Some Quick Thoughts on SMRs for Data Centers

Some Quick Thoughts on SMRs for Data Centers

In recent months a lot of attention has been given to the concept of using small modular reactors (SMRs) to provide reliable 24 X7 conditioned power to the many large data centers that power cloud computing including all aspects of the Internet.

Google, Amazon, and Microsoft, among others, own and operate hundreds of data centers connected  globally to manage customer information. Each of these data centers use large amounts of electricity which makes them obvious platforms for decarbonization of their sources of power.

The global nature of data center management, and their respective power requirements, can be assessed via a short review of the international scope of cloud computing operations and specifically for Microsoft, Google, and Amazon.

As of January 2021 there were nearly 8,000 data centers globally. Among these countries, six house a majority of data centers: the United States (33%), the UK (5.7%), Germany (5.5%), China (5.2%), Canada (3.3%, and the Netherlands (3.4 percent) (figure 1 below). 77% are located in OECD member states, and approximately 64% are in NATO countries.

As of May 2021 In the United States, there are over 2,600 data centers spread across the country. While northern California is known as the location for many data-intensive firms (Google, Facebook, Uber, Twitter, Yelp, for example), Dallas currently has the highest number of data centers (149). This is followed by the Bay Area (147), and Los Angeles(139).

Source: Data Centers Around the World: A Quick Look
United States International Trade Commission
Executive Briefings on Trade, May 2021

Microsoft’s Interest in SMRs to Power  Data Centers

Last October, Microsoft issued a recruitment notice for a “Principal Program Manager, Nuclear Technology, who will be responsible for maturing and implementing a global Small Modular Reactor (SMR) and microreactor energy strategy. This senior position is tasked with leading the technical assessment for the integration of SMR and microreactors to power the datacenters that the Microsoft Cloud and AI reside on.”

According to a company fact sheet, as of August 2023 the Microsoft network connects more than 60 datacenter regions, 200 datacenters, 190 points of presence, and over 175,000 miles of terrestrial and subsea fiber worldwide, which connects to the rest of the internet at strategic global edge points of presence. In addition to pulling electricity from regional grids, each data center has diesel generator backups in case of power outages.

All these numbers mean that there are robust opportunities for Microsoft to harness SMRs to provide reliable, CO2 emission free electricity to its data centers. Further, as data centers grow, especially driven by artificial intelligence (Ai) applications, SMRs can grow with them by adding new units over time. The semiconductors that power have significant requirements for electricity and matching that demand with carbon free power is a significant reason why Microsoft decided to pursue SMRs for its data centers.

How would a candidate for a senior management position at Microsoft, or Google, or Amazon, or any other major IT Platform, approach the question of how to decide where and when to invest in SMRs to power data centers that individually can gobble up 60-100 MW of power? Keep in mind that the biggest data centers globally are in in the US, but there will be significant growth in southeast Asia, India, and other parts of the world. 

Microsoft, Google, and Amazon are obvious IT platforms that might consider SMRs to power their data  centers. In addition to the data about Microsoft (above), here are snapshots of Google’s and Amazon’s stake in data centers.

Google’s Cloud Platform

Google Cloud Platform (GCP), the cloud computing service of Alphabet Inc, provides compute, storage, and networking services through its data centers in over 20 countries and 35 locations around the world. Growth in Google Cloud regions and the company’s core products and platforms, such as Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube, are fueling the company’s need for more data center capacity.

In total, Google operates or is developing nearly 30 data centers around the world. These data centers support Google’s current and planned 44 cloud regions – a physical location where it clusters data centers – that are designed to be highly available, fault-tolerant, and concurrently maintainable. Like Microsoft, Google is placing big bets on the future of artificial intelligence applications and the huge computing assets that will be needed to support them.

Amazon’s AWS Global Infrastructure

AWS global infrastructure lists 102 Availability Zones within 32 geographic regions around the world, with announced plans for 12 more Availability Zones and 4 more AWS Regions in Canada, Malaysia, New Zealand, and Thailand.

Just to get an idea of how the computer industry is driving demand for data centers, Amazon announced in June that it is investing $7.9 billion in data centers in the Columbus, OH, region in part to service Intel’s $20 billion semiconductor manufacturing plant that is also being built a few miles northwest of the city. Amazon is also a key player in the race to win market share of the explosive growth in the realm of artificial intelligence. All this activity requires huge amounts of electricity and, for the most part, a lot of it still comes from fossil fueled generation plants.

The First Questions Aren’t About SMRs

The first question any IT platform like Microsoft, Google, or Amazon should ask isn’t even about SMRs. It is about how many data centers it has now, and the demand for the firm’s products and services that will drive over time the need for new data centers. Assuming the IT platform operates a global network of cloud computing and data storage facilities, the process of selecting which data centers are candidates for SMRs will be influenced by differences among countries where the firm does business. Additional factors  include the demand for current and new IT cloud computing business, and where and when there will be gaps in the supply of electricity to power data centers now and in the future? The gaps can be filled in one of two ways.

Using Power from Existing Nuclear Reactors

The next question for IT platforms is that for the universe of current operations and the need for future data centers, how many will be able to draw power from current nuclear reactors in revenue service or future plants that are likely to come online in the next five-to-ten years? The answer to these questions takes a certain number of data centers off the table as candidates to be powered by SMRs.

Examples of near term opportunities include the two new AP1000 reactors at Georgia Power’s Vogtle site, the four new APR1400s at the UAE’s Barakah, or the new EDF EPR at Flamanvile in France. The UK is building four EPRs which by the end of this decade will be generating 3,300 Mwe of carbon free electrical power.

How many data centers can hook up to these kinds of new nuclear power stations? The number of current and future data centers that can tap these nuclear power stations come off the table as candidates to require SMRs.

Financing Options for Tapping SMR Fleets

The next question is for those data centers that have all the right characteristics to be candidates for being powered by SMRs, how many SMRs will be needed to power them? A parallel question is whether IT platforms needs to go it alone in financing and building SMRs, or can they use power purchase agreements for SMR fleets that are planned to be built.

For instance, TVA plans to build 800 MW of SMRs at the Clinch River Site. The utility would obviously be interested in lining up power purchase agreements for this generation capacity. If the IT platform is worried about cost over runs in the build out of the SMRs, it can include escape clauses in its contracts that release it from the agreement if the resulting electricity turns out to be too costly.

GE-Hitachi’s BWXT300. unlike NuScale, has not yet had a safety evaluation by the NRC. That said the company’s SMR has provisional commitments from TVA in the US and Ontario Power Generation (OTP) in Canada to build multiple units at existing power station sites.

Similarly, Rolls-Royce is planning to build a fleet of 16 470 MWe PWRs in the UK. With data centers using 60-100 MW of power, the IT platform could use power purchase agreements to lock in access to each of them, in whole or part, as the fleet is completed over time.

Another approach, to lock in a guarantee for the power, would be for the IT platform to take an equity position in each SMR that it wants to tap for power for its current or planned future data centers.

It follows that the IT platform does not have to directly fund or build SMRs on its own. It can use existing nuclear reactors via new power purchase agreements, and, where the risks are controlled, take equity stakes in SMR projects that are to be located where the IT Platform wants to build its data centers. The IT platform has multiple options for accessing nuclear power generation capacity without ever having to become the primary developer of SMRs itself.

# # #