Reopening Three Mile Island nuclear plant for Microsoft data centers could cost taxpayers $1.6 billion

A hot potato: It takes a massive amount of energy to power data centers, which is why Microsoft wants to tap the shuttered nuclear power plant on Three Mile Island for its AI ambitions. According to records, the owner of the plant is looking to secure a $1.6 billion federal loan guarantee to help finance the plan, money provided by taxpayer dollars.

The amount of energy being consumed by AI is well-documented, which is why many companies in the industry are looking toward nuclear power as a solution.

In September, Microsoft signed a deal to re-open the power plant on Three Mile Island, site of the worst nuclear meltdown in US history in 1979. The agreement stated that the tech giant would purchase all the power generated by the plant, which is being renamed the Crane Clean Energy Center.

Now, the Washington Post reports that the owner of the plant, utility company Constellation Energy, filed an application for a $1.6 billion federal loan guarantee with the US Department of Energy in May. The company previously said this amount would cover all the costs associated with reopening the plant, which closed in 2019. The application has cleared an initial review and has reached the stage where specific terms are being negotiated.

A loan guarantee means Constellation Energy will be borrowing money directly from the federal government, with the Energy Department acting as guarantor.

The Post explains that the loan would ensure federal financial support for the deal. This would be the case even if it fails to be completed and after a lot of money has been spent on the project, thereby shifting much of the risk of reopening the plant onto the taxpayers.

It's believed that the loan guarantee could save Constellation up to $122 million in borrowing costs for restarting the facility. That's in addition to the federal tax credits on the sale of the power, which could be worth nearly $200 million annually for Constellation and Microsoft.

If Constellation does accept the loan and fails to complete its repayments, the government will have to cover up to $1.6 billion in costs, though the company assures that this won't happen.

"Rest assured that to the extent we may seek a loan, Constellation will guarantee full repayment," Constellation said in a statement. "Any notion that taxpayers are taking on risk here is fanciful given that any loan will be backstopped by Constellation's entire $80-billion-plus value."

Constellation Energy said it plans to reopen Three Mile Island by 2028, supplying Microsoft with over 800 megawatts of carbon-free electricity across a 20-year agreement – provided the Nuclear Regulatory Commission gives its approval.

In January last year, the Nuclear Regulatory Commission gave its approval for the first small modular nuclear reactor to be built in the United States. NuScale Power Corp says its six-reactor, 462-megawatt Carbon Free Power Project should be operational by 2030. It's hoped that small nuclear reactors like these could be used to solve data centers' sustainable power problem.