Opinion: The powering of AI is ‘heating’ up

Andy Drennen

Artificial intelligence is sweeping industries at warp speed with developments that could make our current business modus operandi look as archaic as the floppy disk, and in very short order. The use of resources to power such a future will be immense. Given the increasing demand, what will be the fuel that thrusts this technology into the future?

Hyperscalers are large data centers that use millions of servers to provide computing power and data storage to billions of users around the world. AI has supercharged the demand for data centers and, consequently, the energy required to power them.

The leading hyperscalers are Microsoft’s Azure, Meta, Amazon’s AWS, Oracle and Alphabet’s Google Cloud. Collectively, between just these companies, JPMorgan estimates capital expenditures in AI could reach $191 billion by the end of 2024. This figure exceeds 2023’s $126 billion investment and towers well above the $23 billion invested just 10 years ago. It’s hard to fathom what the spend on AI will be 10 years from now.

Although the energy sector is the leading offender of carbon dioxide emissions, the industry is also a leader for investments in renewable energy, such as solar, wind, geothermal and hydropower. According to the International Energy Agency, low-emission sources will limit the role fossil fuels will play in producing electricity and could account for nearly half of the world’s energy generation by 2026. Assisting with the output: nuclear power.

Unlike fossil fuels, which are believed to be the remains of plants and animals, uranium is theorized to have been formed in a supernova. Uranium is key in the production of nuclear energy. Its waste is toxic, yet nuclear energy emits practically no carbon dioxide or greenhouse gases, which is a significant advantage over fossil fuels. Similar to fossil fuels, however, its supply is finite, and mining can be destructive to the environment.

By next year, the IEA expects nuclear power generation to surpass the record reached in 2021. China is expected to have the largest contribution, and Japan, India, Korea and Europe are also expected to increase output.

According to the World Nuclear Association, there are 440 active nuclear power reactors around the globe. The U.S. is home to 54 across 28 states. China has 55 operating nuclear reactors, 30 reactors under construction, 36 planned and 158 proposed. The U.S. has 13 proposed and, for the first time ever, is reopening one that was recently closed. Hyperscalers are moving quickly to claim their territory.

On Sept. 30, the Department of Energy extended a $1.52 billion loan guarantee through the Inflation Reduction Act to bring the Holtec Palisades nuclear power plant in Michigan back online. Holtec acquired the 800 MW plant from Entergy in June 2022, only to cease operations a month later. The plant was to be decontaminated and dismantled by 2041.

This program marks the first time ever that the DOE has aided in restarting an American nuclear power plant.

In a news release on March 4, Talen Energy, owner of the Susquehanna Steam Electric Station nuclear power plant, announced the sale of its Pennsylvania-based hyperscale data center to Amazon Web Services. The data center sits at the base of the power plant. What better way to power an AI data center than to park it directly next to a nuclear power plant? AWS intends to build 15 data centers on the 1,600-acre site.

In September, Constellation Energy announced a deal with Microsoft that would restart Unit 1 at the Three Mile Island in Pennsylvania to sell 835 MW of power for AI computing. Unit 1 is independent from Unit 2, which suffered a partial meltdown in 1979 when the cooling system malfunctioned.

There have been two other major nuclear reactor meltdowns in history. The deadly Chernobyl accident in Ukraine in 1986 emitted large amounts of radioactive material into the atmosphere and remains the most radioactive place on the planet. The third was the Fukushima triple meltdown in 2011 after a tsunami devastated the region.

The global population is growing along with expanding needs for energy. Considering the three nuclear reactor meltdowns, thousands of devastating oil spills around the globe, a million birds killed each year by wind turbines, and other consequences, the generation of power, its use and its waste come with a cost. By diversifying the world’s energy supply between fossil fuels, renewables and nuclear, perhaps humanity can prolong its energy resources long enough to develop technology that will power a more sustainable future. Perhaps AI holds the key.

Andy Drennen is a certified financial planner and senior portfolio manager at Simmons Private Wealth in Springfield. He can be reached at andy.drennen@simmonsbank.com.