Constellation Energy and Microsoft Partner on Three Mile Island Restart

(Refiles to fix typo in ‘companies’ in paragraph three)

(Reuters) – Constellation Energy and Microsoft (NASDAQ:MSFT) have signed a power deal to help resurrect a unit of the Three Mile Island nuclear plant in Pennsylvania, marking a potential first-ever restart of its kind, the companies announced on Friday.

Key regulatory permits for the plant’s new life, however, haven’t been filed, according to regulators.

Big tech has driven a sudden surge in U.S. electricity demand for data centers necessary for advancing technologies like artificial intelligence and cloud computing. Nuclear energy, nearly carbon-free and seen as more reliable than solar or wind, has become an appealing option for tech companies needing uninterrupted power and adhering to climate pledges.

“Nuclear plants are the only energy sources that can consistently deliver on that promise,” said Constellation Chief Executive Officer Joe Dominguez in a statement.

Constellation’s shares rose over 20% to $251.42 by early afternoon, with a more than 100% increase this year.

Power from the plant would offset Microsoft’s data center electricity use, the companies indicated.

A relaunch of Three Mile Island, which experienced a partial meltdown in 1979 at a different unit, still requires federal, state, and local approvals. Constellation has not yet filed an application with federal nuclear regulators to restart the plant.

“It’s up to Constellation to lay out its rationale for justifying the restart, so we’re prepared to engage with the company on next steps,” said Nuclear Regulatory Commission (NRC) spokesperson Scott Burnell.

Constellation anticipates the NRC review process to be completed by 2027.

BILLION DOLLAR BET

The deal aims to facilitate a revival of Unit 1 of the facility in Pennsylvania, which was retired in 2019 for economic reasons. Unit 2, which suffered the meltdown, will not be restarted.

Constellation plans to invest about $1.6 billion to revive the plant, expecting it to go online by 2028.

Reuters first reported on the potential restart in July. Sources indicated that Constellation hoped for federal support akin to the $1.5 billion conditional loan the Palisades Nuclear Generating Station received for a relaunch from the Biden administration.

Under the Constellation-Microsoft deal, Microsoft will purchase energy from the restarted plant for 20 years. The Three Mile Island unit is expected to provide 835 megawatts of electricity, enough to power about 700,000 homes.

A restart is anticipated to be challenging, but with soaring power demand, this almost carbon-free electricity source is garnering renewed support from tech firms.

“This agreement is a major milestone in Microsoft’s efforts to help decarbonize the grid in support of our commitment to become carbon negative,” stated Bobby Hollis, vice president of energy at Microsoft.

Microsoft has additionally signed a power purchase agreement with Washington-state fusion company Helion, expecting the plant to be operational by 2028, much sooner than many scientists predict fusion commercialization will occur.

Prominent tech executives, including OpenAI CEO Sam Altman and Microsoft co-founder Bill Gates, advocate for nuclear energy as a solution to the rising power demands of data centers. Altman, as chair of nuclear startup Oklo, and Gates, co-founding TerraPower, highlight ongoing advancements in nuclear technology.

Nuclear plants accounted for about 18.6% of total electricity generation in the U.S. last year, according to Energy Information Administration data.

Power supply agreements with A.I. data centers are under increasing scrutiny. A similar deal between Talen Energy and Amazon (NASDAQ:AMZN) has faced opposition from electric utilities claiming it may increase customer costs or jeopardize grid reliability.

Financial details of the Microsoft-Constellation deal were not disclosed, and the companies declined to provide further information on the agreement.