Here's Why AI Might Need Nuclear Power to Succeed
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Over the roughly 70 years since the first commercial nuclear power plant went into operation, the popularity of splitting atoms for electricity has undergone some major swings. After the Fukushima disaster in 2011, countries including Japan and Germany pulled back from the power source. But since the war in Ukraine, it's experiencing a comeback as a secure energy source. And some big names in tech are getting in on the act.

Nuclear is a wonderful way forward as one of the sources of energy, one of the sources of sustainable energy. Tech companies want to be customers for green energy and at least for a period of time they're willing to pay a bit of a premium. That is extremely helpful to reboot the nuclear industry. It's totally fair to say that AI is going to need a lot of energy, but it will force us, I think, to invest more in the technologies that can deliver this.

That was Nvidia's CEO Jensen Huang, Microsoft founder Bill Gates and OpenAI's Sam Altman there. So here's why artificial intelligence might need nuclear power to succeed.

Bloomberg reporter Jonathan Tyrone joins me now to explain. Jonathan, first of all, how big is the renewed interest we've seen in nuclear power in recent years? Oh, there's definitely legitimate growing interest in nuclear power. You can see that in opinion polling. You can also see that in investment. In the Western world, that's mostly at this point flown into extending the lifetime of existing reactors. The biggest builds of new reactors are

occurring in China. They have 20 new builds going on right now. That's unprecedented anywhere else in the world. But then in emerging market countries ranging from Egypt to Bangladesh to India, there are also new builds going on. The places that really are lagging behind right now are Europe and especially the US where there are currently zero new builds happening.

Okay, it's interesting to understand that global spread. Part of the future conversation or the conversation around the future of nuclear power has been around what are called small modular reactors. Can you just explain what are they and why are they proving popular?

Sure. I mean, small modular reactors are not a new concept. People have been talking about small modular reactors for 20 years or more. And these are factory assembled models that would be around 300 megawatts. That's about the third of the size of a traditional reactor, which is going around 1,000 megawatts or 1 gigawatt. The idea behind them is that they can be

built in a factory, enter serial production and therefore lower cost. Right now, there are more than 90 individual designs all competing in the marketplace for acceptance in the market. And this is actually one of the big problems. There's a lot of investment going into what you would call paper engineering. The only countries that have actually built an SMR are China and Russia. The US and Europe, again, they have scores.

scores of different designs, but have been less effective in actually implementing them. Do SMRs provide a solution for countries who are worried about energy security if they're cheaper and faster to build? Well, energy security is an interesting concept. It's true that a nuclear reactor can run anywhere from 18 months to a couple of years without receiving new fuel. However, nuclear reactors, just like gas plants or

coal plants do need to be refueled intermittently. And that fuel cycle is very complex with very long supply chains. And that's also an issue that we see in the US right now, where the US continues to get a large share of its nuclear fuel from Russia.

That's the same similar problem that we witness in Eastern Europe. So yes, SMRs and nuclear could give more base in times of crises to change your supply chain. However, in terms of energy security in this complex world of trade,

they are also prone to uncertainty. So that's the supply side of the equation. But let's talk a bit about the demand. What's AI got to do with this renewed interest in nuclear power? Well, the AI companies, to their credit, are creating demand for clean energy. And undoubtedly, nuclear power is a much cleaner energy source than alternative fossil fuels. And so what the

tech companies want to do is called demand aggregation. And they are looking at putting together all of their increased electricity demands and working with utilities to create power price agreements. These are packages that can be financialized and then used to finance new builds power.

The issue is that when you look at long-term or middle-term electricity demand forecasts, you're still looking at data centers coming in around 1 to 1.3 percent of total global electricity consumption. And even with the onset of artificial intelligence, the growth of electricity demand for data centers is projected to be rapid.

But the level is set to remain relatively small. That's coming from the IEA. And then you put that into comparison with other demand sources. And we're looking at desalination, electric vehicles. And it becomes more of a story about Silicon Valley and Western markets trying to reboot a clean energy source, nuclear power, that has fallen by the wayside in recent decades.

And are the investments that we're seeing companies like Microsoft and Google making going to make a difference in that? Well, the nuclear industry certainly hopes so. But again, we're looking at a demand deficit. And I'll cite again, NextEra Energy. This is

a pro-nuclear utility. They operate nuclear power plants in the US, but even its chief executive officer, John Ketchum, came out last week during his quarterly earnings conference call and said that he's simply not bullish on SMRs because while they conceivably could

provide a service of clean energy or these AI data centers, their actual implementation and deployment is so far out, he estimates towards the second half of the 2030s, that they're not practically placed to serve the increased data needs

that Silicon Valley needs right now. And so he's looking at more traditional sources of nuclear energy, such as extending the lifetime of existing plants and then filling in generation capacity of variable wind and solar with peak gas generation plants.

So nuclear power, there's a lot of interest, there's a lot of great ideas out there, but it still is facing a big challenge when it comes to implementation. Thanks to Bloomberg reporter Jonathan Tyrone. For more explanations like this from our team of 2,700 journalists and analysts around the world, search for Quick Take on the Bloomberg website or Bloomberg Business app. I'm Stephen Carroll. This is Here's Why. I'll be back next week with more. Thanks for listening.

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