The Underlayer

Monday 30 September 2024

Florida, September 2024

A blockbuster deal between Microsoft and Constellation Energy to restart Unit 1 at Three Mile Island looks like a real signal to the future of nuclear energy. The deal will put back in operation a single 819 MW capacity reactor that had been operating as recently as 2019, and Microsoft will purchase 100% of its generation. Significantly, that represents 7.3 TWh of annual clean electricity output that currently does not exist on the US powergrid. Compare that to the annual output of the nation’s largest utility-scale solar plant, Solar Star in California, that generates about 1.6 TWh per year from 747 MW of capacity.

Notice the unsurprising difference in annual generation between Solar Star and TMI, despite having closely matched nameplate capacity. That characteristic was likely highly motivating for Microsoft, which no doubt understands that it would take 5 Solar Stars to create the same output as a single unit at TMI. While it’s not clear how much of TMI’s generation will actually be used locally by Microsoft, the company can simply broker the unused generation to the US grid. And in doing so, Microsoft can improve its own clean-energy balance sheet.

The US tech giants have of course been sourcing new, clean energy for years—either by contracting for new solar capacity, or siting data centers in clean energy corridors like the eastern portion of the Columbia River, where Oregon and Washington have built significant wind capacity. But with the advent of AI, the pace of power demand growth is further boosted—on top of electric vehicle growth, and electrification of buildings. The pace therefore may be too much to match with renewables only—and this mirrors the same problem on the global level: total demand is starting to grow too quickly to catch with wind and solar alone.

Cold Eye Earth has warned for two years now that natural gas, both in the US and globally, will continue to win market share as global power generation growth outdistances clean energy growth. This warning has also applied to coal, which also keeps hitting new all time high in the global powermix. The solution offered here has centered on a new role for nuclear—not as the leader of grid decarbonization—but as a supporter. Which is why the TMI deal is fascinating: it’s precisely the solution we need.

The signal coming from the Microsoft-Constellation deal is that the world is about to turn towards the unused capacity represented by economically recoverable nuclear. These sites also contain an increasingly precious resource: an on ramp to the grid, at a time when large bottlenecks are preventing large volumes of new power from being deployed. We will still need to build many Solar Stars, and we are! Solar and offshore wind are going gangbusters from China to Texas. But the opportunity to quickly add a very large 5-10 TWh of clean power from resurrected nuclear is too juicy to let slip by. The revived TMI nuclear station, which will be renamed the Crane Clean Energy Center, is expected to be operational in relatively short time, by the year 2028. This counters one of the more tedious objections to nuclear that flogs the admittedly long development timelines in the OECD which do, unfortunately, sometimes run towards 20 years. This popular retort however tends to leave out the much shorter newbuild timelines in Asia, at roughly half that length.

There are many well known voices in the world of energy analysis that have been adamant for years that we can decarbonize global power through wind, solar, and storage alone. You wonder, can they hear the signal now starting to arise from nuclear?

The restart of Three Mile Island would be helped, in part, by tax incentives already embedded in the Inflation Reduction Act. This may be why owners of other, shuttered US nuclear plants may be looking at restarts. This summer, for example, it was reported that Next Era Energy, a developer of large renewable projects, was taking a second look at its 600 MW Duane Arnold Energy Center located north of Cedar Rapids, Iowa. In Michigan, meanwhile, the US government is providing a loan to Holtec International to restart the 800 MW Palisades Nuclear Generating Station.

Let’s put these potential re-openings in context. For example, combined wind +solar power in the US is on course to grow from 663 TWh to 755 TWh in 2024, an advance of 92 TWh. Restarting all three of Palisades, Duane Arnold, and Three Mile Island would roughly add 20 TWh to the US grid mix. The proportions here are illustrative. First, the world is unlikely to decarbonize electricity if we were to restrict ourselves to using nuclear, only. This is why wind and solar are the leaders, and will not be surpassed. They are cheaper, but mainly, they are faster—which only adds to their ROI and affordability. But at the same time, unless we build or resurrect some nuclear, then the gaps will be filled by natural gas and coal. Wouldn’t you rather the gap be filled by nuclear? If the answer is no, you must still be telling yourself something false: that the world will decarbonize by adding renewables alone, without additional help on the demand side, and additional help on the supply side—in the form of nuclear.

Why is it so hard for the world’s energy system to attack the fossil fuel underlayer, which presses onward despite larger and larger additions of clean energy? An initial, general answer is that the fossil fuel foundation is composed of multiple cohorts or generations, which do experience turnover, but not at a particularly fast rate. There are coal plants that were built just after WW2, there are natural gas plants that were built in the 1970’s, and then subsequent generations of both as we move through time up to the present. In the US, when that oldest generation of coal plants started to retire about 15 years ago, it happened just as utility scale wind and solar were becoming economically viable. Unfortunately, neither was able to scale up quickly enough to take 100% of the market share left behind by coal, so natural gas filled in the remainder.

The world right now is doing a better and better job each year covering marginal growth with either clean, or cleaner, energy sources. But we don’t seem to be able to work away at all against the bedrock layer of coal, natural gas, and oil that still governs the world’s economy. This means that, overall, renewables have built up their own layer that roughly sits on top of legacy energy. This layer grows larger, it grows quickly, it’s without question its own form of accomplishment, but global emissions tell the tale of the bottom line: we have slowed, but still not halted emissions growth.