Data centers in the energy dilemma: will nuclear power return?

The basement of the Zurich University of Applied Sciences (ZHAW) is as well secured as the lockers in a bank: surveillance cameras are installed everywhere, the doors are heavy and fireproof, and access is only possible through an access gate. What is hidden here?

Actually it’s just a few grid boxes strung together. But two things are strange in this room: Firstly, there is a constant whirring sound. Secondly, despite good insulation due to the thick concrete walls, it is quite warm. While the students study on the upper floors, the data center processes data underground. This requires electricity – a lot of electricity.

Some operators in the USA are therefore looking for new energy supply technologies. They are increasingly relying on nuclear power.

Without hardware, there is no cloud

People stream films, send cat videos to friends on social networks or upload photos from their last vacation to a cloud so that the beautiful memories are never lost. Very few people think about the fact that a lot of hardware has to be installed.

The data is not floating around in the clouds, it is stored on a computer somewhere. And because more and more companies no longer want to outsource their data to large cloud providers such as Apple or Microsoft, they operate their own servers. Some do this on their own premises. Others entrust the data to external service providers such as Patrik Hofer.

Hofer is Managing Director of North C, a company that operates data centers in Switzerland, Germany and the Netherlands. The data center in the basement of the ZHAW in Winterthur is one of them.

His business is going well, says Hofer. More and more companies are concerned about the security of their own data. But Hofer’s everyday life is not without challenges. His customers’ wishes have become more complex.

More electricity because of artificial intelligence

In September, a customer put an IBM computer into operation in its data center, which automatically carries out its tasks using artificial intelligence (AI). “Such AI computers provide many times more computing power than previous models,” says Patrik Hofer.

Depending on its size, a single data center can already consume the same amount of electricity as a small town. Experts agree that the demand for electricity will increase in the future. The amount of data generated by new AI applications is so large compared to existing computers that even savings through greater efficiency are unlikely to compensate for the additional consumption in the future. A search query on Chat-GPT uses many times more energy than on Google.

The International Energy Agency (IEA) estimates that global data center electricity demand will double by 2026.

The electricity comes from hydropower

Data centers have predictable power consumption because the computers run around the clock. This is a challenge when dealing with renewable energy sources such as wind and solar power because different amounts of electricity are produced depending on the weather conditions. Energy suppliers address this problem with storage.

North C sources its electricity from the local energy supplier, which is generated using renewable energies and hydroelectric power plants. Until now, availability has always been high, says Hofer. In case of emergencies, the data center has two diesel generators and enough oil reserves to last three days.

But globally, more and more data center operators are turning away from a complete power supply from renewable energies.

Tech companies are creating a nuclear boom

In the USA, for example, many companies are seriously worried about where the electricity for their computers will come from in the future. The data centers there are larger than in Europe, also because the AI ​​boom is already well advanced. When it comes to power supplies, large tech companies are increasingly turning to an energy source that many had already written off: nuclear power.

In the spring, Amazon bought a data center in Pennsylvania that gets its power from a nearby nuclear power plant. And Microsoft announced last month that it had struck a deal with the owner of the Three Mile Island nuclear power plant. A reactor of the decommissioned nuclear power plant is to be restarted and a data center of the tech company is to be supplied with CO around the clock₂-supply free electricity. Ironically, the largest reactor accident in US history occurred on the same site in 1979.

 

If tech companies build their data centers close to old nuclear reactors, they can rely on existing power networks and thus save the costs of network expansion.

In addition, many people from Silicon Valley have connections to nuclear research: Bill Gates and Sam Altman are both involved in different startups that are working on small reactors. This new group of nuclear power reactors is also called Small Modular Reactors (SMR). While the first SMRs are already being operated in China and Russia, the small reactors in the USA and Europe are still under construction or the approval process is still pending.

And Peter Thiel’s venture capital firm is also investing in a startup that promises a new production method for enriching uranium.

Banks are also getting involved

After the reactor accident in Fukushima, nuclear power fell into disrepute in many places. In Switzerland, the major electricity companies say that investing in new nuclear power plants is currently not attractive enough: the costs of construction are high. There is also a great risk that the approval process will delay the construction process or that the plug will even be pulled from the nuclear power plant halfway through.

At a time when traditional energy companies are holding back on nuclear technology, the tech companies with their deep pockets could boost research and thus pave the way for new nuclear power plants.

Peter Schümers, partner at Energy Infrastructure Partners, also observes this development: “The rise of artificial intelligence has increased the urgency of investing in energy infrastructure, and technologies such as nuclear energy are coming back into discussion.”

The trend has now also reached the financial sector. On the occasion of Climate Week, which took place in New York at the end of September, fourteen financial institutions announced their intention to provide greater support for the expansion of nuclear energy. Among them were some of the world’s largest commercial banks, such as Morgan Stanley, Goldman Sachs and Bank of America.

In a new report, the US Energy Administration predicts that nuclear power capacity in the US could triple by 2050 compared to today.

Switzerland: The hope for new technologies

However, there is not yet much evidence of the nuclear boom in Switzerland. Parliament will soon decide whether to lift the ban on new construction, as proposed by the Federal Council. But the hurdles to building a new nuclear power plant would still be high. A new project would have to go through a lengthy approval process, and voters would have to decide on it several times.

But nuclear researchers hope the process will become easier with a breakthrough in SMR technology. The authors of the technology report commissioned by the Federal Office of Energy speculate that microreactors could be legally classified as “low-risk systems” due to the smaller amount of radioactive material. Energy suppliers could then build a microreactor without a general license application. This would not eliminate all of the hurdles, but one major one.

Will tech providers in this country also invest in nuclear power in order to secure themselves with a continuous power supply? At North C this is not an issue for the time being. The company is currently investigating how it can improve efficiency within existing data centers and thus keep power consumption as low as possible.

But Patrik Hofer says: “Who knows today how scarce the power supply will be in ten years when every SME has set up its own AI systems.”