The owner of the shuttered Three Mile Island nuclear plant is pursuing a $1.6 billion federal loan guarantee to help finance its plan to restart the Pennsylvania facility and sell the electricity to Microsoft to power data centers, according to details of the application shared with the The Post.
The taxpayer-backed loan could give Microsoft and Three Mile Island owner Constellation Energy a major boost in their unprecedented bid to steer all the power from a U.S. nuclear plant to a single company.
Microsoft, which declined to comment on the bid for a loan guarantee, is among the large tech companies scouring the nation for zero-emissions power as it seeks to build data centers. It is among the leaders in the global competition to dominate the field of artificial intelligence, which consumes enormous amounts of electricity.
The plan to restart Three Mile Island — the site of the worst nuclear accident in the United States — has won plaudits from political leaders, including Pennsylvania Gov. Josh Shapiro. The reactor that Constellation plans to recommission was shut down in 2019 and sits next to the unit that has been dormant since a partial meltdown occurred in 1979.
The restart plan has already generated controversy as energy experts debate the merits of providing separate federal subsidies for the project, in the form of tax credits. Constellation’s pursuit of the $1.6 billion federal loan guarantee, which has not been previously disclosed, is likely to intensify that debate.
The loan guarantee request, first submitted by Constellation to the U.S. Energy Department in May, has cleared an initial review. It has reached the stage where the specific terms of a deal would typically start to be negotiated, according to details of the application shared with The Post.
A loan guarantee would allow Constellation to shift much of the risk of reopening Three Mile Island to taxpayers. The federal government, in this case, would pledge to cover up to $1.6 billion if there is a default. The guarantees are typically used by developers to lower the cost of project financing, as lenders are willing to offer more favorable terms when there is federal backing.
In this case, the loan guarantee could save Constellation up to $122 million in borrowing costs for restarting Three Mile Island, according to John Parsons, an energy economist at the Massachusetts Institute of Technology. It would come on top of the federal tax credits on the sale of the power, passed in the Inflation Reduction Act of 2022, that could be worth nearly $200 million annually for Constellation and Microsoft.
Technology companies already benefit from similar tax credits when they purchase energy from a solar or wind farm. But nuclear plants generate more electricity at a higher cost, making the scale of the subsidy larger.
The Energy Department declined to comment on the application, citing confidentiality concerns. Constellation did not directly confirm it applied for the loan guarantee. But it discussed the loan in the context of The Washington Post’s questions. It said it has not decided whether to accept a loan if one were approved. It also extended assurances that any financial risk for taxpayers would be negligible.
“Rest assured that to the extent we may seek a loan, Constellation will guarantee full repayment,” said a statement from the company. “Any notion that taxpayers are taking on risk here is fanciful given that any loan will be backstopped by Constellation’s entire $80-billion-plus value.”
The loan guarantee program gives applicants the option of borrowing the money to fund their project directly from the U.S. Treasury, with the Energy Department still serving as the guarantor in the event of a default. The Constellation application does not specify if the company plans to go that route.
Constellation announced last month that it had struck a deal with Microsoft through which the tech company would purchase all the power from the plant, should regulators sign off on restarting its unit that closed in 2019.
Constellation plans to restart Three Mile Island by 2028. The company is renaming the facility the Crane Clean Energy Center, which is the name used on the federal loan guarantee application. Constellation said its contract with Microsoft would last for 20 years, but the companies are not disclosing any pricing details.
The biggest risk to taxpayers would be if the project were to fail after a significant amount of money is spent trying to get Three Mile Island operational. Such setbacks are common when new nuclear plants are being built. The last new nuclear reactors to go online, near Augusta, Ga., were seven years late and $17 billion over budget. Constellation says it is confident Three Mile Island won’t face such setbacks, because the company is restarting an existing unit rather than building a new one from the ground up.
The Energy Department announced this week that it closed a $1.52 million loan guarantee for the only other active project to restart a nuclear power plant, the shuttered Palisades nuclear facility in Western Michigan, which closed in 2022. Michigan Gov. Gretchen Whitmer (D) had lobbied the owner, Holtec, to reconsider its plan to permanently decommission the plant.
Palisades and Three Mile Island would each generate enough energy to power 800,000 homes if successfully reopened. It is still far from certain that either will come back online. They will be subject to intensive safety inspections by the Nuclear Regulatory Commission. Should the inspectors turn up unanticipated issues, the plant owners could find themselves scrambling to acquire replacement parts that need to be custom built, jeopardizing the tight timelines they have set for the openings.
Proponents say reopening nuclear power plants is a good option, especially with increased demand from data centers that are being built across the country.
“We want Microsoft to buy their electricity from zero carbon energy sources instead of from coal plants, so it is in the interest of all of us that this nuclear power plant gets reopened,” Parsons said of the Three Mile Island plan. He said that while the loan guarantee does bring risk, the reopening of an existing nuclear plant is far less likely to run into the massive cost overruns and delays that are common with the construction of a new nuclear plant.
The power from Three Mile Island would not be connected to directly to Microsoft’s data centers. It would flow into the broader power grid that serves 13 states and Washington, D.C. But as the purchaser of the clean energy, the tech company can use it to erase — on paper — the emissions from burning gas or coal to produce electricity that does flow into its data centers. Microsoft is among several large tech firms using such accounting methods to brand their data centers climate friendly.
But some critics question if Constellation is presenting an overly optimistic assessment of how quickly and cheaply a nuclear plant can be restarted. The company said last month that $1.6 billion would cover the full cost of reopening Three Mile Island by 2028. That is the same amount the company is now seeking in its loan guarantee application.
“We have one big tech company trying to do something that is not aligned with how the markets should be working, and they want to do it on the backs of ratepayers and taxpayers,” said Evan Caron, co-founder of Montauk Climate, which invests in clean-energy technologies.
If there are any cost overruns or delays, Microsoft would probably have the option of abandoning the deal and Constellation would need to find another buyer willing to pay a premium for Three Mile Island power, he said. “This has real risk,” said Caron. “I think the likelihood of that plant coming back online by 2028 is low to zero.”
Constellation takes exception. “We know every inch of this plant and what needs to be done,” the company said in a statement. “To be clear, Constellation will restart Crane in 2028, and in fact, we will aim to restart it a year earlier.”
Baltimore-based Constellation is one of the nation’s biggest energy companies, selling electricity and natural gas in 48 states. It owns 15 nuclear power plants. The company says it provides 10 percent of the clean energy used nationwide. The company’s value collapsed during the financial crisis of 2008.
It later merged with energy giant Exelon. In 2022, Exelon spun off Constellation. Constellation’s stock price jumped more than 20 percent following its Sept. 20 announcement of the deal to sell Microsoft energy from Three Mile Island.