AI's interest in nuclear energy is surging, Microsoft will receive Star Energy Nuclear Power Supply, North American uranium mining stocks and nuclear energy concept stocks are soaring!

The United States' largest nuclear reactor operator, Constellation Energy, has reached an agreement with Microsoft to sell all the electricity generated by the planned restart of the Three Mile Island nuclear power plant to Microsoft, providing energy for its massive artificial intelligence data centers.

Currently, Constellation Energy plans to bring the Three Mile Island Unit 1 reactor near Middletown, Pennsylvania back online in 2028, subject to approval from the U.S. Nuclear Regulatory Commission. The company also plans to apply to extend the operation of the plant until at least 2054. The agreement signed between Microsoft and Constellation Energy is for a duration of 20 years, with Constellation Energy stating that this is the largest power purchase agreement the company has ever signed.

This news caused Constellation Energy's stock to rise by over 17% in early trading on Wall Street on Friday. Since the beginning of the year, its stock price has more than doubled. Additionally, this news led to a surge in uranium mining stocks and energy stocks, with Vistra rising by about 11.1%, Uranium Energy up by 6.4%; Canadian-listed Cameco rose by over 8.03%, Energy Fuels rose by over 7%, and Denison Mines rose by 5.58%.

"This decision is the most powerful symbol of the revival of nuclear power as a clean and reliable energy resource," said Joe Dominguez, CEO of Constellation Energy, during Friday morning's earnings conference call.

Tech Companies Seeking Clean Energy - Nuclear Power Becomes Popular

Microsoft has agreed to purchase the electricity for a period of twenty years, but financial terms were not disclosed. This is the first time Microsoft has specifically secured a 100% nuclear-powered plant for its operations.

Analysts believe that purchasing nuclear energy will help Microsoft achieve its goal of having its entire global data center network powered by clean energy by 2025. Bobby Hollis, Vice President of Microsoft Energy, stated in a media interview that this nuclear energy will be used for data center expansions in areas such as Chicago, Virginia, Pennsylvania, and Ohio.

Earlier this year, Microsoft stated that its carbon-neutral goals were at risk due to the surge in cloud computing demand driven by artificial intelligence. Microsoft's capital expenditures exceeded $50 billion in the fiscal year ending June 30, mainly for expanding data centers, and plans to exceed this amount in the current fiscal year. With the rapid development of AI in the tech industry, it was previously estimated that the power demand of data centers in the coming decades would surge, potentially putting pressure on the power grid. Goldman Sachs predicts that by 2030, data centers' power consumption will account for 8% of the total U.S. power demand, compared to the current 3%.

This decision marks a significant increase in the AI industry's interest in the nuclear energy sector, as the soaring power demand from AI has drawn more attention to the potential of nuclear power generation. Over the past decade, over a dozen reactors have closed due to competition from cheap natural gas and renewable energy. However, the increasing demand for electricity from factories, cars, and especially data centers has led to a renewed focus on nuclear power plants for their ability to provide carbon-neutral power around the clock Hollis said that data centers provide an ideal customer for nuclear power. He said that wind and solar energy outputs fluctuate, while nuclear power plants typically run continuously and require a customer that can absorb all the electricity, making technology companies selling cloud computing an ideal choice.

"We run around the clock, and so do they."

At the same time, the expansion of the manufacturing industry and the popularity of electric vehicles in the United States have significantly increased the demand for electricity. Rystad Energy predicts that by the end of this century, data centers and electric vehicles alone will increase the demand for 290 terawatt-hours of electricity, equivalent to the total consumption of Turkey.

Currently, technology companies are looking to nuclear power to meet this growing demand for electricity while adhering to their climate goals. In March of this year, Amazon Web Services purchased a data center campus from Talen Energy, which will be powered by the Susquehanna nuclear power plant in Pennsylvania, marking the first such transaction. Oracle recently announced that it is designing a data center powered by three small nuclear reactors.

Furthermore, after experiencing a wave of reactor closures over the past decade, support from the federal and state governments for the revival of the nuclear power industry in the United States is increasing. Three Mile Island will become the second nuclear power plant in U.S. history to resume operations, following the Palisades nuclear power plant in Michigan, which is expected to resume operations by the end of 2025.

Restart Ahead of Schedule if Power is Tight

Unit 1 of the Three Mile Island nuclear power plant ceased operations in 2019, mainly because nuclear power was economically challenged to compete with cheap natural gas and renewable energy sources at the time. This reactor was not affected by the 1979 Three Mile Island nuclear accident and was separate from the partially melted reactors at that time. Despite the closure of the Three Mile Island reactor in 2019, Dominguez stated that the equipment remains in good condition. However, restarting it would require significant investments in the main transformer, turbine, and cooling systems, and the company would also need to rehire employees.

Exelon will rename the plant the Crane Clean Energy Center in honor of the late Chris Crane, former CEO of the company's former parent company, who passed away in April this year.

The nuclear restart plan will begin in early 2023, with Constellation starting to assess the feasibility of restarting the reactor. Earlier this year, the company decided to move forward with the project and began discussions with potential customers. Dominguez stated that Microsoft immediately expressed interest.

Dan Eggers, CFO of Exelon, said the plan is to invest $1.6 billion to restart the plant by 2028, including nuclear fuel, with the expectation that the U.S. Nuclear Regulatory Commission will complete its review of the Three Mile Island nuclear power plant in 2027.

"Based on our expertise in plant licensing and regulatory processes, as well as observations from the restart of the Palisades nuclear power plant in Michigan, we are very confident that we can restore the plant's operating license to its pre-2019 closure status," Eggers said In addition to regulatory agencies, the largest grid operator in the United States, PJM Interconnection, will also need to review the impact of Three Mile Island on the grid before the nuclear power plant can restart. Eggers stated that Star Energy plans to submit a grid connection application to PJM next year. Eggers said, if PJM accelerates the processing of grid connection requests to address the tight power supply situation in 13 states in the Mid-Atlantic region of the United States, power plants may restart ahead of schedule.

Since the beginning of this year, the increasing understanding of investors on the value of power plants has gradually influenced the rise in Constellation's stock price. The company plans to fund the project on its own rather than seeking support from states or the federal government. In contrast, Holtec International is seeking around $1.8 billion in funding from the U.S. Department of Energy and the state of Michigan to restart its closed reactor. NextEra Energy has also expressed consideration to restart its closed reactor in Iowa to provide energy for data center customers. However, experts point out that apart from these three, there are few other idle reactors suitable for restart