Microsoft Deal to Restart Three Mile Island Could Be a Game-Changer
Microsoft and Constellation Energy, the utility that owns Three Mile Island, announced a new deal on September 20th that will lead to the restart of Unit 1 at the Three Mile Island Nuclear Generating Station. This will be the first time a nuclear reactor in the United States has been brought back online after being shut down.
The deal is for 20 years and is a power purchase agreement in which Microsoft will buy the power generated by Unit 1 for an estimated $110-$115 per megawatt hour in order to reliably power its Artificial Intelligence (AI) data center demand while meeting the companies clean energy goals. Unit one will reopen as the “Crane Clean Energy Center” by 2028 so long as the Nuclear Regulatory Commission approves the plan.
Unit one shut down in 2019 for economic reasons, when its reliable output was no longer able to compete on price. But reliability and the guarantee of being able to produce the power that is needed are commanding a new premium. Unit 1 operated at full capacity 96.3% of the time in its final year of operation, making it incredibly reliable even by the standards of other nuclear plants which have an average capacity factor (the portion of the time they operate at full capacity) of 92.5%. No other power source comes close to this level of consistent output and this trait is a big draw for data centers that have significant around the clock power demand.
In part because of the structure of highly regulated power markets that tend not to place much monetary value on reliability, nuclear power has struggled to compete economically in recent years. This has only been exacerbated by subsidies for less reliable resources.
Constellation President and CEO Joe Dominguez said in the company’s announcement of the agreement that, “Before it was prematurely shuttered due to poor economics, this plant was among the safest and most reliable nuclear plants on the grid, and we look forward to bringing it back with a new name and a renewed mission to serve as an economic engine for Pennsylvania.”
AI’s emergence may provide a market incentive for nuclear power and drive economic activity both from the data centers themselves, and the power plants that supply them.
Microsoft is happily paying a premium for the right to use the power that the new Crane Clean Energy Center will produce because it will be reliable while still meeting the company’s clean energy goals, and other companies are likely going to be willing to do the same in the near future. This presents a wonderful opportunity for nuclear power. It means that the economics of reopening shuttered plants may suddenly work, and that building new reactors may also be more economically possible.
The Department of Energy recently released a study showing the potential to build new large reactors, as well as new smaller designs, at existing and retired sites across the country. According to the study, there is significant opportunity for new nuclear capacity at these sites, which already have the initial Nuclear Regulatory Commission permits that are a major cost in the process of building a new reactor.
Read more at RealClear Energy