OpenAI, Oracle and SoftBank formed a new joint venture called Stargate to invest in data centers, building on major U.S. investments in the technology. (Image: Bing Image Creator)
OpenAI’s chief executive, Sam Altman; SoftBank’s chief, Masayoshi Son; and Oracle’s founder, Larry Ellison, were at the White House announcement this week with Mr. Trump.
According to the newspaper’s report, Stargate could invest as much as $500 billion over four years. The three companies plan to contribute funds to the venture, which will be open to other investors and start with 10 data centers already under construction in Texas.
The enormous AI venture is seen as a part of the Trump administration’s efforts to compete against China for global leadership in this area. A key national security concern is the use of AI in military applications.
The South China Morning post reported on 01/21/25 that China just announced an $8.2 billion investment fund for AI development. The fund will focus on commercial equity investments in Chinese companies. China does not publish data on its spending on its military expenditures for AI. In 2022 National Defense, a trade press wire service, published a report estimating Chinese military spending on AI as “more than $1.6 billion a year.”
At the same time the huge apparent US commitment of AI related investment leaves Google, Amazon, Apple, and Facebook without equivalent financial throw weight.
Recently, OpenAI reportedly pitched an economic road map for the new administration on 01/13/25 that centered on a large-scale plan for U.S. data centers that are used to power A.I. tools like its ChatGPT. (Full text here: PDF file)
The OpenAI roadmap appears appears to be the inspiration for Trump’s $500 billion plan. The impetus for OpenAI’s road map is that, according to the New York Times, it struggled to to get enough computer power from Microsoft.
This is a critical issue since Microsoft is a major investor in OpenAI having committed $13 billion to invest in the firm much of it in the form of in-kind computer related support. As a result, OpenAI brough Oracle into the picture to beef up the cloud computing capacity of the firm.
The new AI initiative is a turn around for OpenAI which previously sought investors and new business in the Middle East. Last year, Altman met with investors in the United Arab Emirates, computer chip makers in Asia and officials in Washington, proposing that they unite to build new computer chip factories and data centers across the globe.
Saudi Arabia is reported to be spending $40 billion on AI with the string attached for firms wanting the business must come to the desert kingdom and work there. Plus the electricity to power the needed data centers may finally push Saudi Arabia to invest in nuclear energy so as to not burn oil and gas needed for export earnings on AI data center power plants.
After officials in Washington expressed concern that a U.S. company was trying to build vital technology in the Middle East, OpenAI focused on building new data centers in the United States. In particular, there were concerns that AI investments of advanced technology in data centers in Saudi Arabia would leak to China.
Update: The New York Times reported on 01/22/25 that Elon Musk has openly criticized the Trump administration’s plan for a $100M AI initiative. According to Musk, the investors don’t have the money for it, in fact, according to Musk, less than $10B or just 10% of the announced level of planned investment. Sam Altman, of OpenAI is reported to have told the newspaper in fact they do.
What are the Problems with this Proposal?
The market penetration of enterprise level AI may be a determining factor in how fast investments at the multi billion dollar level takes place. A question is whether the AI revolution in the US will really have the customer base to justify this level of investment.
From the perspective of whether the plan is feasible, when you throw this much money at a single industry that requires lots of capital construction and complex, high tech, durable goods, supply chains back up, shortages of skilled trades drive up labor costs, etc. It becomes a case of trying to haul ten tons of turnips on a five ton capacity truck.
Last April Microsoft reportedly developed a plan, named “stargate,” that proposed to build a 5 GW data center. In an invited OP ED in Data Center Dynamics published in April 2024, Neutron Bytes published an assessment of how feasible it would be to use nuclear energy to provide 5 GW of power for a single massive data center. The conclusion is that it would be a major stretch to develop such a project. An updated version of this analysis follows below.
Is the Stargate Project Feasible?
As big as they are, none of the major IT platforms like Microsoft, Google, or Amazon, are going to get into the business of directly building 5 GWe of nuclear reactors nor nuclear reactors of any size. The primary form of access to nuclear power for these firms will be through power purchase agreements with nuclear utilities. Microsoft has already taken this approach with Constellation. Amazon purchased a data center outright due to is lash up with a nuclear utility in Pennsylvania.
Neither of these deals are at the scale needed to provide 5 GW of power. Who or what organization / firm would be in the position to accept commitments of power purchase agreements to build at this scale?
Recent commitments of funds by Google and Amazon to support development of advanced reactors need to be seen as reservations for a place at the table if and when the price of electricity from these reactors is competitive with natural gas.
The problem of capital formation for any utility or state-owned enterprise to build 5 GW of nuclear generating capacity is on the order of $30-40 billion for 5 GW of nuclear power. The time frame for completion is at least a decade, and that’s just for the power. A whole separate timeline, financing package, and construction project would be needed to build the data center which would be shorter than the timeline to build the reactors to power it.
So far globally there are only four examples of new nuclear builds at this scale – Russia (Akkuyu in Turkey, El Daaba in Egypt – both projects consist of four units of 1200 GW each or 4.8 GW for each project).
While China is simultaneously building 30 GWe, composed of multiple 1,000+ MW reactors commercial scale nuclear power plants, there is no way Microsoft, or any other western IT platform will agree to host its data centers located on the Chinese mainland and the same goes for the business customers of Microsoft, Google, and Amazon. A similar barrier exists for considering data centers tied to Russian built nuclear power plants.
The United Arab Emirates (UAE) has built and commissioned 5.6 GW of nuclear generating capacity (four units at 1.4 GW each). The UAE contracted with a consortium of South Korean firms. It took over a decade for all four 1.4 GW units in the UAE to be completed at a cost of about $30 billion. The fourth unit just entered revenue service this month. The first unit broke ground in 2012.
In the UK and France, French state-owned enterprise EDF is building multiple 1.6 GW nuclear reactors and every one of them is suffering from serious cost increases and schedule delays. These include the Hinkley Point and Sizewell projects in the UK and the Flamanville project in France. The state-owned enterprise has undergone a major reorganization in an effort to streamline its path forward to building eight new reactors in France to start the process of replacing the nation’s current and aging fleet of power stations. Clearly, EDF has a full plate. In effect, all of the power expected to be generated by these projects is already committed to customers.
In the US Westinghouse successfully completed the construction of two AP1000 1,150 MW commercial reactors at the Vogtle site in Georgia, but it delivered the two reactors seven years late and $17 billion over budget. The Associated Press reported Vogtle’s costs and delays could deter other US utilities from building nuclear plants, even though they generate electricity without releasing climate-changing carbon emissions.
The separate and similar Westinghouse V. C. Summer project in South Carolina failed, driving the firm to seek bankruptcy protection. The failed project left South Carolina ratepayers holding the bag for $9 billion on costs. The blame for the failure of the V. C. Summer project, twin AP1000s, resulted in felony convictions of two executives from the utility for fraud. Efforts are underway to revive it with a new owner, but actual work to do so is a long way off.
Since then, Westinghouse has emerged from bankruptcy being purchased by a joint venture of Brookfield Partners, a Canadian private equity firm, and Cameco, a Canadian miner of uranium. The firms’ primary interests in Westinghouse are its global nuclear fuels business and its reactor services business for existing reactors. However, recently Westinghouse has shown renewed interest in global nuclear reactor markets.
Overseas, Westinghouse signed an agreement with the government of Poland to build three AP1000s (6.9 GW) in that country. However, financing the project on the Polish government side remains a work in progress. Westinghouse and its partner Bechtel Corp. declined to take an equity position in the project. Westinghouse is involved in a similar deal in Bulgaria for two AP1000s which faces similar challenges to finance it.
US IT Platforms Will Not Invest Directly in Nuclear Power for Data Centers
Earlier this month Microsoft’s Director of Nuclear and Energy Innovation Todd Noe told World Nuclear Symposium 2024 the firm sees nuclear in the same vein as renewables for helping it to meet its clean energy goals – but currently has no intention of directly investing in its own nuclear power plants.
Microsoft does not “want to own and operate generation assets, any generation assets”, he said. “But if we need to wait on transmission, it may make more sense to put in an SMR and be co-located to a degree. But I think in the next couple of years a lot of these different schemes are going to be used by the different end users working with utilities.”
Though Microsoft is not considering equity stakes in nuclear plants, Noe said the company’s investments in owning and operating data centers were helping to de-risk new nuclear by providing purchasing certainty.
“We’re spending tremendous amounts of CapEx on data center build-out and core services, so right now there’s not much of an appetite for CapEx going away from our core business to the energy side. However, how we enable it is on the back end giving surety for purchasing,” he said.
Earlier this year, Microsoft teamed up with North American steel manufacturer Nucor Corporation and Google to work together across the electricity ecosystem to develop new business models and aggregate their demand for advanced clean electricity technologies, including advanced nuclear.
Last year, the company signed an energy matching agreement with Constellation Energy Corp to harness the environmental attributes of Constellation’s nuclear generation to reduce the carbon footprint of a data center in Virginia.
During a panel discussion at the June 2024 Chicago ANS meeting, Briana Kobor, an executive at Google, said that the company is willing to pay a premium for the reliable power for its data centers, but it draws the line on investing in the reactors that would provide the power.
Tech companies “are not going to write checks,” said Peter Freed, former clean Energy Buyers Alliance board member and former director of energy strategy at social media company Meta. He added that big data centers will do business with nuclear power utilities through power purchase agreements
“We do need to have nuclear technology to meet the load growth” of cloud data centers and AI centers” Freed added.
At the same ANS panel, Adrian Anderson, general manager for energy and sustainability at Microsoft, said technology companies should focus on their strength, building data centers, and rely on utilities to deliver the power.
In pointed remarks, he added, if a data center needs clean wind power, the operator should reach out to a utility, not a wind-turbine provider. He applied the same principle to nuclear power.
“The notion that individual buyers should be assessing nuclear technology for risk is a ridiculous concept. We are not going to own a nuclear project. Company capital is better deployed on data centers because we make money.” Anderson said.
Q: Where could the US data centers and reactors be built?
The US has over a dozen sites that were previously considered for new nuclear reactors. For instance, Duke Power at one time considered building twin AP1000s at sites in Florida (Levy County), South Carolina (Wm States Lee), and North Carolina (Shearon-Harris) for a total of six reactors and 6.9 GW of power.
Separately, across the US there are more than a dozen planned nuclear power projects that sought or also obtained NRC licenses that were never built. One or more of them, like Duke’s sites spread over three states, could be candidates for nuclear power projects to power data centers.
Even so a deep-seated NIMBY ethos prevails across the US when it comes to siting anything with the word “nuclear” in its title. Efforts to build static interim storage sites for spent nuclear fuel at bone dry, remote, desert sites in Texas and New Mexico met with fierce political opposition and court challenges to the NRC licenses for the projects.
Q: How Big a Data Center Can Be Built at One Site
A question Microsoft might consider, relative to AI computing power for Open AI, is whether to assemble its needed 5 GWE of nuclear generating capacity via a network of 1 GW power plants rather than building one single site with all 5 GW of power on it.?
Given the capital requirements needed to finance the data center and the nuclear reactors to power it, an alternative would be to build five separate 1 GW data centers over time. Since Microsoft is a global enterprise, a more efficient approach could be to build the five units in different parts of the globe rather than in one place.
This approach would spread the risk for capital formation, attract more investors on a country-by-country basis, and shorten the completion time to have 5 GW of nuclear power and data processing power available. The reason is the five separate joint data & power facilities in different parts of the globe could have closer start dates to each other. Candidate countries include the UK, France, Sweden, Finland, Poland, Romania, the Czech Republic, India, and South Korea.
India is of particular interest as NPCIL recently changed a long-standing policy and will now allow private enterprises to fund new reactors. India is building a fleet of domestic design 700 MW PHWRs. According to the World Nuclear Association, NPCIL intends to set up five “Nuclear Energy Parks”, each with a capacity for up to eight new-generation reactors of 1,000 MWe each.
It follows that one of the places where a 1 GWe data center to support these applications could be built, along with the necessary nuclear power plant to provide electricity to power both the factory and the data center, could be in one of these countries.
However, challenges exits with this approach of having five data centers. First is the fact that they would not operate as a single supercomputer, which appears to be a core requirement for OpenAI. The latency posed by the separation would render it impossible to handle a single training run across continents. AI researchers are working to address this issue in order to be able to spread the learning curve for an AI platform over multiple cloud computing centers.
Secondly, shifting it across multiple countries would lead to regulatory headaches for OpenAI, which has preferred to keep its training in the US to avoid challenges.
Q: How much land would a 1 GW data center need?
Microsoft’s $1 billion supercomputer data center now under construction in Mt. Pleasant, WI, is expected to cover 1,030 acres when completed in 2034. The firm is buying raw undeveloped land for the project. Even assuming data centers are multi-story structures, land use estimates of land use for hyper-scale facilities will still be much larger.
In terms of Microsoft’s plans for a 5 GW data center, and possible co-location of nuclear reactors to power it, the land area required includes the acreage for the data center and the enormous physical footprint for the nuclear reactor, switchyard, and cooling towers which would also have a buffer zone around it for safety and security reasons.
Q: What’s involved in the engineering, procurement, and construction of the data center?
There are huge challenges for the supply chain, e.g., long lead time components for the reactors and a parallel challenge to hire the work forces to build the reactors and the data centers.
There are long wait times for reactor pressure vessels, steam systems, turbines, and switch yard transformers. The procurement cycle for five 1,000 GW nuclear reactors would easily spread over a decade. The supply chain for the computer centers themselves would also be taking place on an unprecedented logistical scale in terms of manufacturing, installation, and acceptance.
In terms of project management, a 1,000 MWe nuclear power plant takes, in a best-case scenario, six-to-eight years to build and a construction workforce of about 4,000 or more people. For example, Rosatom is building four 1,200 MW VVER in Turkey. The average completion time is eight years.
Nuclear Power in Turkey. Table: World Nuclear Association
Staffing the reactors requires permanent technical and administrative staff of 400-600 workers for each site. While data centers are highly automated, humans are still needed to keep them up and running. Overall, the location of the data center(s) and their nuclear power plants would have huge socio-economic impacts on any community where they were located.
Q: What about the need for water for cooling the reactors and the data centers?
Massive data centers, which have enormous demand loads for cooling water, share that profile with nuclear power plants. The dispersal of the heat loads from both types of facilities will require enormous amounts of water which would likely compete with other use types in the region where the data center is built.
Coastal sites to use sea water for cooling might be the best option, especially for the reactors. A good example is the Diablo Canyon twin reactors on the Pacific Ocean coast near San Luis Obispo, CA.
Q: Is the federal government doing anything about getting more power for massive data centers?
In late March in a visit to Michigan, where DOE Secretary Jennifer Granholm was governor for two terms, said the Biden administration wants to “accelerate” its conversations with big technology companies on how to generate more electricity — including with nuclear power — to meet their massive demand for artificial intelligence computing.
Granholm made her remarks after announcing a $1.52 billion loan to Holtec International to reopen the 800 MWe Palisades nuclear power plant.
The growing demand for power from AI and data centers is a “problem” that needs to be addressed, Granholm told Axios in a wide-ranging interview.
She noted that DOE is exploring how technology firms like Microsoft, Google, and Amazon might be able to host small nuclear plants on the campuses of their massive data centers. She said conversations with the big companies need “to accelerate, because this demand for power is only going up.” Small nuclear reactors (SMRs) come in various designs but generally offer between 50-300 MW of power.
Only one US developer, NuScale, has successfully completed the NRC review to license its 77 MW light water reactor SMR. NuScale offers the SMR in configurations of two, four, and six units.
Other US vendors of SMRs include GE-Hitachi with a 300 MW SMR and Holtec International with a similar size SMR.
GE Hitachi has an agreement with the Tennessee Valley Authority (TVA) to build up to 800 MW of SMR based generating capacity at the utility’s Clinch River site. The firm has a similar deal to build one or more SMRs at Ontario Power Generation’s Darlington site.
Holtec says it plans to build two SMRs at the Palisades site in Michigan and is considering the decommissioned Oyster Creek nuclear site in New Jersey for a similar project.
By themselves, SMRs can’t supply 5 GW of power even if multiple units are racked and stacked on site. For instance, Romania is planning to build SMRs, but its priority is to complete two 700 MW PHWRs at Cernavoda. It would take 18 of NuScale’s 77 MWe SMRs to equal the output of the two large reactors. More recently, in October 2024 Romania committed to a $5 billion deal to complete Cernavoda units #3 & #4. The contract with all parties was signed on November 14, 2024. See this report from World Nuclear News for details.
Q: What about grid access for the reactors to deliver the power?
Granholm didn’t mention it, but one of the other issues facing data center developers looking for power is grid access to power plants that are not adjacent to the data centers. The Federal Energy Regulatory Commission (FERC) is supposed to be “reforming the process” by which new high voltage electricity transmissions lines are approved for construction and operation.
A huge backlog of decisions indicates the agency has its work cut out for it. According to S& P Global, at the end of 2022, more than 2,000 GW of generation and storage — equal to all existing US generating capacity — were waiting in interconnection queues, and successful projects can face wait times of up to five years to connect to the grid.
Q: Is Microsoft’s a case of overreach?
In summary, it is worth asking one final question, and that is whether Microsoft’s plans for a 5 GWe data center are overreach? While the firm wouldn’t be in the business of building nuclear reactors, its plans to offer commitments of power purchase agreements for nuclear power at this scale would put any single publicly traded electric utility in a “bet the company” posture.
Based on experience in the US so far, with the Westinghouse reactors in Georgia, it is doubtful, at least for now, that any US nuclear utility would step up to the plate to take on the project even with Microsoft’s deep pockets writing the checks.
Microsoft has a big job ahead of it and that is to convince power producers in the US, or globally, that it isn’t biting off more than it can chew.
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