Nuclear energy is seeing a resurgence in interest due to an expected surge in power demand over the next two decades. Microsoft is helping lead the charge by signing a deal to buy all the future power produced by a nuclear power-generating unit that Constellation Energy plans to restart. The tech titan needs the emissions-free energy to power its data centers and support its cloud computing and artificial intelligence (AI) operations.
Many believe this deal could help jump-start the country's dormant nuclear energy industry. While nuclear power plant operator NextEra Energy (NYSE: NEE) believes this energy source will play a role in helping meet the country's power needs, it sees some practical limitations.
As a leading producer of all forms of power, including nuclear, NextEra Energy is as dialed into the industry as anyone. The company believes the U.S. power industry is entering a "period of unprecedented growth in power demand," according to CEO John Ketchum on the utility's third-quarter conference call. He pointed out that "there are forecasts for an approximate six times increase in power demand growth in the next 20 years versus the prior 20."
Several catalysts are driving that robust outlook, including data centers. Ketchum said their "power demand alone is expected to increase substantially, adding approximately 460 terawatt hours of new electricity demand at a compound annual growth rate of 22% from 2023 to 2030."
Because of that, the country will need to build a tremendous amount of additional power-generating capacity. Data centers, in particular, need baseload capacity because they operate 24/7/365 and require uninterrupted power. Nuclear is ideally suited to meet this need because it's baseload and emissions-free, which is important for tech companies in reaching their climate goals.
Because NextEra Energy operates several nuclear power plants, many often ask about its view on the future of this energy source. On the call, Ketchem discussed what he sees ahead for nuclear energy. He stated, "Nuclear will play a role, but there are some practical limitations."
First, he noted, "There are only a few nuclear plants that can be recommissioned in an economic way." That includes its Duane Arnold nuclear plant in Iowa, which it's looking to restart. However, "even with a 100% success rate on those recommissionings, we would still only meet less than 1%" of the expected 900 gigawatts of new power capacity needed by 2040.