Growing Demand

The upcoming power demand required for artificial intelligence (AI) is projected to increase significantly in the coming years, driven primarily by the growth of data centers and advancements in AI technologies. As recently reported in Forbes, Wells Fargo predicts AI power demand is expected to surge by 550% by 2026, escalating from eight terawatt-hours (TWh) in 2024 to 52 TWh. By 2030, this demand could further rise to 652 TWh, marking an increase of 1,150% from initial figures as shown in the graphic below.¹

Generative AI Power Demand, AI Training, and Inference

Source: Wells Fargo

In the near term, the computational power required for AI is currently doubling approximately every 100 days, which contributes to an annual increase in global energy demand attributed to AI of 26% to 36%.²

Big Tech’s Response

In response to this expected demand for power, Big Tech firms like Microsoft, Google, and Amazon are choosing to develop their own sources of power rather than waiting for utilities or independent power producers to make the investment in new generating facilities and grid improvements. Most notable of these trends has been recent investments in additional nuclear generation, both in existing facilities and new small modular reactors (SMRs).³

Microsoft’s Initiatives

Microsoft is significantly investing in nuclear power as part of its strategy to meet the growing energy demands of AI and to achieve its sustainability goals.

Investment in Three Mile Island

Microsoft has committed to purchasing all electricity produced by the decommissioned Three Mile Island nuclear power plant in Pennsylvania, and this power plant is set to reopen by 2028. This plant is historically significant due to the partial meltdown that occurred in 1979 but has been shuttered since 2019. The agreement allows Microsoft to secure a stable source of emissions-free energy for its data centers, which are increasingly reliant on substantial power due to AI demands.⁴

Focus on Small Modular Reactors (SMRs)

Alongside its deal with Three Mile Island, Microsoft is exploring investments in SMRs, a technology considered by some to be safer and more cost-effective than traditional large-scale reactors. These smaller reactors can be built more quickly and are designed to operate with passive safety systems, which minimize risks associated with nuclear energy. However, larger facilities do enjoy some greater efficiencies and economies of scale as compared to SMRs.⁵

Google’s Plans

Last week, Google announced a deal with nuclear startup Kairos Power, buying 500 megawatts of electricity from seven SMRs that have yet to be built.⁶

Google has also made a significant move to address the growing energy demands of AI with SMRs. Google plans to purchase up to 500 megawatts of nuclear capacity from six or seven SMRs to be developed by Kairos Power, with the first reactor expected to become operational by 2030 and the rest by 2035.

Amazon’s Investments

Amazon’s cloud computing subsidiary, AWS, is investing more than $500 million in nuclear power, announcing three projects from Virginia to Washington state. AWS also announced it has signed an agreement with Dominion Energy, Virginia’s utility company, to explore the development of a small modular nuclear reactor, or SMR, near Dominion’s existing North Anna nuclear power station.⁷

Amazon also recently bought a data center currently powered by nuclear energy in Pennsylvania from Talen Energy⁸ and has struck a similar deal with the startup X-Energy.⁹

Why Nuclear?

Many Americans still remember the Three Mile Island accident, which occurred on March 28, 1979, at the Three Mile Island Nuclear Generating Station in Pennsylvania, recognized as the most serious accident in the history of the American nuclear power industry.

Despite this history, nuclear power is coming back into favor. The key reasons for this are:

1. Climate change and decarbonization goals: Nuclear power is recognized as a clean energy source that can significantly contribute to global decarbonization efforts.¹⁰
2. Energy Independence: The geopolitical landscape, particularly following Russia’s invasion of Ukraine and the current conflicts in the Middle East, has heightened the desire for energy independence. Many nations are looking to nuclear power as a stable source of energy that does not rely on imported fossil fuels. This shift is crucial for enhancing national security and ensuring a consistent energy supply.¹¹
3. Technological Advancements: Recent innovations in nuclear technology, especially the development of SMRs, are making nuclear power more appealing. SMRs are designed to be safer, cheaper, and quicker to build compared to traditional large reactors.¹²
4. Shifting Public Perception: Public opinion regarding nuclear energy has been shifting positively in recent years. Factors such as rising energy prices and the need for reliable power sources have contributed to increased support for nuclear power in various regions, including the United States. Notably, recent surveys indicate that over half of Americans now favor the development of nuclear energy, reflecting a growing recognition of its potential benefits amid climate challenges.¹³
5. Policy Support and Investment: Government policies are increasingly supportive of nuclear energy as part of broader climate strategies. Significant funding initiatives, such as those included in the Biden administration’s Infrastructure Investment and Jobs Act, aim to bolster nuclear facilities and research into advanced reactor technologies.

“Green Power” Capacity Factors

Not included in the list above is the fact that data centers require a continuous energy source; intermittent energy from alternative green sources like solar, which does not produce energy at night, would require that data centers be shut down and then repowered when the power returns, which would critically impact their availability and reliability for users.

In electrical engineering, this term is called “capacity factor.” To illustrate this calculation, assume a utility has a two-megawatt wind turbine as part of its generating capacity. Given this capacity, this unit could potentially produce 17,520 megawatt hours over one year (two megawatts * 24 hours/day * 365 days/year), assuming the wind blew constantly, which we know it does not. Nationally, as shown in the table below, wind has about a 40% capacity factor, meaning that turbine can produce power at its rated capacity about 40% of the time.

However, a nuclear facility, given that it does not require daylight or blowing wind to produce power at a specific time, can produce power at its rated capacity over 90% of the time, a characteristic critical to meeting future energy demands.

2023 Average Capacity Factors by Energy Source¹⁴

Conclusion

Big Tech’s pivot to nuclear energy highlights a forward-looking approach to managing growing AI power needs. This strategy not only addresses the limitations of traditional energy sources and grid constraints but also sparks essential discussions on sustainability, safety, and planning in an AI-driven future.

WTI Strip Prices Decrease

Spot prices and futures prices for the West Texas Intermediate (WTI) contract decreased approximately $1.75 per barrel in the near term and decreased approximately $2.25 over the longer term. Some of this recent downward movement could be attributed to Donald J. Trump’s victory in spite of concerns over the Middle East conflict and recent OPEC+ decisions. 

WTI Strip Prices – One Month Change

As shown, the oil price curve remains in a state of “backwardation,” reflecting the market’s expectation of lower future spot prices.

Oil Price Outlook

The price distribution below shows the crude oil spot price on November 6, 2024, as well as the predicted crude oil prices based on options and futures markets. Light blue lines are within one standard deviation (σ) of the mean, and dark blue lines are within two standard deviations.

WTI Crude Oil $/BBL

Based on these current prices, the markets indicate there is a 68% chance oil prices will range from $59.00 and $90.50 per barrel in mid-February 2025. Likewise, there is roughly a 95% chance that prices will be between $43.00 and $137.50. By mid-April 2025, the one-standard deviation (1σ) price range is $56.50 to $92.00 per barrel, and the two-standard deviation (2σ) range is $38.50 to $142.50 per barrel.

Key Takeaways

Remember that option prices and models reflect expected probabilities, not certain outcomes, but that does not make them any less useful. Throughout most of 2023 and 2024, crude oil spot prices have primarily fluctuated within the range of $70 to $90 per barrel. During that time, we observed general increases in futures price volatilities as prices neared the upper bound of that range, as evidenced by the futures price ranges observed. For mid-April 2025 pricing as of November 6, 2024, the 1σ range had a spread of $35.50 per barrel, and the 2σ range had a spread of $104.00 per barrel. For comparison, in 2022 we observed 1σ and 2σ price ranges in excess of $65.00 and $150.00, respectively.

1. "AI Power Consumption: Rapidly Becoming Mission-Critical," Beth Kindig, Forbes, June 20, 2024.
2. "Report: The Rise of AI Threatens to Explode US Electricity Demand and Overburden the Gird - but Also Promises New Efficiencies," The Conference Board, June 13, 2024.
3. "Hungry for Energy, Amazon, Google and Microsoft Turn to Nuclear Power," Ivan Penn, Karen Weise, The New York Times, October 16, 2024.
4. "Why Microsoft made a deal to help restart Three Mile Island," Casey Crownhart, MIT Technology Review, September 26, 2024.
5. "Comparison of Small Modular Reactor and Large Nuclear Reactor Fuel Cost," Christopher P, Pannier, Radek Skoda, Scientific Research, May 2014.
6. "Microsoft, Google and Amazon turn to nuclear energy to fuel the AI boom," Mehek Mazhar, CBC Radio, October 29, 2024.
7. "Amazon goes nuclear, to invest more than $500 million to develop small modular reactors," Diana Olick, CNBC, October 16, 2024.
8. "Google to buy nuclear power for AI datacentres in 'world first' deal," Alex Lawson, The Guardian, October 15, 2024.
9. "Microsoft, Google and Amazon turn to nuclear energy to fuel the AI boom," Mehek Mazhar, CBC Radio, October 29, 2024.
10. "Advantages and Challenges of Nuclear Energy," Office of Nuclear Energy, June 11, 2024.
11. "Restarting nuclear power plants: the unprecedented game in the US," Thomas Urbain, Tech Xplore, September 25, 2024.
12. "Small reactors could make nuclear energy big again. How do they work, and are they safe?" Roberto Bocca, Johnny Wood, World Economic Forum, October 6, 2022.
13. "Restarting nuclear power plants: the unprecedented game in the US," Thomas Urbain, Tech Xplore, September 25, 2024.
14. "Capacity factors for selected energy sources in the United States in 2023," Statista, April 2024.