Microsoft needs power

Those of us that were born in the 1960s, or earlier, will know the name Three Mile Island. A nuclear power station near Harrisburg, Pennsylvania, on the banks of the Susquehanna River, experienced a reactor meltdown in March 1979. Design faults and operating blunders at Unit 2 resulted in the release of radioactive substances into the air and water.

I remember that disaster well, with nightly reports on the television news. Although no one died, and no definitive increase in cancer occurrences were ever proved, the event fed into anti-nuclear fears and basically prevented the permitting of new reactors in the US.

Ironically, Three Mile Island's Unit 1 reactor ran for another 40 years after the meltdown, but was shut down in 2019 because it was too costly to run. US electricity demand was practically flat, and renewables and natural gas were able to meet the stagnant need.

Over the past couple of years, though, demand for electricity has picked up as we start to electrify everything - cars, appliances, and now AI. Electric power utilities have been doing rather well.

Constellation Energy, the owner of the plant, will invest $1.6 billion to revive unit 1 in 2028, agreeing to sell all the output for 20 years to Microsoft, who wants 835 MW of carbon-free electricity for AI data centres in Pennsylvania, New Jersey and Maryland.

Constellation CEO Joe Dominguez said: "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." Restarting the plant will require the re-issuing of local, state and federal permits.

In the right context, nuclear power makes sense. Safety remains a concern so regulatory oversight is intense. Permitting new sites is very hard and construction is very expensive, so long-term off-take agreements are essential.

Microsoft is the perfect customer, and their confidence in the deal underscores their commitment to AI as a revenue-generating service. The plant will be renamed the Crane Clean Energy Center.