Behind Microsoft’s AI Power Deal

Sep 30, 2024 | Wall Street Journal

Originally published on the Wall Street Journal

President Biden’s energy policies are so detached from reality that companies are scrambling to find more power on their own. Witness Constellation Energy’s deal on Friday to restart its Three Mile Island nuclear reactor to power Microsoft AI data centers.

Artificial intelligence is increasing demand for power while baseload plants that provide power around the clock shut down. New data centers are on hold because the grid can’t support AI systems with intermittent wind and solar. Hence, the Microsoft deal.

One of Three Mile Island’s two nuclear reactors in Pennsylvania shut down permanently after the 1979 nuclear accident, and the other closed in 2019 because it became uneconomic. But the AI boom and forced retirements of coal plants are reviving nuclear power.

Microsoft’s deal follows Amazon’s purchase of a Pennsylvania data center powered by an on-site 2.5 gigawatt nuclear plant. The Energy Department has approved a $1.5 billion government loan guarantee to restart a closed nuclear reactor in Michigan amid a Midwest power crunch.

A growing problem is that coal and natural gas plants are closing prematurely amid an onslaught of regulation and heavily subsidized renewables. Wind and solar power can turn a profit running only some of the time. Baseload power plants can’t—especially as they’re burdened by costly new Environmental Protection Agency rules.

The EPA finalized its Clean Power Plan 2.0 that will require coal and new or refurbished gas plants to implement carbon-capture technology by 2032. Such technology isn’t economic or feasible now, so coal plants will have to shut down. This threatens grid reliability, four regional grid operators warn in a friend-of-court brief supporting a challenge to the rule by 27 states.

The grid operators that provide power to some 156 million customers—MISO, PJM, ERCOT and SPP—tell the D.C. Circuit Court of Appeals that EPA compliance timelines “are not workable and are destined to trigger an acceleration in the pace of premature retirements” of coal and gas generators. This will “substantially strain” their ability to “maintain the reliability of the electric power grid.” They also warn “about the chilling impact” that the EPA’s rules collectively “will have on the investment required to retain and maintain existing units.”

The climate lobby claims batteries are the answer, but the grid overseers explain that “long duration energy storage resources are only in nascent development and have not yet proven economically feasible for deployment on a mass scale.” Nor do they “provide all the necessary reliability attributes that coal and natural gas units provide, such as grid inertia.”

A North Dakota state analysis by the research outfit Always On Energy Research projects the rule will lead to blackouts across the Midwest with a $87 billion social cost, which is in top of the $448 billion in grid investment needed to replace shuttered coal plants.

The lights are flickering. Is anyone at the White House home?

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