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Amazon Is Betting Big On Small Nuclear Reactors To Power Its Data Centers

As Amazon announces three major nuclear deals, AWS CEO Matt Garman told Forbes he sees unique potential for advanced, small reactors to provide widespread clean power.

AWS chief executive Matt Garman Josh Edelson For AWS

AWS chief executive Matt Garman Josh Edelson For AWS

Amazon is betting big on nuclear power to help drive a massive data-center expansion that includes more than $52 billion across just three U.S. states.

Amazon and Dominion Energy, the $48 billion (market cap) energy behemoth, announced Wednesday that they’ve entered into an agreement to explore the development of small modular reactors, a type of advanced nuclear reactor less than 10% the size of a traditional nuclear plant, in Virginia. Amazon simultaneously announced an agreement to fund the development and deployment of small modular reactors in Washington state with the public power agency Energy Northwest.

Amazon signed a separate agreement with X-energy, a developer of small modular reactors, known as SMRs, that is building one as part of the partnership with Energy Northwest. The startup is currently building its first advanced reactor with chemical giant Dow in Seadrift, Texas. As part of its agreement with X-energy, Amazon is anchoring a $500 million investment in the startup, which was founded by billionaire serial entrepreneur Kam Ghaffarian in 2009, through its Climate Pledge Fund.

Through this deal, Amazon and X-energy plan to bring more than 5 gigawatts of new power projects online across the United States by 2039 — enough to power more than one mid-sized city — in an effort to meet the ballooning power needs of artificial intelligence.

 
 

“Over the last year, we have become much more bullish about what nuclear can provide.”

—Matt Garman, AWS CEO

 

Amazon, as well as other major data center providers like Microsoft and Google, are looking to these small modular reactors to serve their rapidly growing power needs. SMRs can be built in less time and at lower cost than traditional nuclear power plants — plus, they’re carbon-free, key to the tech giants’ broad commitments to reduce emissions. And unlike solar or wind power, they’re reliable and can operate 24-hours-a-day, a key advantage for data centers and factories. The U.S. Department of Energy has said that U.S. nuclear capacity has the potential to triple from 100 gigawatts in 2024 to 300 gigawatts by 2050 to meet the demands of both decarbonization and nonstop power.

“Nuclear is a great option for how we scale the world’s energy needs,” Matt Garman, CEO of AWS, told Forbes in a video call. “We need more energy brought to the grid,” he said, and SMRs are the “most promising” new technology to do that.

Garman, who started at Amazon as a summer intern in 2005 and became AWS’s third CEO in June, said that he expected nuclear to be an important piece of how the company continued to expand its data centers to meet demand, while also reaching its goal of net-zero across its operations by 2040. He declined to give targets for how much of AWS’s power needs would be supplied by nuclear, but said he hoped it would be a “material source of power generation” by 2040.

“We view it as a cost-effective way to scale up energy,” Garman said, adding, “It depends how fast the technology evolves and how rapidly we can scale building new reactors.”

AWS-CMH-Data-Center-by-Amazon
Inside an AWS data center: Amazon has committed to spend more than $52 billion on data center expansion in Virginia, Mississippi and Ohio. Amazon

 

But while nuclear power does not release greenhouse gases, it requires managing radioactive waste. And despite lots of talk in recent months about the development of SMRs, none have opened in the United States to date, leaving unanswered questions about their expense and feasibility. The costs “are a bit of a moving target now,” said Doug Vine, director of energy analysis at the Center for Climate and Energy Solutions.

Garman said that while the technology is new, it has advanced dramatically in recent years and that new advanced nuclear reactors are far safer than the old plants of the 1950s and 1960s. It’s been 45 years since a nuclear reactor Three Mile Island near Middletown, Pennsylvania, melted down in what was the most serious accident in U.S. commercial nuclear plant operating history. A different reactor at the Three Mile Island nuclear plant is now slated to reopen to power Microsoft’s data centers.

“Over the last year, we have become much more bullish about what nuclear can provide,” Garman said. “The world is going to have a hard time building solar and wind farms at the rate we all want to use energy.”

Neither Amazon or Dominion have disclosed the financial details behind their agreement. Dominion CEO Robert Blue said in a statement that the collaboration with Amazon would give the company a way to develop SMRs “with minimal rate impacts for our residential customers and substantially reduced development risk.”

Energy research consultancy Wood McKenzie has said that it expects SMRs to play a small part in the power market through 2030, largely because high costs have held back deployment and construction timelines have meant that only a few plants would be built by that point. It noted that there would need to be at least 10 to 15 SMR projects in development between 2030 and 2040 to lower costs.

“There’s a couple of pieces that need to come together over the next several years to really deliver energy at scale,” Garman said. “We will be at the leading edge of that.”

Virginia is one of the densest regions in the world for data centers, with more than 100 currently operating in the northern part of the state alone. And that’s led to an explosion of demand for electricity: An official from Dominion, which is based in Richmond, noted that power demand from data centers in Virginia had doubled over the last five years and is expected to quadruple over the next 15 years.

AWS-PDX-Data-Center-by-Amazon
Energy hogs: Artificial intelligence has turbocharged the needs of Amazon's data centers / Amazon

 

This is also where Dominion and Amazon are planning for an SMR plant, near the energy giant’s existing North Anna power station in Louisa County, Virginia. Broadly, it will aim to bring at least 300 megawatts of power to the state. A typical data center uses about 32 megawatts of electricity, enough to power 6,000 homes, compared with about 80 megawatts for AI-oriented data centers.

In July, Dominion announced a request for proposals from SMR technology companies to evaluate the feasibility of building one in Louisa County. It has not yet chosen a winner, and an SMR is unlikely to be completed before the mid-2030s.

The SMR project will be located in the same county as two of Amazon’s new data center projects, in which it is investing $11 billion. That’s part of a broader investment of $35 billion across the state by 2040 that it announced in January 2023. (Amazon is spending an additional $10 billion on data centers in Mississippi and another $7.8 billion in Ohio.)

Louisa County, which is located between Charlottesville and Richmond, is about two hours south of Loudoun County, the world’s data center capital, that boasts of hosting 30 million square feet of operational data centers with another 5 million square feet in development.

While Virginia is a major hub for Amazon’s data centers, the company has an enormous footprint, with data centers in 108 different areas globally. AWS, which offers computing infrastructure to broad swaths of the economy, brings in annual sales of more than $100 billion. And its sales are increasing at a rapid clip that’s faster than Amazon’s as a whole, growing 19% in the second quarter, compared to the parent’s 10% growth in that same period.

AIapplications are expected to trigger a 160% jump in overall data center power needs, according to a Goldman Sachs report, which estimated that a Chat GPT query needed nearly 10 times as much electricity as a Google search. There’s so much demand that some prospective data center customers are being told they may have to wait until the next decade to get the power they want, while others have received less power than they expected, according to the Wall Street Journal.

“It would be an understatement to say that it will be exceptionally challenging to meet the demand,” said the Center for Climate and Energy Solutions’ Vine. “This is really just one of many challenges around climate change.”

 

X-energy-Control-Room-People-by-Amazon
Inside an X-energy control room: Amazon and nuclear reactor startup X-energy have teamed up to bring 5 gigawatts of new energy online over the next 15 years / Amazon

 

At the same time, Amazon, like other tech companies, has struggled to reduce its carbon emissions. In 2023, its carbon footprint fell nearly 3%, to just under 69 million metric tons of CO2, according to its most recent sustainability report. But its emissions had ballooned previously, reaching 71 million metric tons in 2021, up from 51 million metric tons in 2019, when it first committed to becoming net-zero by 2040. In June, Amazon canceled plans to tap natural gas pipelines for future data centers in Oregon following climate protests outside the company’s downtown Seattle offices.

That’s what makes SMRs so ideal: carbon-free, scalable and able to produce energy round-the-clock. These advanced small reactors, which rely on a variety of different technologies and typically have a power capacity up to 300 megawatts, can be located close to data centers and rolled out in a modular way to meet increasing demand.

As the technology has advanced, a number of startups have sprung up to develop it, including X-energy, Bill Gates’s TerraPower, which is developing a new kind of sodium reactor that uses salt to store energy, and NuScale, a publicly traded SMR developer with a market cap of $1.4 billion. X-energy, which called off its planned $2 billion SPAC deal in October 2023, has now raised nearly $900 million, including $385 million before the new investment, according to VC database PitchBook. In addition to Amazon, investors in its new $500 million funding round include Citadel founder Ken Griffin, affiliates of Ares Management and energy investor NGP. CEO Clay Sell said the company (whose current valuation he declined to disclose) intended to go public with a traditional IPO when market conditions are right.

Sell told Forbes that he expected its first SMR project for chemical giant Dow in Texas to come online “around the end of this decade” and for the Amazon projects to follow “as quickly as possible.” The footprint for a gigawatt of power with X-energy’s reactors is roughly 60-to-75 acres, versus some 200,000 acres, including an exclusion zone, for a traditional nuclear power plant, he said. Sell expects that X-energy will have “tens of projects underway in 2035, some completed, some in construction and some in earlier phases of licensing.” Its Xe-100 reactor produces 80 megawatts of power, but as with the Washington project deployments can include multiple small reactors at one site.

These projects take a long time to build in part because of the necessary regulations to build nuclear reactors. The U.S. Nuclear Regulatory Commission approved the first SMR design, from NuScale Power, in January 2023. X-energy is working through the approval process now, and has said that the NRC concluded its initial assessment in January 2024 and found no barriers to moving forward.

Sell said that X-energy had additional projects in the works beyond those with Dow and Amazon, though he declined to identify them; the company is also among those that are participating in the Dominion bid in Virginia, he said. “We know that when we execute well on our first project that we are effectively unconstrained in demand,” he said.

The potential has led to a deluge of funding for SMR developers. Terrapower has raised more than $1 billion in private funding, while NuScale went public in a $1.9 billion SPAC deal in 2022. But there have also been stumbling blocks: NuScale canceled a project it had planned in Idaho last year as costs surged.

 

“It speaks to the magnitude of the demand, and really what AI has done to the way we think about electricity in the United States.”

—Clay Sell, X-energy CEO

 

“I see the amount of money going into SMRs…for nuclear energy” Sundar Pichai, CEO of Alphabet and its Google subsidiary, said in a recent talk at Carnegie Mellon. “And so when I look at the capital and innovation going in, I’m optimistic in the medium- to long-term.” On Monday, Google said that it had signed a deal with Kairos Power to bring its first SMR online by 2030 with additional deployments through 2035. Speaking before the Google deal was announced, AWS’s Garman said he believed that the deal Amazon had struck with Dominion was the first of its kind.

Sell said that X-energy and Amazon had begun talking 18 months ago as AWS looked to procure 24-7 energy while meeting its climate commitments. “It speaks to the magnitude of the demand, and really what AI has done to the way we think about electricity in the United States,” he said. “With small modular reactors, the footprint associated with a gigawatt of power is so much less than what people think about with a traditional power plant.”

The other component of AWS’s big push into nuclear power is its partnership with public utility Energy Northwest in Washington, which is planning to build an SMR near its Columbia Generating Station nuclear plant in Richland, Washington.

Energy Northwest plans to use X-energy’s SMR design. Greg Cullen, vice president for energy services and development at Energy Northwest, said that the utility had begun working with the startup in 2020 following Washington State’s passage of the Clean Energy Transformation Act, which commits the state to providing 100% clean energy by 2045.

“We see a really great opportunity here for a company like Amazon that has the balance sheet and risk appetite and need … to help get the technologies off the ground and proven,” Cullen said. While he noted that it was “a little strange” for a public power company to do a deal with a tech giant, he stressed that it would allow Energy Northwest to deploy the new technology without needing to put in place a rate increase to cover the development costs. “We think small modular reactors provide a lot of opportunity for us,” he said.

Cullen expects the Washington project to be operational beginning in the early 2030s. As part of the deal, Amazon will have the right to purchase electricity from the first four modules, equivalent to 320 megawatts, while Energy Northwest will have the option to build up to an additional eight modules, for total power of up to 960 megawatts.

With the deal Amazon struck with X-energy, the two expect to develop 5 gigawatts of power in the next 15 years, including the project with Energy Northwest. Sell, the X-energy CEO, said that to provide this amount of energy, the startup could build four to five sites, with each one of similar scale to the Energy Northwest project, in areas of the country with a heavy data center concentration, such as Virginia or Pennsylvania.

Amazon has been looking at ways to tap into the existing nuclear fleet to power its data center expansion as well. In March, AWS agreed to purchase a 960-megawatt data center campus in Pennsylvania from Talen Energy for $650 million. As part of the deal, AWS reportedly will purchase fixed-price nuclear power from Talen’s Susquehanna nuclear power plant, which is the sixth largest nuclear power facility in the U.S.

“There’s no doubt that AI is going to increase the energy load,” Amazon chief sustainability officer Kara Hurst said at the Forbes Sustainability Summit in New York last month. “We’ve already done one nuclear deal, and we’re going to look at carbon-free as part of that solution.”

But while Amazon and other tech companies are looking to tap into the power from old nuclear plants, the new technology offers more flexibility. “We view this as not just a one-off,” Garman said. “That’s part of the idea of SMRs. You can build them wherever you need them all over the world.”

 

Author: Amy Feldman, Forbes Staff

Source: Forbes Magazine:::

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