(Bloomberg) -- The owner of the shuttered Three Mile Island nuclear plant in Pennsylvania will invest $1.6 billion to revive it, agreeing to sell all the output to Microsoft Corp. as the tech titan seeks carbon-free electricity for data centers to power the artificial intelligence boom.
Constellation Energy Corp., the biggest US operator of reactors, expects Three Mile Island to go back into service in 2028, according to a statement Friday. While one of the siteās two units permanently closed almost a half-century ago after the worst US nuclear accident, Constellation is planning to reopen the other reactor, which shut in 2019 because it couldnāt compete economically.
Shares of Constellation Energy jumped as much as 16% to a record high on Friday.
Microsoft has agreed to purchase the energy for two decades and declined to disclose financial terms. This is the first time Microsoft has secured a dedicated, 100% nuclear facility for its use.
The decision is the latest sign of surging interest in the nuclear industry as power demand for AI soars. More than a dozen reactors went dark over roughly the past decade in the face of increasing competition from cheaper natural gas and renewable energy. But growing demand for electricity ā from factories, cars and especially from data centers ā has spurred interest in nuclear plants that can provide carbon-free power around the clock.
āPolicymakers and the market have received a huge wake-up call,ā Constellation Chief Executive Officer Joe Dominguez said in an interview. āThereās no version of the future of this country that doesnāt rely on these nuclear assets.ā
Constellation ā which has seen its shares jump this year thanks to mounting investor awareness of the value of power plants ā plans to fund the project from its own coffers rather than seek state or federal support. Thatās in contrast to Holtec International, which is pursuing the only other disclosed effort to restart a closed reactor, with about $1.8 billion in conditional funding from the US Energy Department and the state of Michigan. NextEra Energy Inc. has also said itās considering reviving a closed Iowa reactor, in part to supply data-center customers. However, beyond these three, experts say there are few other mothballed reactors that may be suitable for restarting.
While Constellation isnāt averse to outside financial support, Dominguez said government approvals move slowly and he doesnāt want to wait. Work at Three Mile Island is expected to start immediately. The deal to supply Microsoft with electricity from the 837-megawatt reactor is Constellationās biggest-ever power purchase deal.
The restart effort has been in the works since early 2023, when Constellation began evaluating whether it made sense to switch the reactor back on. By early this year, the company had concluded that it wanted to pursue the project, and began talking to potential customers. Microsoft was immediately interested, Dominguez said.
The nuclear power purchase will aid Microsoftās plans to run all of its massive global network of data centers on clean energy by 2025, Bobby Hollis, Microsoftās vice president for energy, said in an interview. This nuclear energy will be used to fuel data-center expansion in areas like Chicago, Virginia, Pennsylvania and Ohio.
While the additional nuclear power will help Microsoftās climate goals, it does not address the most intractable issue ā emissions from concrete, steel and chips used in the data centers, Hollis said.
āThis is not a simple piece, but itās easier than figuring out how to decarbonize the entire supply chain,ā he said.
Still, data centers make a useful customer for nuclear power. Wind and solar power outputs can vary, while a nuclear plant generally runs constantly and requires a customer that can take all of that electricity, Hollis said. That makes tech companies selling cloud computing an ideal option.
āWe run around the clock. They run around the clock,ā he said.
Microsoft isn't the only tech company looking to nuclear power to fuel its AI ambitions. Earlier this year, Amazon.com Inc.'s cloud computing division agreed to spend $650 million to acquire a data center campus connected to Talen Energy Corp.ās 40-year-old nuclear power plant on the Susquehanna River in Pennsylvania.
While the Three Mile Island reactor was mothballed in 2019, Dominguez said the equipment is still in good shape. Still, restarting it will require significant investments in the main transformer, turbine and cooling systems. The company will have to restaff the facility and must seek approval from the Nuclear Regulatory Commission. Constellation will also seek to extend its operating license through 2054, and is planning to rename the facility the Crane Clean Energy Center, after the late Chris Crane, former CEO of Exelon Corp., which spun out its generation unit to become Constellation in 2022.
One of the biggest hurdles will be connecting the plant to the power grid operated by PJM Interconnection LLC, which has a lengthy queue. If PJM can move fast enough, Dominguez said the facility could potentially be ready to supply power as early as 2027.
āIām so glad weāre reversing a terrible mistake that shouldnāt have happened,ā he said. āIt will be a lot more difficult to achieve the energy transition if we only want to use wind and solar and storage.ā