The drive for clean energy — or at least the appearance of clean energy — is pushing energy-hungry Artificial Intelligence (AI) firms and hydrogen producers into the arms of a nuclear industry eager for profitable offtake contracts. On the face of it, these deals offer nuclear operators a chance to make more money for their megawatts than they can get on wholesale markets, where they often struggle to compete against cheaper power sources. In return, their energy-hungry customers can advertise their electricity consumption as “green.” But the deals that are being cooked up face resistance from grid operators and raise a number of practical and ethical questions.
This trend is being advanced in at least two ways in the US. One method involves co-locating an AI data center (typically cryptocurrency mining centers) or hydrogen hub “behind the meter” on the site of a nuclear power plant with an offtake agreement theoretically providing the customer with all its power needs via the operating nuclear plant.
A second method embraced by Constellation — the country’s largest nuclear operator — and Microsoft enables the computer giant to receive up to 35% in “environmental attributes” from nuclear power for a data center in Virginia via an hourly carbon-free matching platform. Together with recent “new wind and solar purchases,” Microsoft is “very close to its goal of operating the data center on 100% carbon-free electricity around the clock,” according to a Constellation press release.
Many Questions
These deals raise a lot of questions. When nuclear operators commit some, or all, of their capacity to an individual customer “behind-the-meter,” do they remain inside their regional wholesale transmission system, or opt out of it? If they opt out, how does the offtaker manage operations during a planned or unplanned nuclear power plant outage? If they remain inside the transmission system, how are the electricity flows and capacity payments handled? Should capacity dedicated to a single customer qualify for nuclear subsidies, which, after all, are aimed at greening the grid — in “front” of the meter?
Constellation and Microsoft have worked together for several years to pioneer the carbon-free technology and “are confident this agreement will demonstrate the value and impact of hourly matching in the fight to address the climate crisis,” said Constellation Executive Vice President and Chief Commercial Officer Jim McHugh.
Microsoft’s deal with Constellation is a way of ensuring low-carbon power when the wind and solar plants aren’t providing enough and “that’s why they’re calling it virtual hourly matching,” explains Tim Judson of the Nuclear Information Resources Service. “I assume Constellation is doing this at a premium to let Microsoft claim they’re getting zero-carbon energy.”
But Judson points out that while Constellation operates within PJM, and Virginia is within the PJM service territory, none of Constellation’s nuclear plants are in the “same transmission system subregion that this data center is in.”
It’s possible that side deals have been done through PJM to ensure the “virtual” delivery of nuclear electrons from another provider when they’re needed, but if that is the case none of the parties have made this public. “PJM cannot speak to the specific agreements between members and any other outside entities, or specific electrical flow from a generator. You would need to contact them directly,” PJM spokesperson Jeffrey Shields wrote in an email. Constellation didn’t respond to queries about the issue.
Proposed Projects
At least seven projects involving co-located data centers at nuclear sites have been proposed in the US, according to Judson, and there are more involving hydrogen hubs. One, at Talen Energy’s (two-unit) 2,400 megawatt Susquehanna nuclear plant in Pennsylvania, is already operating with a 50 MW “first phase” data center, with an option to add another 50 MW.
Talen isn’t revealing how its “behind-the-meter” deal is working with its crypto customer TeraWulf, but TeraWulf boasts that its Nautilus facility in Pennsylvania is “powered by 100% nuclear power” with a five-year “fixed power cost of only $0.02 per kilowatt hour.” PJM takes a dim view of such operations, particularly if the parties opt out of the transmission system altogether. Noting “significant interest in the use of co-located load configurations in PJM,” PJM recently issued guidance warning that co-located loads “must either be PJM Network Load [with applicable firm transmission service] or not PJM Network Load.” In the latter case, electricity from the grid would not be available to the “behind-the-meter” offtaker in the event of a supply disruption.
“There is no option to change between configurations unless it is a permanent change. For example, co-located load that elects to operate not as PJM Network Load cannot switch to a PJM Network Load configuration if the colocated Customer Facility [meaning the nuclear power plant] is unavailable.” And making a permanent change isn’t done overnight — studies are necessary to form the basis of an amended service agreement, the guidance points out.
In other words, you either play ball with PJM or risk electricity disruptions. But even remaining within the network carries financial and technical risks for co-located players. For example, nuclear operators will no longer receive capacity payments for that portion of their load that is dedicated to the data center or hydrogen hub and electricity flows must be carefully metered to determine how much the station should receive in revenues based on whether it’s been a net provider to the grid or not.
Reliability Analyses
Shields explained that “PJM will work with both generation owners and the data centers to make sure that necessary physical/technical parameters are being met. We will conduct reliability analyses before the data centers can connect behind the meter to make sure that these arrangements don’t create reliability challenges and that analysis reflects the reduced amount of capacity the generator is allowed to offer into our capacity auctions.”
Nuclear operators who receive capacity market payments through PJM’s capacity auctions “are required to bid into our markets” when their output is called for, he notes. “If a resource owner does not want to bid into our markets they would need to ‘de-list’ the units. PJM would be involved in front-of-the-meter data center/service connection as well. It is our preferred approach.”
Nuclear ‘Greenwashing’
The drive to reduce carbon emissions shouldn’t be undermined by artificial deals whose real aim is to increase profitability on the back of energy guzzlers racing to get to the front of the queue for green credits. Those guzzlers need to economize on their own demand and find more efficient ways of using energy. Meanwhile, lawmakers ought to eliminate subsidies for nuclear power that are taken off wholesale markets because the reactor operator is essentially privatizing climate benefits. “The reason we subsidize these nuclear plants is we need them to play a role in climate change,” notes Judson. “And if thousands of megawatts of nuclear are going to be diverted to these off-grid loads then why did we subsidize them to begin with?”
Stephanie Cooke is the former editor of Nuclear Intelligence Weekly and author of In Mortal Hands: A Cautionary History of the Nuclear Age. The views expressed in this article are those of the author.
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