Betting on Small Modular Reactors to Fuel the Data Center Boom

A lengthy feature in POWER magazine explored the challenges, risks and opportunities of developing new sources of power like small modular reactors.

Elina Teplinsky, the leader of Pillsbury’s Global Energy Industry team and a key member of the firm’s Nuclear energy practice, told POWER that “The barriers for advanced reactor projects aimed at supporting data center capacity are similar to barriers to advanced reactor development and commercialization more broadly. However, there is the added factor of timelines—data center operators need the power today, while it takes a number of years to license, develop, and deploy an advanced reactor, or any nuclear facility.”

Recently, the U.S. Nuclear Regulatory Commission approved a project by NuScale that essentially eliminated the traditional 10-mile evacuation zone requirement (EPZ) around nuclear sites. That decision will allow nuclear plants to be located much closer to industrial facilities, including data centers, Teplinsky said.

“NRC already validated a risk-informed methodology for NuScale that allows that developer to adopt an EPZ limited to the site boundary,” she explained. “This paves the way for other developers to use methodologies to demonstrate that smaller EPZs will provide the same level of protection to the public as the 10-mile EPZs currently mandated by the NRC for existing plants. This would allow the siting of advanced reactors closer to population centers, including data centers.”

Meantime, the Federal Energy Regulatory Commission (FERC) rejected an interconnection service agreement between PJM Interconnection and Susquehanna Nuclear that would have increased the load sent from the Susquehanna nuclear plant to AWS’s Cumulus data center co-located with the plant.

“FERC’s position on interconnection service agreements that allow for direct power sales from nuclear power plants to data centers will be a key permitting issue in the potential co-location of data centers with advanced reactors,” Teplinsky noted.

From a business perspective, some companies are exploring partial ownership stakes to secure guaranteed energy supply. “Deals with hyperscalers also present an opportunity to secure some equity investment into these projects,” Teplinsky said. “The demand from data centers is less a barrier than an opportunity—it allows developers to secure firm and bankable offtake for these projects—potentially at a premium.”

Along with regulatory and business concerns, other key uncertainties remain for the emerging nuclear industry.

“Tax credits—especially the clean electricity production tax credits and investment tax credits—will be vital to the commercial viability of these projects, especially considering the FOAK [first of a kind] risk,” Teplinsky said. “DOE [U.S. Department of Energy] loan guarantees and direct financing from the Federal Financing Bank at low rates are also essential to companies’ ability to secure debt and reduce cost of capital. Grant funding to support commercial demonstrations and high-assay low-enriched uranium support are also key.”

These incentives “will need to remain in place in order for data center-driven advanced reactor projects to be viable,” Teplinsky concluded. “In fact, these incentives need to expand and address some of the key issues still inhibiting large-scale advanced reactor deployment despite data center demand, such as FOAK deployment and cost overrun concerns.”