption. Their pledges are somewhat believable, as they are so profitable that they can actually afford to do this – unlike smaller, less profitable businesses. At the most extreme end of the scale, Microsoft pledged almost five years ago to be carbon negative by 2030, additionally promising that by 2050 they will have

entirely stripped all of the carbon they emitted over the life of the firm from the environment. As difficult as that goal will have sounded in 2020, it has only gotten more difficult over time, thanks to AI. Microsoft now says that they expect to consume five to six times more electricity than they had planned on when they first made that promise – but they are still sticking to their goal. The reason for the huge step up in energy consumption is that AI consumes an awful lot of power. A ChatGPT query – for example – uses about 10 times as much power to process as a simple Google search does, and generating a single AI image consumes the same amount of energy as fully charging a smartphone. Microsoft revealed earlier this year that its carbon emissions have increased by 30 percent since 2020 – so they are well off target. The data centers being planned or built today consume more power than can be bought from utilities,

and so - if big tech wants a lot of zero carbon power – their only realistic option is nuclear. Before we get to that let me tell you about this week’s video sponsor Gamma – a presentation tool that I have used to create many of the images in this week’s video. For businesspeople and marketers, presentations are the language of persuasion. If you present your ideas well they lead to favorable decisions and investments. A boring presentation on the other hand can put your audience to sleep. Gamma can be thought of as a modern alternative to PowerPoint, and if you are not a graphic designer but have a big idea to communicate, presentations just got a whole lot easier as Gamma can take simple text or a document and quickly turn it into an impressive presentation in seconds. Just start with an idea or a lot of ideas, tell the computer and Gamma takes it from there, creating the perfect deck for you.

I will definitely be using Gamma to make charts going forward, as it is so much easier and better looking than my old workflow. With Gamma, you are not stuck with the 16x9 format that other presentation software uses; you can use it to make vertical presentations or even modular websites. Visit gamma.app on your computer to sign up for a free account or click on the link in the description below. Three Mile Island in Pennsylvania was the scene of the worst commercial nuclear accident in U.S. history when a cooling malfunction in 1979 caused part of the core to melt in Reactor 2, releasing radioactive gases and radioactive iodine into the environment. Schools near the reactor were quickly closed, pregnant women and small children were evacuated from the area, and residents were urged to stay indoors. Within a few days, 140 thousand people left the area. In the aftermath, an investigation found that the average radiation dose to people living within 10 miles of the plant was about equal

to that of a chest x-ray. Further studies found that the accident had no observable long-term health effects on those living near the plant. Nonetheless, it was a big scare. The Three Mile Island accident was a turning point in the growth of nuclear power. Prior to the incident, the number of reactors under construction globally had grown steadily almost every year, but, following the event, 52 planned nuclear reactors were canceled in the United States alone. At the time of the incident, 129 nuclear power plants had been approved for construction worldwide, but of those, only 53 were completed. The Chernobyl disaster in Northern Ukraine seven years later had an even bigger impact on public and political attitudes towards the safety of nuclear power and ended the growth in active reactors globally. Last month, it was announced that Constellation Energy will reopen a nuclear plant at Three Mile Island to provide power to Microsoft's

data centers. The plant being reopened is unit one – which was just decommissioned five years ago and unit two – where the accident occurred in 1979 - will still remain closed. The recommissioned plant at Three Mile Island will provide more than 800 megawatts of power, all of which has been bought by Microsoft – from Constellation Energy under a 20-year power purchase agreement. The plant is expected to be brought online in 2028 and to run until at least 2054. The location of the datacenters that will use the electricity has not yet been announced. Constellation says that the deal will create more than three thousand jobs, add sixteen billion dollars to Pennsylvania’s GDP and bring in at least $3 billion dollars in state and federal taxes while providing safe, reliable, carbon-free electricity that helps reduce emissions. Not to be outdone, Amazon last week announced that they would be spending more than $500

million dollars to support development of four next-generation “small modular reactors.” They took a stake in X-energy, an SMR developer. Google additionally agreed to buy 500 megawatts of power from six to seven small modular reactors, which will be built by Kairos Power. None of these companies revealed the financial details of the agreements or where in the U.S. the plants will be built. The idea behind Small Modular Reactors – known as SMRs – is that the components of each unit can be small enough to be mass-produced on an assembly line, making them cheaper to manufacture than full-size reactors. Each power plant could start with just one reactor and add more as needed. SMRs can, in theory, be sited in locations not suitable for larger nuclear power plants. The US Department of Energy defines SMRs as advanced nuclear reactors with a power capacity of up to 300 megawatts per unit, which

is about one-third of the generating capacity of traditional nuclear power reactors. Rolls Royce’s SMR design generates 470 megawatts – which is actually bigger than many of the first-generation nuclear reactors that were built in the UK. According to Goldman Sachs, data center power demands will grow 160 percent between now and 2030. They say that when this is combined with the electrification of transport and the reshoring of manufacturing, electricity demand can be expected to double. Since 2021, American companies have announced plans to spend more than 500 billion dollars on factories for semiconductors, batteries, solar panels, and more. As great as this sounds, there is not sufficient generating capacity to power all of these factories today. The climate author Solomon Goldstein-Rose argued in a 2001 TED talk that while the world is on track to replace all fossil fuel power plants by 2050, that this would not be good enough as we

are likely to need five times as much power in 2050 as we use today if the world is actually switching to electric vehicles, electric heating, and electrifying various industrial processes like steelmaking and concrete manufacturing. He points out that over 700 million people today have no access to electricity worldwide, and that billions more have access to only small amounts of intermittent power and that providing these people access to energy would lift them out of poverty. His estimate of needing five times as much power came before these AI data centers were being built. Nuclear power is well suited to data centers because it provides a reliable source of power around the clock, unlike wind and solar. There are a few excellent YouTube videos by Practical Engineering explaining the importance of a base load on a power grid and why it is much harder than you would expect to connect solar and wind power to our existing electrical grids. I was surprised to learn that many grid-tied solar

systems shut down whenever the grid goes down – which is not really what you would want. This happens both for the safety of utility workers and because many of the inverters are grid-following inverters which need to sense the voltage of the grid so that they can synchronize their output to match the grid's frequency and phase. A more obvious barrier to a 100% wind and solar grid is the intermittency of these power sources. The wind doesn’t always blow, and the sun doesn’t always shine — on top of that, the windiest and sunniest places are not all that close to most major population centers. Grid-scale battery backup has been put forth as a solution to this problem, but it is by no means a perfect solution as rapid cycling degrades the lifespan of utility-scale batteries. A 2021 wind drought in Europe meant that windmills generated significantly less electricity than was expected, sending power prices to record

highs as utilities had to scramble to find alternative fossil fuel power sources. This map shows the potential for solar power in different parts of the world, and you’ll note that Canada and Western Europe are particularly ill-suited to solar generation. British businesses – as an example - already face the highest energy costs in the developed world - and if the new government is hoping to boost growth - dealing with the weak energy infrastructure might be a good start. Unfortunately, Britain is not only ill-suited for solar and wind generation, it is also the most expensive place in the world to build a new nuclear power station. According to Sam Dumitru, Hinkley Point C, which is currently being built, will cost 6 times more to build per megawatt than its South Korean equivalents. France and Finland, which use the same reactor design, manage to build them for about 50% less per megawatt.

South Korea has kept their costs lower by building fleets of reactors – benefiting from economies of scale. The same reactor as is being built in the UK is cheaper to build in Finland and France because of a simpler approvals process. UK regulations required a more complex planning process and requested 7000 changes to the original design – essentially making it entirely bespoke. One of the alterations required to make it through the planning process involved spending tens of millions of pounds on underwater loudspeakers to scare fish away from the cooling intake. This “fish disco” – is not required in other countries. Even outside the UK, nuclear power can be extremely expensive and time-consuming to build. It is much more expensive than wind and solar, and while the climate case for nuclear is strong, the challenge of safely storing nuclear waste has not been entirely resolved. There is of course plenty of controversy over whether nuclear power can be considered clean.

energy or not, mostly driven by concerns around nuclear waste, nuclear weapon proliferation, and the risk of accidents. A number of studies show that coal power plants output more radiation than nuclear power plants do. The fly ash emitted when burning coal for electricity carries 100 times more radiation than a nuclear power plant producing the same amount of power. According to the US office of nuclear energy, the use of nuclear power in the United States has reduced CO2 emissions equivalent to removing 100 million cars from the road, and nuclear power plants produce more electricity on less land than any other clean-energy source. They say that all of the used nuclear fuel produced by the US nuclear energy industry could fit on an American football field at a depth of less than 3 yards. Because this video is about AI and energy, I thought it might make sense to use Microsoft Copilot to convert those measurements into something more understandable for an international audience.

I’m not actually joking – it came back with the reply that this volume is equivalent to eighteen Olympic-sized swimming pools filled up with Tesla’s… - so yeah – it’s a big box I guess… The US office of nuclear energy goes on to say in their report that a lot of that waste could be reprocessed and recycled and that many of the new reactor designs can operate on used fuel. Now, there are not enough decommissioned nuclear reactors – like Three Mile Island - for big tech to resurrect, but they have shown a growing interest in using small modular reactors, the problem with that is that there are only three operational SMRs in the world today, one in China, one in Russia, and one in India, three more are under construction and 65 are still in the design stage. GE Vernova, Rolls Royce and Westinghouse all have SMR designs as do a long list of startups - like

the Bill Gates-backed TerraPower, which broke ground on its first plant in Wyoming this summer, X energy, which is backed by Amazon, and Oklo, which counts Sam Altman of OpenAI among its backers. Bill Gates has invested more than a billion dollars in TerraPower, which is working to develop SMRs in partnership with Warren Buffett’s utility company PacifiCorp. France gets around 70% of its electricity from nuclear energy – which is the highest percentage in the world, but the United States generates the most nuclear power overall – mostly through plants that began construction in the 1960s and 70s. There are more SMRs being planned in the United States than anywhere else today, largely because of the tech industry. While promising, the technology behind SMRs is still unproven at scale, and a recent Wall Street Journal article asked, “What customer would pay the higher price for a

first-of-a-kind project? And who would order enough to get an assembly line started?” The answer to that question today is obviously big tech – and while power plants can be thought of as boring infrastructure which might be difficult to finance – the fact that these data centers are needed for AI – which venture capital and retail investors are very excited about – means that AI companies can raise loads of cheap money from VC funds and pump it into building not only the data centers that they need – but also the nuclear power to run them on – as without sourcing your own power – you might be out of luck waiting for grid upgrades. Last month Microsoft teamed up with BlackRock to launch a $30 billion dollar fund to invest in artificial intelligence infrastructure. They told the press that the partnership would mobilize up to $100 billion dollars in total investment potential once debt financing was included and that the money would be invested to enhance AI supply chains and energy sourcing.

Microsoft said that they expect this trend to catch on with other tech firms and said that Microsoft might participate in all of them. Governments, after years of ignoring it, are also getting excited about nuclear power. During UN Climate Week, officials reaffirmed their commitment to triple the global output of nuclear power by 2050, and at the same event, fourteen large banks said that they were willing to finance these projects. Joe Biden recently signed a law with bipartisan support (which is almost unheard of in the United States today) to hasten the development of new nuclear energy projects. Historically, many Democrats opposed new nuclear plants, citing safety, environmental, and economic concerns; today, they see it as being critical to their goals of reducing greenhouse gas emissions and meeting the needs of a growing economy. The Department of Energy Loan Programs office has a 600-billion-dollar allocation of funds for renewables and advanced manufacturing – and this

can be used to fund new nuclear power projects. As an example of how much funding there seems to be - Bloomberg reported this summer that Sam Altman of Open AI was staking a sizable chunk of his personal wealth on a nuclear fusion startup which he says is key to an AI-enabled future… Nuclear fusion attempts to create energy not by splitting atoms but by smashing them together, which requires extreme temperatures and lots of power but, hypothetically, could output more energy than goes into it without creating the radioactive waste associated with today's nuclear fission reactors. While currently unproven as a workable option for power generation, nuclear fusion advocates claim that if successful, fusion has the potential to be a sustainable and abundant energy source. Sceptics on the other hand say that fusion is worse than Tesla Robotaxis as it is always just 20 years away. Most experts say that we're unlikely to be able to generate large-scale energy from

nuclear fusion any time soon, but Microsoft still signed a power purchase agreement with Altman’s company Helion earlier this year. Bloomberg reported that this deal caught some Helion employees by surprise, and they expressed doubts about the company’s promise to get a prototype running by year-end. Like most VC-backed startups, Helion seems to be aiming to move fast and break things, but is unfortunately being slowed down not just by the science but by the numerous complaints of harassment and gender discrimination. The fusion industry, which as I said is not hugely promising in the short term, has still managed to attract more than $7 billion in venture capital investment. A nuclear power resurgence may not be essential for AI to get off the ground, but when combined with the climate commitments big tech firms have made along with the power demands of electrified transportation and reshoring of manufacturing, it does seem to be happening. From

the perspective of big tech firms, nuclear power’s success would help calm the climate-driven fears about the extreme power demands of generative AI. And after that, it will be up to big tech to develop the AGI, which they – for some strange reason – are telling investors will kill us all. – which I have to say I’m firmly against. If you found today's video interesting, you should watch this one next. Don’t forget to check out our sponsor, Gamma, using the link in the description. Have a great day and talk to you in the next video, bye.

Big Tech is Going Nuclear!

Patrick Boyle is a hedge fund manager, a university professor and a former investment banker. 

This channel is all about quantitative finance. By subscribing you will see videos explaining what is happening in markets right now, you will learn about financial derivatives, corporate finance and how traders use quantitative tools like statistics. You will see interviews with some of the most interesting people in the financial industry.  In addition, you will see some longer form documentaries on the history of financial markets.

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Big Tech is Going Nuclear!

Big Tech is Going Nuclear!

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