Microsoft Deal Reopens Three Mile Island Nuclear Power Plant to Power AI

Pennsylvania’s defunct Three Mile Island nuclear power plant will be brought back online to meet Microsoft’s massive energy needs under an unprecedented deal announced Friday that will see the tech giant buy 100 percent of the company’s electricity for 20 years.

Restarting Three Mile Island, the site of the worst nuclear accident in U.S. history, would mark a bold step forward in the tech industry’s quest to find enough electricity to support the artificial intelligence boom. The plant, which Pennsylvanians thought was closed for good in 2019 because of financial problems, will be back online by 2028 under the agreement, according to plant owner Constellation Energy.

If approved by regulators, Three Mile Island would provide Microsoft with energy equivalent to powering 800,000 homes, or 835 megawatts. Never before has a U.S. nuclear power plant been returned to service after being decommissioned, and never before has the entire capacity of a single commercial nuclear power plant been allocated to a single customer.

But the economics of both the energy and computing industries are changing rapidly. Tech companies are scouring the country for energy that is both reliable and helps them deliver on their promise of powering AI developments with zero-emission electricity — fueling a nuclear power renaissance.

“The energy industry cannot be the reason that China or Russia beats us in AI,” said Joseph Dominguez, CEO of Constellation. “This plant should never have been closed. … It will produce as much clean energy as all the renewables (wind and solar) built in Pennsylvania in the last 30 years.”

The four-year restart plan will cost Constellation about $1.6 billion, he said, and is dependent on federal subsidies in the form of nuclear tax credits in the Inflation Reduction Act of 2022.

Constellation will also have to overcome steep regulatory hurdles, including intense safety reviews by the federal Nuclear Regulatory Commission, which has never previously authorized a reopening of the plant. The deal also raises thorny questions about federal tax breaks because the plant’s power would be produced entirely for a single private company, rather than a utility serving entire communities.

The partial meltdown at Three Mile Island in 1979 sent panic across the country and shockwaves through the nuclear industry. The unit Constellation plans to restart is next to the one that failed 45 years ago.

Constellation and Microsoft have come up with a new deal to address the country’s growing energy problem: The sprawling data centers that Microsoft and other digital giants need have become so large and energy-hungry that they are straining existing power sources across the country.

Constellation revealed months ago that it was exploring options for restarting Three Mile Island, which sits along the Susquehanna River. The news was met with mixed reactions. Nuclear safety advocates expressed concern. But some community leaders welcomed the development, seeing the potential for an economic boost for a struggling region. A study funded by the Pennsylvania Building & Construction Trades Council said the reopening would create 3,400 jobs at the plant and the companies that operate it and its employees, and generate $3 billion in state and federal taxes.

The Inflation Reduction Act tax credits are key to making the deal economically feasible, according to Constellation. They provide a credit for every megawatt-hour of nuclear power produced.

Constellation declined to provide details of the Microsoft deal or disclose the value of the tax breaks. Energy Secretary Jennifer Granholm has said in the past that federal subsidies could cut the cost of starting a new plant by as much as half.

Critics of the Three Mile Island deal are skeptical about the use of public subsidies for the project, saying utility ratepayers will inevitably suffer as Constellation recoups its investment. “Microsoft says it will buy all the nuclear power from Three Mile Island, but it wants the utility bills and taxpayers to foot the bill for the plant renovation,” said Henry Sokolski, a former deputy for nonproliferation policy at the Pentagon.

Sasha Luccioni, climate director at sustainable AI startup Hugging Face, said that while nuclear power could be part of the solution to tech companies’ greenhouse gas emissions, having one company acquire so much power shows how insatiable AI’s appetite for energy has become.

“It does not address the fundamental problems that by definition make current AI practice unsustainable,” she said of the agreement. “Instead of monopolizing decommissioned nuclear plants, we should focus on integrating sustainability into AI.”

Nuclear industry representatives have offered a different view of the deal, arguing that nuclear power is a sensible, zero-emissions solution that eases the strain on the power grid from data centers.

“Microsoft saw the value and used it to provide the power to run its business,” said Robert Coward, former president of the American Nuclear Society. “I would expect to see more deals like this… in the coming months and years.”

The announcement of the Microsoft deal follows Amazon’s agreement with Talen Energy to buy power produced by the financially troubled Susquehanna Nuclear Power Plant for a planned data center campus in Pennsylvania. That agreement has faced regulatory headwinds as regional utilities express concerns that their ratepayers will be left footing the bill for necessary grid upgrades.

Amazon’s plan has also raised concerns among clean energy advocates that tech companies are ceasing to be a driving force in the clean energy transition and are starting to exclude others by claiming such large amounts of clean electricity.

Dominguez says the Three Mile Island case is an example of how Silicon Valley’s out-of-the-box thinking will help stabilize the power grid for everyone. The power from the plant won’t go directly to Microsoft’s facilities but to a congested regional grid that serves 65 million people in 13 states and D.C., called the PJM Interconnection.

Nuclear power is considered “clean” because, unlike burning natural gas or coal to produce electricity, it does not produce greenhouse gas emissions. Building or restarting plants is expensive, and the industry has no long-term solution for the spent but highly radioactive uranium fuel rods.

“This agreement represents a significant milestone in Microsoft’s efforts to decarbonize the electricity grid as we deliver on our commitment to achieve negative carbon emissions,” said Bobby Hollis, Microsoft’s vice president of energy, in a statement.

Dominguez said other taxpayers using the PJM network will not face any costs, and Constellation will also not seek special subsidies from the state of Pennsylvania.

Constellation has already conducted extensive testing at Three Mile Island. It says most of its components are ready to go back into operation. “The plant is in extraordinary shape,” Dominguez said.

Three Mile Island isn’t the only nuclear plant the industry wants to revive. The owners of a plant in western Michigan called Palisades are also working to revive the dormant facility. The project has been approved for a $1.5 billion federal loan guarantee. The plant’s owner, Holtec, says it hopes to bring nuclear power from Palisades to the regional grid by the end of next year.

The Palisades move comes at the request of Michigan Gov. Gretchen Whitmer (D), as her state struggles to meet climate goals and generate adequate energy. The plant was slated for permanent closure when Holtec took it over in 2022. The company had planned to retire the facility but changed course after talks with the governor.

But that plan was scrapped Wednesday after federal nuclear regulators revealed that “a large number of steam generator tubes” may be faulty and require further inspection. Holtec said the finding does not change its plans. But some nuclear safety advocates say the company’s push to reopen the plant quickly is putting the public at risk.

The enormous costs and regulatory challenges of nuclear power aren’t deterring the tech industry from betting on it. In a remarkable turn of events for an industry that struggled to stay competitive just a few years ago and focused largely on closing plants, it’s now in expansion mode. In addition to seeking contracts to power existing plants, tech companies are also bullish on next-generation nuclear technologies.

Several companies are exploring the possibility of placing their facilities near small modular nuclear reactors that could power them directly. Such technology is in its infancy and has not yet been approved by regulators. That hasn’t stopped a company led by Microsoft cofounder Bill Gates from doubling down on its investment. A company called Terra Power began construction this year on a site that would be a small reactor in Wyoming.

Microsoft is also pursuing fusion power, a potentially abundant, cheap, and clean form of electricity that scientists have been trying to develop for decades—and most say it’s still a decade or more away from generating electricity. Microsoft has signed a contract to buy fusion power from a startup that says it can deliver it by 2028.