Nuclear energy renaissance?

Bottom line

Artificial intelligence is turning the internet into the world’s most voracious energy consumer. To keep the lights on and the servers cool, US tech giants are looking beyond natural gas, coal, solar and wind to the atom, fueling a revival in nuclear reactors.

Nuclear power provides about one-fifth of US electricity generation, and the country has more nuclear power reactors than any other. But few projects have come online since the early 1990s. Over the past decade, China has built more than three dozen reactors, while the US has completed two. However, with electricity demand surging across the country, increasing due to the frenetic construction of data centers, a nuclear power renaissance may be on the horizon. 

Bipartisan support President Biden signed the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act in 2024 and President Trump issued executive orders in 2025 to quadruple nuclear power production by 2050. To jump-start activity, he directed the Department of Energy to offer $17.5 billion in low-cost loans for utilities to build large nuclear reactors. This initiative has rare bipartisan support in Congress, in part because nuclear is a low-emission source, albeit with high construction costs and safety risks. Moreover, 60% of adults in the US are in favor of adding more nuclear power plants, according to Pew Research Center, up from 43% in 2020.

NIMBY Although two-thirds of planned data centers are slated for rural areas, most existing facilities are concentrated in urban areas. The industry’s reach is already extensive. Around 88% of Americans live within five miles of at least one, imposing higher electricity costs. Unsurprisingly, 71% of Americans oppose construction of a data center in their communities, i.e., Not In My Backyard. Will this aversion stall the AI juggernaut before the nuclear buildout even gets off the ground?

Go small A solution might come with small modular reactors (SMRs). Like conventional nuclear plants, these produce electricity from the heat caused by controlled fission. Its effectiveness comes from its modular nature. Components can be built in a factory, shipped to a site and scaled  in stages as energy demand increases. That significantly lowers upfront capital requirements.

‘The China Syndrome’ Despite its relative safety compared to other forms of energy production, resistance against the expansion of nuclear energy in the US stems primarily from three major accidents. The first occurred just 12 days after “The China Syndrome,” a popular film about an averted meltdown in a fictional plant in Pennsylvania, hit theaters: 

• Three Mile Island (US, 1979) A breakdown in its water cooling system led to a partial meltdown of a reactor core and release of radioactive coolant into the environment. While a disaster was prevented, the cleanup took 14 years and cost $1 billion. Thankfully, the accident did not take lives or result in health issues. Now operational, Microsoft has tapped the plant to power its future data centers.
• Chernobyl (Ukraine, 1986) This Soviet-era plant had an undetected design flow that exacerbated a botched safety test, causing a massive steam explosion that destroyed the rector and released radioactive material. The catastrophe killed 30 workers and many additional deaths resulted from the spread of radiation. It also caused around $700 billion in damages.
• Fukushima Daiichi (Japan, 2011) Its reactors followed protocol and shut down following a 9.0 magnitude earthquake. But the resulting tsunami overwhelmed the site’s seawalls and flooded backup diesel generators. Without electrical power, the plant lost core cooling, causing multiple units to melt down and produce hydrogen that later exploded. Some 2,000 people died, and cleanup and compensations costs ran into the hundreds of billions of dollars. 

While SMRs do not eliminate these risks, they are considered safer due to simpler designs and reduced size. 

Hot summer weather complicates the debate Amid the intense “super El Niño” heat this summer, Americans are projected to spend about 10% more to cool their homes this year. The Dept. of Energy has authorized utilities to curtail power to large customers — including data centers — if air conditioning demand climbs too high. Given that risk, data centers might build their own SMRs as a dedicated energy redundancy.

Waste disposal strategy While nuclear energy expels relatively low emissions, disposing of its radioactive waste is a significant issue. Spent fuel rods often remain at the reactor site for decades, first in cooling pools and later in sealed casks of steel and concrete. Unfortunately, the US does not have a federal storage facility. In addition to supporting the ADVANCE Act, the Trump administration has identified five potential states to host nuclear waste sites (Idaho, Louisiana, Oklahoma, Tennessee and Utah).

Is adding nuclear power generation inevitable due to AI growth? Probably. While data center construction is shifting to rural areas, nuclear energy offers a plausible solution to support economic growth and respect the environment. It offers a scalable source of carbon-free power capable of supporting large industrial loads without exacerbating emissions targets. As politicians become more concerned about rising electricity prices and local opposition to data centers, nuclear power looks less like an option and more like a necessity.

Research assistance provided by Federated Hermes summer intern Liam Oaks

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