The Looming Power Crunch: Can Nuclear Energy Power our Digital Future?

Data centers are the beating heart of our digital economy, powering everything from the apps on our phones to the algorithms driving AI innovation. However, as these centers continue to expand, the pressure on our energy infrastructure is reaching a tipping point. Nowhere is this more apparent than in regions like Phoenix, Arizona.

Over the past three years, Arizona has seen a data center boom, especially in areas like Phoenix, Goodyear, and Mesa. With 587 megawatts of capacity and another 267 MW under construction, Phoenix has risen to become the fifth-largest data center market in the world, according to JLL. In 2021 and 2022, Phoenix ranked among the top three fastest-growing data center hubs, according to CBRE.

Yet, with this explosive growth comes a significant challenge: power. “It’s not at the doorstep of Arizona, but I can tell you right now that train is coming to this market,” said Michael Ortiz, CEO of Layer 9 Datacenters, at the recent DICE Southwest 2023 event. He added a stark warning, “If we don’t get smart about it, this market is going to face a Jake Brake the same as in Virginia where Dominion Energy is saying there’s no new power for the next three and a half years.”

Given this context, it’s no wonder that the energy conversation is shifting to alternative, sustainable sources. While renewables like solar and wind are ramping up, there’s growing curiosity about nuclear power. Could nuclear be the dominant energy source for data centers by 2040? I know when people hear the word “nuclear’ – their mind immediately races to Chernobyl or Fukushima. Yet —  just liked mobile phones have developed and changed over the years, so has nuclear technology. Is public perception lagging behind?

Let’s explore the possibilities of a nuclear-powered digital future…

The Case Against Nuclear Dominance by 2040

1. Public Perception and Safety Concerns: Despite technological advancements, nuclear power still carries a significant stigma. Events like Chernobyl and Fukushima left a deep mark on public consciousness, and fears of a similar catastrophe could hinder nuclear adoption. Overcoming this public sentiment would require substantial efforts in education and communication.
2. Regulatory Hurdles: Nuclear energy faces long lead times and complex regulatory approvals. Even with new legislation aimed at streamlining the process, nuclear plants often take decades to build, making it difficult to scale this energy source rapidly enough to meet the data center industry’s growing needs by 2040. Also, see A. Public pushback can play a role in regulatory reticence.
3. Competition from Renewables: Solar and wind power, coupled with advancements in battery storage, are becoming increasingly cost-effective. As these technologies become more scalable, they pose a significant challenge to nuclear energy, which is still associated with high upfront costs and longer development timelines.
4. Infrastructure and Investment Requirements: Building nuclear power plants, especially the advanced Small Modular Reactors (SMRs) that are being touted as the future of nuclear energy, requires significant infrastructure investment. Given the competition from renewables, private and public sectors may be hesitant to pour resources into nuclear development at the necessary scale.
5. Energy Equity and Security Concerns: Co-locating data centers with nuclear plants raises questions about energy security and equity. The proximity of such facilities could spark local opposition, potentially leading to regulatory pushback or delays in approval.

The Case For Nuclear Power by 2040

1. Technological Advancements: SMRs (small modular reactors) promise to revolutionize the nuclear industry by offering enhanced safety features, lower costs, and greater scalability. If these technologies continue to evolve, nuclear power could become a more attractive option for data centers, providing reliable, carbon-free energy on demand.
2. Growing Energy Demand: Data centers are consuming more energy than ever, driven by the rapid adoption of AI, blockchain, and other technologies. As energy consumption continues to rise, the reliability of nuclear power may make it an appealing alternative to the intermittent nature of renewables.
3. Climate Change and Carbon Reduction Goals: With global climate goals pushing for drastic carbon reductions, nuclear energy’s low-carbon profile makes it a serious contender. Governments and industries alike are looking for ways to decarbonize their operations, and nuclear energy may provide a viable path forward.
4. Government and Private Sector Support: Bipartisan support for nuclear energy is growing, and significant investments from tech billionaires and other private sector players could accelerate the adoption of nuclear power. The tech sector’s growing influence may help to sway public opinion and speed up regulatory approval processes.
5. Regulatory Support: Legislative acts like the ADVANCE Act aim to simplify the nuclear reactor permitting process. The ADVANCE Act directs the NRC to develop guidance to license and regulate microreactor designs within 18 months. It also eliminates costs associated with pre-application activities and early site permits at DOE sites or other locations that are critical to our national security. While regulatory hurdles remain, these initiatives could reduce lead times and allow nuclear energy to play a larger role in the data center ecosystem sooner than expected.

Thinking Through the Probabilities

When we consider nuclear energy as a dominant power source for data centers by 2040, it’s clear that multiple factors are at play. Technological advancements in SMRs and the growing energy demands of data centers create strong incentives for nuclear adoption. The pressure to meet climate change goals adds urgency to this conversation, as does the potential support from both governments and private investors.

However, the hurdles are substantial. Public perception, safety concerns, and regulatory delays are formidable barriers, not to mention the fierce competition from ever-cheaper renewables. Even if nuclear energy makes strides in the coming years, its path to dominance will be fraught with challenges.

Conclusion

Adjusting for both the optimism around nuclear technology and the significant barriers to its widespread adoption, a 25% probability that nuclear will become a dominant energy source for data centers by 2040 seems reasonable. The potential is there, but so are the obstacles. Maybe it’s time we have more serious discussions — particularly around the promise of SMRs — to power our digital future. Either way  — whether nuclear energy can overcome these challenges and outpace renewables remains to be seen. But one thing is certain: the energy demands of the digital world aren’t slowing down, and we’ll need every tool in the toolbox to keep the lights — and the servers (and the AI and the robots) — on.