Data centers are expanding in every possible way. Companies around the world need more and more data center resources and operators are rushing to add capacity – both into existing structures and to build new facilities.
Either way, there’s another problem that’s causing data center operators headaches – power supply. Even as is the situation is not good. Both data center operators and utilities companies are struggling to get enough electricity towards the facilities. It’s a problem that will continue to torment the industry for the next few years.
The hunger for power
A recent prediction by Gartner, for example, says that data center electricity consumption will rise 160% over the next two years. That’s a massive increase, especially considering all of the efforts that are going in for optimizing energy consumption of data centers. It won’t be enough, though. Gartner again predicts that 40% of existing AI-focused data centers will be constrained by power availability by 2027. This means they won’t be able to function at their full capacity.
“The explosive growth of new hyperscale data centers to implement GenAI is creating an insatiable demand for power that will exceed the ability of utility providers to expand their capacity fast enough. In turn, this threatens to disrupt energy availability and lead to shortages, which will limit the growth of new data centers for GenAI and other uses from 2026,” says Bob Johnson, VP Analyst at Gartner to DataCenterKnowledge.
Gartner estimates that in 2027 the needed power for AI data centers will reach 500 TWh. That would be 2.6 times the level it was in 2023. “Short-term power shortages are likely to continue for years as new power transmission, distribution and generation capacity could take years to come online and won’t alleviate current problems,” says Johnson.
These realities are forcing operators to be more proactive with finding solutions. Some of them require the investing into new power projects. Other solutions are entering in partnerships and long-term power delivery agreements with providers. This is also a way for operators to have a better predictability over the energy prices.
“Significant power users are working with major producers to secure long-term guaranteed sources of power independent of other grid demands. In the meantime, the cost of power to operate data centers will increase significantly as operators use economic leverage to secure needed power. These costs will be passed on to AI/GenAI product and service providers as well,” says Johnson.
What about sustainability?
The data center industry prides itself as being one of the leaders when it comes to sustainability and the share of green energy being used. Unfortunately, green energy is not nearly enough to cover all the power needs of data centers. They require 24/7 availability, predicable supply and no disruptions. Those are things that can’t be fully covered by green sources, for example, solar or wind. So, that’s why operators are building diverse supplies. The negative side of this is some sustainability goals will suffer as a result.
“The reality is that increased data center use will lead to increased CO2 emissions to generate the needed power in the short-term. This, in turn, will make it more difficult for data center operators and their customers to meet aggressive sustainability goals relating to CO2 emissions,” adds Johnson.
So, while data center operators are re-evaluating their sustainability goals, they also have to still solve the power supply issues. And this is where nuclear power emerges as a possible solution and a prime candidate.
Is it time to go nuclear (again)?
Data center firms are known for their green investments, so a shift to nuclear might seem a bit counterproductive. Unfortunately, they don’t have much of a choice. Green energy is dependent on location and other factors and while for a long time data centers could be built in locations to compensate for that, things are changing. Available land, regulations and demand are forcing operators to build data centers everywhere they can.
“Data centers are becoming increasingly energy hungry and can’t keep relying solely on the grid. However, many zero-carbon energy systems are location-dependent, leaving nuclear energy a viable option. Even if they were to use coal or gas plants, those are also location-dependent. Nuclear power is the best solution because it isn’t tied to specific locations and provides the most consistent energy output,” says James Walker, CEO of microreactor company Nano Nuclear to DataCenterDynamics.
There are a lot of such companies popping up now. They are developing micro nuclear reactors operators can setup on location. It’s an alternative as opposed to relying only on on-site green energy solutions.
And big companies flocked to these ideas. Earlier in 2024 Amazon signed an agreement with Talen Energy to buy a 960MW data center powered by a local nuclear plant in Pennsylvania. Basically, Amazon would power the entire campus by the plant without the need to use the main grid for additional energy. Unfortunately for the company, the Federal Energy Regulatory Commission voted against the request, DataCenterKnowledge reported.
“We remain committed to continue innovating and advancing carbon-free energy solutions with companies like Talen Energy to power data center operations in the United States and the many technologies supporting our customers and our daily lives,” Duncan Neasham, an Amazon spokesperson said and added the company intends to go forward with the Talen project.
Why was the project voted down? Local energy companies complained it was unfairly benefiting both AWS and Talen. Both companies intend to continue their partnership, which means they will have to make changes to the project in order to get it accepted.
Google also is going nuclear. It has signed an agreemend with Kairos Power to build up to seven SMRs (small modular reactors) for a total of 500MW of power, DataCenterFrontier reports. The first unit has to be online in 2030 and the rest – by 2035. So, it will be a while before these SMRs actually start solving the power hunger.
“To accelerate the clean energy transition across the U.S., we’re signing the world’s first corporate agreement to purchase nuclear energy from multiple small modular reactors to be developed by Kairos Power. This agreement is a key part of our effort to commercialize and scale the advanced energy technologies we need to reach our net zero and 24/7 carbon-free energy goals and ensure that more communities benefit from clean and affordable power in the future,” wrote Google’s Senior Director of Energy and Climate, Michael Terrell in a company’s blog post.
Kairos Power will have to develop, construct and then operate the SMRs. It will then sell all of the needed services and energy to Google under a PPA (Power Purchase Agreement). “Having an agreement for multiple deployments is important to accelerate the commercialization of advanced nuclear energy by demonstrating the technical and market viability of a solution critical to decarbonizing power grids while delivering much-needed energy generation and capacity. This early commitment from Google provides a strong customer demand signal, which reinforces Kairos Power’s continued investment in our iterative development approach and commercial production scale-up,” Jeff Olson, Kairos Power Vice President says.
But wait, there’s more…
Microsoft is the next big name now backing nuclear power. In September 2024, the company said it will help revive the nuclear power plant on Three Mile Island. There is a power plant there which was retired years ago as part of the green transition. But said green transition is not fast enough and it can’t keep up with the rise of the demand for power. It’s a trend that has been going in a lot of sectors and forces the renewed talk about nuclear power in general.
If Microsoft’s project is successful, the company will take the entire capacity of the plant. All 837MW will go to Microsoft’s data centers in the state of Pennsylvania along with Chicago, Virginia and Ohio. That’s a lot of power that’s going to solve plenty of issues for Microsoft in the region.
“Given all of the demand that we’re seeing from data centers, and the compression of supply and available sites ready to go, it’s creating even more of a premium on other industries outside of data centers to try to lock up low-cost renewable generation,” says NextEra CEO John Ketchum. He adds, that the company is also contemplating on restarting its nuclear plant in Duane Arnold due to the strong interest from data center operators.
And this is a trend that’s not happening only in the US. In Taiwan, TSMC has also said it is “very open” to the usage of nuclear power to cope with the demand for power. And in other regions around the world, Europe included, the nuclear debate is back on track. Many countries are debating whether or not to stop their planned nuclear power plant shutdowns and some are even reviving facilities like in the US.
Is going back to nuclear power going to solve the data center power demands? Not by itself. But it will add much needed extra balance to the grid. Let’s not forget it’s not only data centers whose power demands are rising. Nuclear power, including SMRs are a part of the solution. They will solve some issues, but will introduce new ones – like dealing with the waste, high initial costs, etc. Despite all of this, industries around the world are also increasing their energy demand, so work has to continue in all areas – energy efficiency optimization, sustainable energy sources, grid improvements, nuclear plants, etc. Only a complete effort on all fronts will achieve the intended long-term results.