Amazon, Ken Griffin Invest In Nuclear Power

Nearly a month after Microsoft bet $16 billion on reviving the defunct Three Mile Island nuclear plant to power its energy-hungry data centers, Google and now Amazon are inking massive deals to finance the United States’ ambitious atomic revival plans.

On Wednesday morning, Amazon Web Services announced a megadeal with two utilities to fund the construction of next-generation nuclear plants near its server farms in Virginia and Washington.

Unlike its rivals’ recent deals, the tech giant isn’t just agreeing to buy nuclear-generated electricity. Amazon teamed up with billionaire Ken Griffin to pump $500 million into X-energy, a Maryland-based startup designing small modular reactors that are a fraction of the size of conventional units and use high-temperature gas as a coolant instead of water.

“Amazon and X-energy are poised to define the future of advanced nuclear energy in the commercial marketplace,” X-energy CEO J. Clay Sell said in a news release.

The investment mirrors Amazon’s purchase of a double-digit stake in Rivian around the same time the company ordered a fleet of the electric automaker’s battery-powered delivery trucks. Amazon has similarly big plans to scale its latest green gamble, promising to build 5 gigawatts ― equal to 5,000 megawatts ― of new nuclear power plants in the U.S. over the next 15 years using X-energy’s 80-megawatt reactors.

“It’s the old Hair Club for Men commercials — ‘I’m not just the president, I’m also a client,’” said Brett Rampal, a nuclear power expert at the hedge fund Segra Capital Management.

“It’s all about getting skin in the game. We need these companies to actually be deep in. Some companies are struggling with that, but it seems Amazon is leaning directly into this deal.”

The announcement came two days after Alphabet-owned Google unveiled a far more modest deal to buy up to 500 megawatts of power from Kairos Power, another so-called “advanced” reactor developer that uses fluoride salt instead of water to cool the fission reaction.

“This is unbridled good news for the nuclear industry in that we are getting a clear demand signal from some of the most well-resourced private corporations on Earth that there is a need and a market for new nuclear generation,” said James Krellenstein, a physicist and industry historian who now serves as the chief executive of the Cambridge, Massachusetts-based nuclear consultancy Alva Energy.

In another sign of the industry’s shifting fortunes, the world’s biggest banks last month pledged to support nuclear deals after years of shying away from projects that typically went billions of dollars over budget.

“The market is signaling that, the U.S. government is signaling that, state governments are signaling that,” he added. “The real question we have to ask is, are we going to be able to deliver to fulfill that market need?”

After decades of decline, nuclear power is making a dramatic comeback amid surging demand for electricity and growing recognition that solar panels and wind turbines alone are insufficient to replace fossil fuels.

U.S. electricity demand remained relatively flat since the late 1990s as heavy industry moved overseas and efficient new appliances muted the impacts of a growing population on an aging grid. But artificial intelligence software is driving up demand at just the moment when policies to reduce planet-heating emissions from fossil fuels are nudging more Americans to replace fossil-fueled cars, stoves and heaters with electric alternatives.

At the same time, the effects of climate change already underway – more severe storms, hotter and longer heat waves – are straining a grid that wasn’t built to withstand extreme weather and serve a record number of households’ air-conditioning needs.

Making matters worse, the U.S. has undergone a haphazard transition away from the electricity sources around which the grid was built. Like nuclear, coal plants produce heat that makes steam to spin turbines that generate electricity, and can run virtually all the time regardless of weather. Newer natural gas-burning plants generally spew less carbon dioxide into the atmosphere, but do not store huge amounts of fuel on site, instead depending on networks of pipelines that have repeatedly failed in extreme temperatures.

Even in markets with huge solar and wind farms, gas is used as backup at night or when the air is still. Batteries and programs that pay ratepayers to turn off appliances during periods of intense demand on the grid have helped. But the average duration of power outages Americans endure each year has more than doubled over the past decade, federal data shows.

For years, tech companies like Google and Amazon offset the fossil-fueled electricity their data centers used by paying to build solar panels and wind turbines elsewhere in the country. Yet those renewables require vast areas of land and new transmission lines that remain difficult to permit in the U.S., limiting how much the investments actually expanded the pie internet servers were eating. With the appetite from AI now threatening to devour ever-larger amounts of electricity on the grid, Silicon Valley giants are embracing the most efficient and abundant source of electricity ever harnessed — tapping the heat released from splitting atoms.

Nuclear power looked poised for a renaissance in the early 2000s, too, with the U.S. making plans for dozens of new plants. But the U.S. oil and gas boom, brought on by a revolution in the drilling technique known as hydraulic fracturing, or “fracking,” made gas so cheap that investors cooled on reactors that cost billions of dollars and take a decade or more to construct. Coupled with renewed global fears of atomic energy after the 2011 Fukushima disaster, all but two reactors were canceled.

By the time those two new units at the Alvin W. Vogtle Electric Generating Plant in Georgia were finally completed earlier this year, the political consensus across the world had shifted. No longer did the more than $30 billion it cost to build the Plant Vogtle project seem like a sign atomic energy cost too much to consider part of the future energy mix. Instead, it served as a signal to global and U.S. policymakers that subsidies and investment deals needed to be reformed to figure out how to finance nuclear energy.

The solution that emerged at first was to mimic how solar panels and wind turbines got cheaper — building a lot of them at once. Nuclear developers put out designs for small modular reactors that effectively shrunk traditional, water-cooled units, with the idea that buying machines that generate 300 megawatts or less in bulk would bend the cost curve more quickly than buying one-off 1,100-megawatt reactors.

The U.S. planned to debut its first such small modular reactor plant in Utah with technology built by the Portland, Oregon-based developer NuScale. That project collapsed last November as inflation and higher interest rates drove up costs, and NuScale laid off more than a quarter of its full-time staff.

The problems called into question the entire business thesis, since large, conventional reactors like the Westinghouse AP-1000 units built in Georgia benefit from economies of scale. Now that the supply chains and design for the AP-1000 are established, research from Massachusetts Institute of Technology professor Koroush Shirvan, who has modeled the cost of different technologies, indicated this year that Westinghouse’s flagship product would be the cheapest reactor to build next in the U.S.

New startups focused on project management rather than new technologies such as the Nuclear Company aim to build out order books for more large-scale reactors.

But the older technology is not necessarily in competition with the newer designs.

The next-generation reactors Google and Amazon are investing in offer potentially unique advantages, including producing heat at temperatures that could be useful for industrial processes other than electricity. In the reactor developer’s first major corporate deal, Dow Chemical agreed in 2022 to work with X-energy to deploy its technology at a petrochemical facility on the Gulf Coast.

Also in the mix is Bill Gates’ reactors startup TerraPower, which broke ground on its debut plant in Wyoming in June.

“If [Amazon] were serious about 5 gigawatts of demand by 2040, they’d build AP-1000s. It would be easier,” Rampal said. “But it would be harder for Amazon to get a piece of Westinghouse, and Amazon just got a piece of X-energy.”

Still, he said, there’s plenty of room in the market for multiple vendors.

“I don’t know of any industry where there’s a single monolithic product that demands the entirety of the market, whether its cars, trains, planes or natural gas combined cycle plants,” Rampal said. “They may look the same on the outside, or they may have the same name, but if you buy a natural gas combined cycle standardized plant from one vendor or another, they have differences just like cars have differences between each other. The question here is, do we need 1,000 or do we need 10?”

It would help, first, to have at least one that’s on the grid. China, which is building nuclear reactors of all kinds faster than any other nation, hooked its first high-temperature gas-cooled reactor up to its grid last December. The U.S. is now at least a decade behind China in deploying next-generation reactors, a recent analysis concluded.

Neither X-energy nor Kairos have built reactors that have produced electricity yet, Krellenstein said. Companies like Amazon and Google bring with them “highly competent engineering teams,” he said.

“But hard tech is hard, and nuclear hard tech is even harder,” Krellenstein said.

The next steps are expected to be challenging, said Craig Piercy, the president of the American Nuclear Society, a nonprofit organization of industry and academic professionals that advocates for nuclear technology in the public interest.

“Advanced nuclear is kind of like deep-dish pizza. All the ingredients are in place, you’ve got the sauce, the cheese, all the toppings are prepared, but the thing about deep dish is you have to have it in the oven for a while before it’s ready,” Piercy said. “I see all the pieces for advanced nuclear in place, but you still have the regulatory process you have to go through, you still have to build the supply chain, you still have to build the workforce.”

In June, Congress passed new legislation aimed at easing the regulatory process for new reactors, and the Nuclear Regulatory Commission is weighing new rules with an eye toward the need for more atomic energy in the U.S.

Still, Piercy said, the deals this week mark what he called “a tipping point.”

“It’s a momentous occasion this week, and I don’t think this is the end of it,” Piercy said. “If anyone was asking if or whether there was going to be a resurgence of nuclear technology, I think this week answers that question. The question is not if but when and how fast. That’s a big sea change from where we were.”