Time to go nuclear? Inside the battle to power AI
December 16 – It is unlikely that many people stop to think about power consumption as they make AI-generated cat videos on their phones.
But what happens in the virtual world has real-world consequences. Every cat video relies on processors that hum away inside data centres. These data centres, in turn, require huge amounts of electricity, as well as water for cooling. Even before artificial intelligence began to take off, grids were coming under strain around data centre clusters, such as Virginia, Dublin and Singapore. With the rise of power-hungry AI applications, the International Energy Agency expects global data centre power demand to do
The scramble for power is particularly intense in the United States, where the animal spirits of American capitalism are driving the frenetic development of AI applications.
Boston Consulting Group projects that by 2030 data centre power demand will rise to 100-130GW, compared to 45-50GW today. It warns that supply constraints will leave the U.S. facing a power shortfall of up to 80GW.
Given the long wait to connect to local power grids in some areas, tech companies are willing to consider radical solutions for private power sources.
Repurposed aircraft engines are being used to power data centres in the U.S. China has begun building an underwater data centre, using seawater to cool processors. Google announced in November that it will consider putting data centres in space.
Tech companies have historically claimed to seek green energy to meet power demands. This has somewhat slipped down the agenda, however, as finding enough power to enable AI to accelerate becomes the overriding priority.
“We are seeing a lot of gas deals, or potential gas deals,” says Kaam Sahely, partner at law firm Vinson & Elkins. “That was probably a place where, two years ago, there was some reluctance on the emissions, and I think that reluctance has definitely dissipated, if not been completely eliminated.”
A total of 114GW of new gas-fired capacity is in the development pipeline in the U.S. as of mid-2025 – more than double the level from a year earlier. Data centres account for almost half of the growth in the country’s forecasted rise in power demand, according to the IEA.
Some tech firms are backing carbon capture and storage as a technology that can mitigate emissions from data centres powered by fossil gas. Google, for example, announced in October that it had signed a first-of-its-kind agreement to support a gas power plant with CCS in Decatur, Illinois, which it says will reduce 90% of the plant’s emissions, compared with unabated gas, when it comes online in early 2030.
“By agreeing to buy most of the power it generates, Google is helping get this new, baseload power source built and connected to the regional grid that supports our data centres,” the company said.
CCS, however, is still a nascent and expensive technology. The NGO Beyond Fossil Fuels warns that new EU data centres, being built without CCS, could account for 39 million tonnes of carbon dioxide by 2030, equivalent to the annual emissions of Estonia and Lithuania.
Over the longer term, if tech companies want to mitigate the carbon footprint of data centres while ensuring a reliable power supply, other alternatives need to enter the mix. This is where the nuclear option comes into view.
Some hyperscalers have embraced conventional reactors: Microsoft agreed last year to restart Three Mile Island in Pennsylvania. But another option is to use small modular reactors. SMRs work in a similar way to conventional reactors, but on a smaller and more flexible scale.
An SMR “offers clean baseload power around the clock”, says Andrew Richards, vice president of government affairs at TerraPower, an SMR developer founded by Bill Gates. “Unlike renewables, it’s on all the time, so it just it fits in perfectly.”
Small-scale reactors have been used for decades in ships and submarines, but no SMR has come into commercial operation in western countries.
That may soon change. TerraPower’s first reactor is currently under construction in Wyoming. The company announced a collaboration with Sabey Data Centers in January to explore deploying SMRs at sites in the Rocky Mountains and Texas.
Google, meanwhile, signed a power purchase agreement with SMR company Kairos Power last year, with a first site to come online in Tennessee in 2030.
The Trump administration is seeking to accelerate the deployment of SMRs through streamlining regulatory processes. The UK government is also supportive. “The fact that you’ve got such a strong backing from a political standpoint to make it happen gives us a little bit more confidence that it will become real,” says Jeff Miller, Americas power and utilities sector lead at EY-Parthenon.
Yet some developers acknowledge uncertainty in how data centres will use SMRs.
“There’s a lot of hype around data centres right now as potential customers … and there’s many reasons why this makes sense,” says Thomas Jam Pedersen, CEO of Copenhagen Atomics. Yet he cautions that no data centre has actually completed a transaction for an SMR. And he believes that rather than using SMRs as a private power source, it makes more sense for data centres to procure power from SMRs that is delivered through the grid.
“If they’re connected to the grid, then the power plant doesn’t have to be right next to the data centre. It could be hundreds of kilometres away, because you use the grid as an intermediate. And the great thing about the grid is that you don’t have to worry too much about the power plant being available 100% of the time.”
Although several developers have raised billions of dollars, there is still lingering scepticism about SMRs. Many private infrastructure fund managers, which typically play a key role in financing major energy projects, remain unconvinced.
“A lot of this technology and the scaling of this technology is still a little unproven,” says Andrea Echberg, global head of the infrastructure team at investment firm Pantheon. “Whilst it looks, in theory, like a good solution at the moment, infrastructure investors are, I think, some way off.”
Then there are question marks over safety and security.
“When we’ve deployed nuclear facilities and nuclear reactors in the past, it’s always been in an isolated location, where we can have good visibility of the area around,” says Ross Peel, research fellow at King’s College London. But with SMRs potentially built alongside data centres in built-up areas, “it becomes a little bit more difficult to apply security in the same way”.
Peel believes SMR developers must include security considerations from the beginning of their design and planning process. However, there is a “spectrum” of attitudes towards security planning among developers, he warns.
And while SMRs offer a low-carbon solution, critics point to environmental hazards.
“Unexpected things can happen,” says Doug Parr, chief scientist and policy director at Greenpeace UK. He fears that more reactors, in more locations, increases the risks of accidents and incidents. Parr also laments the lack of a “deliverable solution” to the problem of waste and spent fuel from reactors.
Perhaps the biggest hurdle, though, is that SMR developers – even in the most optimistic scenarios – will struggle to deploy units before the 2030s, too late to meet rapidly growing demand. Duncan Stewart, director of TMT research at Deloitte Canada, says: “That suggests that SMRs, as valuable as they may be longer term, don’t address the near-term question.”
He says another low-carbon technology that could help is geothermal power. Iceland, where around 30% of electricity comes from geothermal, is already a mini-hub for the European data centre industry. Microsoft is looking to tap into geothermal power in Kenya, while multiple companies are developing data centres around geothermal hotspots in the American West.
“As the compute task changes, one of the things that we’re seeing is that there are tasks that I need an answer in milliseconds, but a lot of the AI stuff we’re doing is much less latency-sensitive,” says Stewart, referring to the time needed for a server to process a request.
“All of a sudden, that means I can start putting data centres in a lot of places that previously I wouldn’t have thought of, and maybe near geothermal fields starts being an option.”
He cautions that geothermal is only a solution “at the margins”, but says “every percent helps”, given the struggle to meet demand.
Spencer Lamb, chief commercial officer at UK-based operator Kao Data, does see SMRs as part of the solution, but only over the longer term.
He suggests more immediate benefits could be achieved in Britain by incentivising data centres to move north, closer to the country’s offshore wind farms – a source of power that is often curtailed due to grid constraints. Data centres built in Scotland “would start to consume all those wasted curtailed green kilowatt hours,” he says.
Kate Hardin, executive director of Deloitte’s Research Center for Energy and Industrials, suggests nuclear power could meet around 10% of AI-related power demand in the U.S. “We see nuclear over time – not tomorrow, but over time – helping to meet this window that we’re trying to close.”
Hardin notes that the mix of power will depend on the type of data centre and its location, and points out that data centres are increasingly looking to run some of their most power-intensive applications outside of peak times, lessening pressures on local grids.
A data centre typically takes 18-24 months to get up and running, she says, which is well-matched to the development timeline for a solar-plus-storage project. Renewables are also considerably quicker to deploy than a gas-fired alternative. Supply chain delivery bottlenecks mean a gas turbine ordered today will typically not be ready until around 2030.
Few operators would bet only on intermittent renewables – even with storage – to provide power, given that data centres typically demand 99.999% uptime.
Yet, when combined with a grid connection or other back-up, renewables with storage can make abundant commercial sense, even if tech companies are no longer as committed to net zero as they might once have claimed.
“Is there still a piece of this puzzle that’s solved by renewables?” asks Hardin. “I would say yes.”
Source - Time to go nuclear? Inside the battle to power AI
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