FERC Rejects Amazon's Nuclear Power Deal for AI Data Center, Raising Questions About Future Tech-Energy Partnerships

Feeding AI's appetite: Who pays the price for power-hungry data centers?

Feeding artificial intelligence's growing appetite for electricity is no small task. But it raises an important question: Who should pay for the infrastructure needed to keep these AI ventures afloat, and what happens when the tech giants behind them try to bypass the usual costs? In a Nov. 1 ruling, the Federal Energy Regulatory Commission voted two-to-one against Amazon's attempt to sidestep energy grid fees associated with a 960-megawatt Amazon data center campus co-located with Talen Energy's Susquehanna nuclear power plant. In a sharply worded dissent, Chairman Willie Phillips called the decision a potential threat to "our continued economic prosperity and national security." But others argue that exempting Amazon from the standard grid fees would set an economically risky precedent for future deals. The policy at the center of the ruling is the designation of Amazon's data center as "non-networked load," which would expand the permissible power transfer from the nuclear plant to the data center. A non-networked load designation avoids transmission charges typically associated with the load on the power grid, thereby reducing the price consumers pay for power. Amazon isn't the only tech giant to turn to nuclear power for its data centers. Microsoft has inked a deal to reopen the infamous Three Mile Island nuclear facility. Transmission charges in that case are estimated to amount to $30 per megawatt-hour. For the Amazon data center campus at the center of this ruling, a $30 per megawatt-hour charge would translate to about $250 million in annual transmission costs. But this lost revenue from grid fees may force utilities to pass costs on to general ratepayers. Responses to the filing argue that the data center uses the grid for backup power and load stabilization and that "the co-located load should not be allowed to operate as a free rider, making use of, and receiving the benefits of, a transmission system paid for by transmission ratepayers". McKinsey estimates that by 2030, data centers will account for over 11 percent of U.S. power demand, and unchecked "free-riding" could saddle consumers with staggering costs. Without opining directly on the validity of the responses, FERC Commissioners Mark Christie and Lindsay See ruled that the filing failed to demonstrate a need to amend the service agreement between Amazon and Talen. As evident in his dissent, the chairman in opposition fears that the ruling sets a precedent on data center colocation that could slow the pace of future deals. There is tremendous economic potential at stake. Between 2013 and 2021, operators decommissioned nearly 10 gigawatts of nuclear capacity due to financial challenges. However, as the economic outlook for nuclear energy improves, an opportunity exists to reopen these plants. In addition to the Microsoft and Amazon deals, there are further reasons for optimism: During its Q3 earnings call, NextEra indicated strong interest from data center companies that may lead it to recommission the Duane Arnold nuclear facility which was shuttered in 2020. The scope of the opportunity notwithstanding, FERC appears cautious about setting precedents that could lead to increased costs for consumers and unintended financial burdens on existing customers. We agree with the majority that Chairman Phillips' claim of economic harm and a national security threat lacks substantiation for the following reasons: First, data centers are not location agnostic. Low latency is essential for users, and data localization policies can require regional infrastructure. Offshoring data centers usually isn't an option, and in today's competitive environment, companies cannot afford to delay building them. Amazon's decision to push ahead with the Talen deal illustrates this dual necessity. Second, many companies that are building data centers have pledged to reduce carbon emissions and seek to power their operations with non-emitting generation. Neither solar nor wind power are suited for this purpose, because they are intermittent sources of energy, and data centers require consistent and reliable energy access. Companies have begun investing in power sources that have not yet achieved commercial scale, such as geothermal power, small modular fission reactors and even fusion power. With its Three Mile Island deal, Microsoft has shown that reliable, clean energy is worth the cost premium of grid-tied nuclear power. The demand for reliable, clean energy is evidently urgent. Finally, in his concurring opinion, Commissioner Christie emphasizes that the filing has been rejected without prejudice, leaving the door open to refile the motion, an option Talen Energy has indicated it may pursue. The financial magnitude of this ruling ensures that the question will be revisited before lasting harm is done. The opportunity is compelling: recommissioning 10 gigawatts of clean, domestically sourced power for AI infrastructure. But it must come with fair contributions to grid infrastructure costs. With the grid facing strain and more energy-hungry giants sitting down at the table, ensuring fair contribution isn't just sound policy -- it's absolutely essential.

Tech partnerships with power companies for AI in doubt after government rejects key Amazon agreement

A power substation near the LC1 CloudHQ data center in Ashburn, Virginia, United States. Technology companies' push to directly power artificial intelligence with nuclear plants hit a major roadblock, after a federal regulator rejected a request to increase power for an Amazon data center. The Federal Energy Regulatory Commission on Friday rejected a request to increase the amount of power the Susquehanna nuclear plant in Pennsylvania can dispatch to an Amazon data center campus. Independent power producer Talen Energy in March sold the data center campus to Amazon for $650 million, which would be powered by the nuclear plant in a first-of-its-kind deal. Talen's stock fell more than 9% in premarket trading on FERC's denial order. Constellation Energy and Vistra Corp. tumbled nearly 8% and more than 3%, respectively, in sympathy. Investors were expecting Constellation and Vistra to announce similar deals at some point. The grid operator PJM Interconnection and the Susquehanna plant, which Talen owns, had filed a request to increase the amount of power dispatched to the Amazon data center from 300 megawatts currently to 480 megawatts. The arrangement, called co-location by the power industry, "could have huge ramifications for both grid reliability and consumer costs," said FERC Commissioner Mark Christie in his opinion backing the order. Talen said FERC's decision will have a "chilling effect on economic development in states such as Pennsylvania, Ohio, and New Jersey" in a statement Monday. The power company said it is evaluating its options with a "focus on commercial solutions." The Amazon data center campus can still use 300 megawatts of power from the Susquehanna nuclear plant, according to Talen. The company said the deal is "is just and reasonable and in the best interest of consumers." The FERC decision does not impact Constellation's plans to restart the Three Mile Island nuclear plant in 2028 through a power purchase agreement with Microsoft. Three Mile Island will dispatch power to the electric grid, rather than directly power Microsoft's data centers. But Constellation and Vistra have expressed interest in striking deals with tech companies that are similar to the agreement between Talen and Amazon. Data centers that power AI and cloud computing are consuming growing amounts of electricity. Utilities are scrambling to find ways to power the growing electric load. Tech companies are increasingly turning to nuclear power because it is reliable and does not emit carbon dioxide emissions. Vistra and Constellation are two of the best performing stocks in the S&P500 this year, as investors bet on a potential windfall from the tech sector's growing energy needs. Vistra's stock has more than tripled this year, outpacing even Nvidia to become the best performing stock in the market. Constellation has more than doubled and is the fourth best stock in the S&P500 this year.

Amazon's Nuclear Deal Stalled -- But Its AI Power Demand Won't

Nuclear power plants are designed to withstand a plane crash. We are now getting a live experiment in whether the nuclear sector is built of similar stuff, after federal regulators dropped a bomb on Friday night. In a 2-1 vote, the Federal Energy Regulatory Commission rejected an amended interconnection agreement for the deal that sparked a frenzy for nuclear power stocks earlier this year: Amazon.com's acquisition of a datacenter co-located with a reactor owned by Talen Energy Corp. Few saw it coming, and the sector dived on Monday morning. Once the smoke clears, though, two realities are likely to re-emerge: Datacenter builders want power supply secured sooner rather than later and they can afford to pay a premium for it. As long as the market's foundational assumption -- that we are in the early innings of an artificial intelligence-inspired datacenter boom -- holds, power developers will benefit. The FERC ruling will reshape how that happens, however.

US regulator rejects bid to boost nuclear power to Amazon data center

The Federal Energy Regulatory Commission (FERC) rejected an effort Friday to allow an Amazon data center to tap into additional power from a nearby Pennsylvania nuclear plant. The decision could throw a wrench in efforts by large technology companies to secure so-called "behind the meter" power from nuclear plants as they seek to meet the growing energy demands of artificial intelligence (AI). In a 2-1 decision, FERC found that the regional grid operator, PJM Interconnection, failed to prove that the changes to the transmission agreement with Susquehanna power plant were necessary. The regulator's two Republican commissioners, Mark Christie and Lindsay See, outvoted Democratic chairman Willie Phillips. The chairman's two fellow Democratic commissioners, David Rosner and Judy Chang, both sat out the vote. "Co-location arrangements of the type presented here present an array of complicated, nuanced and multifaceted issues, which collectively could have huge ramifications for both grid reliability and consumer costs," Christie wrote in a concurring statement. In a dissenting statement, Phillips argued that the deal with Amazon "represents a 'first of its kind' co-located load configuration" and that Friday's decision is a "step backward for both electric reliability and national security." "We are on the cusp of a new phase in the energy transition, one that is characterized as much by soaring energy demand, due in large part to AI, as it is by rapid changes in the resource mix," Phillips wrote. Amazon purchased a 960-megawatt data center next to the Susquehanna power plant for $650 million earlier this year. Following the announcement, PJM sought to increase the amount of power running directly to the co-located data center. However, the move faced pushback from regional utilities, including Exelon and American Electric Power (AEP). Tech giants have increasingly turned to nuclear energy to power AI. Last month, Google announced a deal to purchase nuclear energy from a fleet of small modular reactors, a new type of nuclear reactor, set to be built by Kairos Power. Just days later, Amazon unveiled a series of deals to invest in advanced nuclear reactors, including an agreement with Northwest Energy to build four small modular reactors in Washington. Nuclear energy operator Constellation Energy also announced a deal with Microsoft in September to reopen Three Mile Island to power the tech giant's data centers for two decades starting in 2028. Nuclear offers a carbon-free source of energy for tech giants. It could be key to keeping down emissions, as many companies seek to keep their public promises to become carbon neutral or negative by the end of the decade.

Nuclear-Hungry AI Campuses Need New Strategy to Find Power Fast

Tech giants looking to quickly power massive artificial intelligence centers will need new plans after US regulators quashed Amazon.com Inc.'s effort to tap a Pennsylvania nuclear facility. The Federal Energy Regulatory Commission on Friday rejected a request that would allow Talen Energy Corp.'s Susquehanna nuclear plant to divert some of its electricity output to Amazon's data center. The deal had generated excitement for the ability of hyperscalers -- the largest data center developers -- to quickly gain access to power without years of waiting for new power plants or transmission to get built.