New Frontiers for Energy Resilience

Friday Reflection by Brian Kozel, CFP^® and Daniel Smyth, CFP^®, CPWA^®

The need for more energy production is undeniable. Data centers accounted for roughly 4% of energy use in the U.S. in 2022, and the boom in AI and cloud computing is expected to push that up to 6% of total energy usage by 2026.[1] As an example, a search on ChatGPT, on average, requires almost 10 times as much electricity to process as a traditional Google search.[2] The power needed to run data centers and large-scale computing operations is projected to grow 160% by 2030.

Meeting that demand will strain the aging electrical grid in the U.S., and with 60% of electricity still coming from fossil fuels, the impact of global warming is expected to worsen. The trajectory of AI usage has already inspired large tech companies to look beyond the existing grid to meet future energy demands. For some, this has meant a renewed interest in nuclear power.

Greenhouse gas emissions are often used as the benchmark for determining whether an energy source is “clean” or not. During the day, the sun shines through the atmosphere, warming the earth’s surface. At night the earth’s surface cools, releasing heat back into the air. Greenhouse gas traps heat in the Earth’s atmosphere, and the cumulative effect has contributed to a greater frequency of extreme weather events.

Nuclear power plants produce minimal greenhouse gas emissions, including carbon dioxide (CO2), providing a significant advantage over fossil fuel-based energy sources like coal, oil, and natural gas. Additionally, nuclear power produces larger amounts of energy from smaller amounts of fuel. For many regulators, companies, and investors, this makes nuclear energy qualify as both clean and efficient.

At the U.N.’s major climate conference last year, known as COP28, a group of more than 20 countries, including the United States, launched the Declaration to Triple Nuclear Energy.[3] As of 2023, nuclear energy already constituted 18% of U.S. electricity generation.[4] This commitment to expanding nuclear energy production by 2050 is seen as a key component in the efforts to reach carbon neutrality by mid-century.

In the U.S., bipartisan legislation was passed earlier this year to support additional innovation and nuclear expansion. The Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act is designed to promote technical innovation, accelerate licensing of nuclear facilities at retired fossil-fuel energy generation sites, and strengthen nuclear supply chain infrastructure.

Today, nearly all large-scale commercial nuclear plants use enriched uranium as fuel to generate electricity through nuclear fission reactions, and temperature is controlled with a cooling system that uses water. A growing number of companies are working to modify this formula. Efforts to improve both cost and safety have led to two important innovations: smaller modular reactors and a shift from water-based cooling to the usage of molten salt for the cooling process.

Large tech companies are driving these innovations. Google announced a deal to purchase nuclear energy from small modular reactors being developed by a start-up called Kairos Power, which it expects to be running by 2030. Amazon announced an investment in the development of small modular reactors by another start-up, X-Energy. Microsoft’s deal with Constellation Energy to revive a reactor at Three Mile Island was announced earlier this year and remains part of their long-term plans despite a recent regulatory setback.

In 2020, Google achieved its goal of running its data centers and operations entirely on renewable energy. Currently, the bulk of that energy is generated by wind and solar, both of which are dependent on weather and daylight. In their effort to bolster round-the-clock reliability and meet increases in energy demands, Google and Microsoft are aggressively pursuing nuclear power and are thus interested in making new efforts to address the challenge of managing radioactive waste.

TerraPower has partnered with both companies and is developing a process that uses the volatility of chloride salts at high temperatures to separate uranium from used nuclear fuel. This process could reduce the amount of nuclear waste sent to repositories by 10-20 times. In addition to reducing the nuclear waste output, TerraPower is developing programs to use spent nuclear fuel for medical applications, such as extracting actinium-225, which is used in cancer clinical trials.

When considering nuclear power as a clean energy source, it is hard to look past the risks, especially the output of radioactive waste during the nuclear energy cycle. Portions of the spent nuclear fuel remain radioactive for thousands of years, requiring specialized disposal and storage techniques. While modern nuclear power plants are much more efficient than older reactors, safe storage and disposal of this waste is nevertheless a challenging issue.

In addition, there are safety concerns when nuclear power plants are placed close to civilian populations for whom they provide power. Following the Three Mile Island incident in 1979, the regulatory framework and safety standards for nuclear power became far more stringent: modern reactors are designed with passive safety systems, which do not require active intervention (like pumps or external power) to operate. Technological advances now allow a plant to rely on natural forces such as gravity, natural convection, and heat dissipation to cool the reactor in the event of a malfunction, reducing the risk of human error or mechanical failure.

Like electric vehicles, solar panels, and most consumer electronics, the production of nuclear power requires mining of rare earth metals. Uranium acts as fuel for most nuclear power plants, and the extraction process can have environmental and health impacts, including land degradation, water use, and pollution. Forward-looking mining companies are working to ensure sustainability in their operations, including collaboration with Indigenous peoples and a focus on water stewardship, site monitoring, and reclamation.

The future of energy production, especially with the demands of AI and cloud computing, hinges on a balanced and sustainable mix of sources. As established technology companies partner with nuclear startups, sustainable solutions they develop could help meet the rising demand without further exacerbating climate concerns. Despite the challenges of waste disposal and safety concerns, innovations in modular reactors, alternative cooling methods, and waste reduction technologies have the potential to make nuclear power a key contributor to a cleaner, more resilient energy landscape.

Resources

¹ Electricity 2024: Analysis and forecast to 2026

² AI is poised to drive 160% increase in data center power demand. Goldmansachs.com

³ At COP28, Countries Launch Declaration to Triple Nuclear Energy Capacity by 2050. Energy.gov

⁴ U.S. Energy Information Administration.