Federal regulators have rejected a plan to increase nuclear energy flow to an Amazon data center, sparking concerns about grid reliability and economic development.
At a Glance
- FERC voted 2-1 against boosting Susquehanna nuclear plant’s power output from 300 to 480 megawatts
- Decision impacts Amazon’s data center expansion plans and other tech companies’ nuclear energy initiatives
- Talen Energy, Constellation Energy, and Vistra Corp. stocks dropped following the announcement
- Regulators cited concerns about grid reliability and consumer costs
- Amazon plans to proceed with its data center using existing 300 megawatt capacity
FERC Rejects Power Increase for Amazon Data Center
The Federal Energy Regulatory Commission (FERC) has voted 2-1 against a proposal to increase the electrical output of the Susquehanna nuclear power plant in Pennsylvania. This decision directly impacts plans for an Amazon data center expansion, which was set to benefit from the proposed power boost from 300 to 480 megawatts. The rejection has sent ripples through the energy and tech sectors, raising questions about the future of nuclear-powered data centers and grid management.
The Federal Energy Regulatory Commission rejected an agreement that would have allowed an Amazon data center to directly tap into power from a Pennsylvania nuclear plant. https://t.co/GEjLxmfMCn
— Bloomberg Markets (@markets) November 2, 2024
Republican Commissioners Mark Christie and Lindsay See cast the deciding votes against the deal, while a Democratic Commissioner supported it. Two other Democratic commissioners abstained from voting. The decision was primarily based on concerns about grid reliability and potential increases in consumer costs. “Co-location arrangements of the type presented here present an array of complicated, nuanced and multifaceted issues, which collectively could have huge ramifications for both grid reliability and consumer costs,” said Christie.
Impact on Energy Companies and Tech Giants
The FERC’s decision had immediate financial consequences for several energy companies. Talen Energy, which operates the Susquehanna plant, saw its stock fall by 2.2% to $170 per share. Constellation Energy and Vistra Corp., both of which may have been considering similar deals with Amazon, experienced even more significant declines. Constellation Energy’s stock dropped over 12%, marking its worst trading day since spinning off from Exelon in February 2022, while Vistra Corp.’s shares fell by about 3%.
This decision not only affects the specific deal between Talen Energy and Amazon but also has broader implications for the tech industry’s efforts to secure “behind the meter” power from nuclear plants. As artificial intelligence and data processing demands continue to grow, tech companies are increasingly looking to nuclear energy as a reliable, carbon-free power source to meet their energy needs and carbon-neutral goals.
Talen Energy’s Response and Future Plans
Talen Energy, which had sold the 960-megawatt data center to Amazon for $650 million in March, expressed significant disappointment with FERC’s decision. The company stated that it believes FERC erred in its judgment and is currently evaluating its options, with a focus on finding commercial solutions to move forward.
“FERC’s decision will have a chilling effect on economic development in states such as Pennsylvania, Ohio, and New Jersey,” said Talen.
Despite this setback, Talen Energy has indicated that the Amazon Web Services data center project can still proceed using the existing 300 megawatts of capacity. However, the company is exploring alternative approaches to potentially increase the output in the future, subject to regulatory approval.
Implications for the Energy Sector and Grid Management
The FERC’s decision highlights the complex challenges facing the energy sector as it attempts to balance the growing demand for power from tech companies with the need to maintain grid reliability and keep consumer costs in check. Commissioner Willie Phillips, who dissented from the majority opinion, argued that the decision could be a setback for electric reliability and national security, particularly given the increasing energy demands driven by AI technologies.
“We are on the cusp of a new phase in the energy transition, one that is characterized as much by soaring energy demand, due in large part to AI, as it is by rapid changes in the resource mix,” said Phillips.
As the debate over nuclear energy’s role in powering the tech industry continues, this decision may prompt a reassessment of how grid operators and regulators approach large-scale power agreements between nuclear plants and data centers. The outcome could have far-reaching consequences for future energy infrastructure planning and the tech industry’s ability to meet its growing power needs while also achieving carbon neutrality goals.
