Constellation Energy (NASDAQ:CEG) announced that it will restart TMI Unit 1 to provide 835 MW of carbon emission free nuclear power. Under an agreement with Microsoft, the computer system giant will purchase power from the restarted plant over a 20 year period in a deal worth an estimated at $16 billion over the life of the agreement.
According to news media reports, all of the reactor’s power generation capacity would be made available solely to Microsoft to power its data centers. It follows that one or more of the massive computing centers would be built within a economical distance to the plant for private wire connections.
Image: Constellation
Shares of Constellation Energy rose after the company signed a new deal with Microsoft (MSFT) to provide it with clean energy to satisfy the tech giantâs electricity needs for its cloud computing and AI data centers. The stock closed Friday 9/21/24 at $255/share up from $208/share on 09/19/24.
Sources told Reuters that Constellation plans to request a loan from the Department of Energy similar to what was given to the Palisades Nuclear Generating Station, which received a $1.5 billion conditional loan for a relaunch from the Biden administration.
DOE Energy Secretary has encouraged utilities with closed nuclear power plants to consider requesting financial assistance to reopen them as part of the Biden Administrationâs efforts to deal with climate change.
The only other closed nuclear plant on the near term horizon that might go down the path taken by Holtec at Palisades is the Duane Arnold Plant in Iowa. It is unclear whether any other closed reactors, like the twin units at Indian Point in New York are candidates to be reopened due to progress with decommissioning efforts.
Constellation plans to spend $1.6 billion to restore the plant, to revenue service and expects that to happen in 2028. Federal tax credits available to restart closed nuclear power plants will sweeten the deal for Constellation.
Constellation may seek an infusion of cash either from capital markets or issue stock to pay for its costs to refurbish the plant and to repay the loan if it gets one from DOE. The firm has a market cap of $80 billion. According to its end of year financial report for 2023, the firm had $24.9 billion in revenue from all operations and pretax income of $2.4 billion.
The utility said that while it has not yet submitted a license application to the NRC, it expects to complete the licensing process by 2027. It will then pursue licensing to keep the plant open through 2054. The NRC was, as is usual, noncommittal when asked by the news media about licensing timelines for projects that have not yet been submitted to the agency.
The Unit 1 reactor is located adjacent to TMI Unit 2, which shut down in 1979 and is in the process of being decommissioned by its owner, Energy Solutions. TMI Unit 1 is a fully independent facility, and its long-term operation was not impacted by the Unit 2 accident.
To prepare for the restart, significant investments will be made to restore the plant, including the turbine, generator, main power transformer and cooling and control systems.
The reactor was shut down five years ago due for economic reasons and not due to any mechanical faults with the reactor or any of its systems. In its last year of operation, the plant was producing electricity at maximum capacity 96.3 percent of the time â well above the industry average.
The plant had an annual payroll of about $60 million and employed more than 600 full-time workers, in addition to the 1,000 highly skilled, mostly union craftspeople that supported the plantâs biennial refueling outages. Constellation purchased TMI Unit 1, in 1999.
The Restart Effort Faces Significant Challenges
There are multiple challenges, mostly technical, and following their resolution, regulatory concerns dominate the restart decision especially as the NRC has no experience conducting a safety evaluation of a proposal to restart a nuclear reactor that was shut down.
The NRC is working through the regulatory issues related to the restart of the Palisades nuclear plant in Michigan. The NRC has the last word on deciding whether to issue a license to restart the plant. Note that so far the power purchase agreements that will likely attach to the restart of the plant in Michigan donât involve data centers.
A key issue will be the condition of the steam generating system. The potential problem with the steam generator is particularly important as this is the system that gets the heat, in the form of super-heated steam, out of the reactor and into the turbine to generate electricity.
The way it works is that hundreds of tubes filled with water are inside the system which is outside of the reactor. The tubes are surrounded by the steam coming off the reactor heats the water in the tubes turning it to steam. This is the steam, created in physical isolation from contact with the steam coming out of the reactor, that drives the turbines that generates electricity. In a PWR this system prevents any radioactivity from the reactor steam from getting into the turbine.
If the steam generator tubes have leaks, they have to be plugged or replaced, and if too many of them are in bad shape, the entire system has to be ripped out and replaced, which is easily a $200-400 million project.
This is the problem that torpedoed the SONGS plant in California and forced the utility owning the twin reactors there to shut down rather than replace the steam system and also apply for a 20 year license extension.
Constellationâs technical assessment of the condition of the steam generator will be double checked by the NRC as part of the license application review process. Constellation says that an assessment of the steam generator and other nuclear and non-nuclear equipment has been underway for some time which will speed up the restart process.
As noted by Constellation, the main transformer in the switchyard, and probably other equipment may have to be replaced, and these items have long lead times for delivery.
The nuclear fuel that was in TMI-1 when it was shut down five years ago was removed at the time the plant was closed and has long since cooled off well beyond the point that it can be re-used. New fuel will need to be ordered to power the reactor.
Constellation is the countryâs biggest nuclear fleet operator with 14 sites in revenue service. Yet, despite its size, the utility, like any other contractor, must deliver on its promises to Microsoft which, given the rapid pace of growth of its energy gobbling AI data center related businesses, is likely to be an impatient customer.
& & &
Amazon to Hire Expertise in Small Nuclear Reactors
Data Center Dynamics (DCD), a trade publication serving the data center industry, reports Amazon Web Services (AWS) is hiring for data center âprincipal nuclear engineerâ to evaluate SMRs and nuclear fuel strategy roadmaps. (AWS) said it is hiring a principal nuclear engineer to join its data center engineering power generation solutions team.
According to DCD the previously unreported job listing mentions working with external partners to influence the design of âoperationally efficient and safe modular nuclear plantsâ to support its growing cloud power demands.
The new expertise to be hired by AWS is expected to have experience with the design and operation of both utility-scale and small modular (SMR) nuclear power plants, and will build the âinternal and external nuclear product and fuel strategy roadmapsâ for AWS data centers.
The role will also involve doing due diligence on âspecific power projects,â and building relations with the US Department of Energy and regulatory bodies.
âThe candidate must navigate the permitting and regulatory processes to help AWS deliver capacity-enabling projects,â the listing states.
Last December Microsoft hired Archie Manoharan as director of nuclear technologies, joining from micro modular reactor company Ultra Safe Nuclear, and Erin Henderson as head of nuclear development acceleration, joining from the Tennessee Valley Authority.
IT Firms will not invest in nor pay for construction of SMRs
The big IT platforms are at loggerheads with the Department of Energy and the nuclear utilities over who pays for new power generation capacity for data centers. The IT platforms, e.g., Microsoft, Amazon, Goggle, etc., want the utilities to restart the old reactors, or build new smaller ones, e.g., 300 MW, instead of full size units at 1,000 MW or more.
However, they donât want to pay for the new builds, nuclear or gas fired generation, nor for the grid connections to their data centers from the power stations, e.g., use of private wire connections. This stance has produced very significant push back from grid operators.
The demand for power for data centers by the IT platforms shifts the risk for construction to rate payers leaving the only obligation for the IT platforms is to pay for the power if and when it becomes available.
Lastly, as a practical matter, the electric utility industry will likely quickly bring new gas fired power plants online to serve data center power needs as the construction timeline of even the small modular reactors (SMRs) are unlikely to break ground until close to the end of this decade. Restart dates for f Palisades or TMI-1 to enter revenue service, in a best case scenario, are also on a similar timeline.
Microreactor developer Oklo has signed several nonbinding agreements with data centers to be powered by its design which is claimed to be able to provide 15-50 MW of electrical power.
Separately, Oracle indicated it wanted to power its data centers in the form of SMRs but declined to name the vendor or the location of the data centers or the SMRs.
# # #
