Shares of nuclear energy companies hit record highs this week after Amazon and Google reached historic power supply deals, bolstering efforts to deploy the first small modular reactors in the United States.
The share prices of US-listed SMR developers Oklo Inc and NuScale Power rose 99 percent and 37 percent, respectively, after rivals X-energy and Kairos Power, two private SMR developers, announced financing agreements. Shares of Cameco, Oklo, NuScale, Constellation Energy and BWX Technologies all traded at record highs during the week.
The deals support the deployment of a dozen next-generation reactors to provide low-carbon electricity to power energy-hungry artificial intelligence data centers at Amazon and Google.
Investors saw the announcements as evidence that a nuclear renaissance is accelerating, after the slowdown following the Fukushima accident in Japan in 2011.
The proliferation of data centers is driving historic growth in U.S. electricity demand, undermining efforts to reduce reliance on fossil fuels and decarbonize.
Shares of Constellation, which operates the largest fleet of conventional reactors in the United States, have more than doubled since the start of the year.
The company signed a 20-year power supply agreement with Microsoft last month that will lead to the reopening of the Three Mile Island nuclear power plant in Pennsylvania. This location was the scene of the most serious nuclear accident in US history, when one of the reactors suffered a partial meltdown.
Shares of uranium producer Cameco have risen 38 percent this year, while shares of nuclear components supplier BWX Technologies have jumped 65 percent.
Reactor manufacturers “have been saying for some time that they would be needed to meet the boom in AI power demand, but no one seemed to believe them,” said Seth Grae, chief executive of the fuel developer Nuclear Lightbridge Corporation and Chairman of the International Council of the American Nuclear Society. .
“These significant investments show that the technology industry does not believe that renewables and batteries can provide enough stable or cost-effective energy and that nuclear will be necessary,” he said.
Until recently, investors were wary of financing the deployment of small reactors, touted by their proponents as being smaller, safer and more efficient than large-scale nuclear reactors. Concerns about the industry’s ability to deliver projects on time and on budget, combined with high interest rates and a shortage of clients willing to underwrite projects, had slowed progress.
Last year, X-energy was forced to enter into a $1.8 billion deal to go public through a special purpose acquisition company due to ‘challenging market conditions’ . Shortly thereafter, NuScale canceled plans to build the first small reactor in the United States. Few power utilities have expressed interest in buying power from the supplier after it raised prices by more than 50 percent over two years, to $89 per megawatt hour.
“The dilemma for the (small reactor) industry was that customers did not want to sign up for the ‘number one reactor’ because it is more expensive and riskier to build than later reactors,” Marc Bianchi said. , analyst at TD Cowen.
Amazon and Google’s decisions to invest in small reactors reflect their need for reliable, cost-effective, clean electricity to power a new wave of AI data centers. In the first half of 2024, new data centers totaling nearly 24 gigawatts have been announced by companies, more than triple the same period last year, according to Wood Mackenzie.
“It’s not just about replacing existing fossil generation, but also building more now. It created a real sense of urgency,” said Mike Laufer, co-founder and chief executive of Kairos Power, which this week signed a deal with Google to deploy six or seven small reactors by 2035.
The industry also benefits from billions of dollars in funding from the U.S. government, which fears that Russia and China – which have deployed a handful of small reactors – are becoming unassailable leaders in the nuclear sector. Washington is also aware of the need to ensure a stable electricity system to maintain its lead in AI technologies without leading to increased emissions.
“The only constraint preventing the United States from remaining a leader in artificial intelligence is power. It’s not dirt, it’s not chips, it’s power. And so that’s the number one goal,” said Clay Sell, CEO of X-energy.
But this week’s euphoria around nuclear power, and small reactors in particular, masks significant risks associated with the deployment of a new generation of technology that has been subject to delays and cost overruns in the past, critics warn.
Edwin Lyman, director of nuclear energy safety at the Union of Concerned Scientists, said the X-energy and Kairos SMRs were “untested designs” and would likely take much longer to complete. deploy only their target dates in 2030 and beyond.
“The path to safe and reliable commercial exploitation of any experimental nuclear technology is bound to be fraught with challenges and it is virtually impossible today to estimate what the final cost of electricity will be,” he said.
Strict regulatory standards and challenges remain obstacles, developers of competing energy sources say.
“The euphoria is a bit exaggerated,” said Andres Gluski, chief executive of AES, the largest renewable energy development company, which signed 5.8 GW of power purchase agreements with Google , Microsoft and Amazon.
Solar, wind and battery storage account for 95 percent of all capacity waiting to be connected to the grid, while nuclear accounts for less than 1 percent, according to data from the Lawrence Berkeley National Laboratory. No small reactor projects have begun construction in the United States, and more than 80 percent of announced capacity has yet to enter the development pipeline, according to Wood Mackenzie.
But developers of small reactors say they are confident that support from tech giants will be the game-changer they need.
“The technology community has placed value not only on carbon-free benefits, but also on availability and reliability,” said Clayton Scott, NuScale’s chief commercial officer. “The momentum is there.”
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