(Bloomberg) -- Microsoft Corp. is going to pay a hefty premium for power from the soon-to-be-restarted Three Mile Island nuclear plant, a recognition that carbon-free electricity is more valuable when it’s available around the clock.
The company will pay owner Constellation Energy Corp. at least $100 a megawatt-hour for power from the Pennsylvania plant, according to estimates from Bloomberg Intelligence, while Jefferies LLC puts the figure at about $112. That compares to about $60 a megawatt-hour for wind and solar energy available now in the same region, according to Jefferies.
Big technology companies are racing to line up power supplies for the massive data centers needed to run artificial intelligence systems. Surging demand for power is prompting utilities to build more natural gas-fired plants, undermining lofty environmental goals for both the industry and tech firms. It’s also driving up interest in nuclear plants that deliver clean energy at all hours, including the deal Constellation announced last week to restart Three Mile Island to feed power to Microsoft.
“People say power is just a commodity,” BI utilities analyst Nikki Hsu said. “Nuclear power doesn’t seem to be a commodity now.”
Constellation plans to reopen a reactor that was shut in 2019 because it couldn’t compete economically, bringing it back into service in 2028. A second reactor at the facility permanently closed 45 years ago after a partial meltdown in what was the worst US nuclear accident.
The companies haven’t disclosed terms of the 20-year deal, though financial details in a Constellation presentation gave analysts enough data to make estimates. Constellation declined to comment on the analysts’ estimates while Microsoft didn’t have an immediate comment.
The deal should provide Constellation with about $785 million in annual revenue by 2030, according to Paul Zimbardo, an analyst at Jefferies. That’s enough to justify the $1.6 billion the company expects to spend to restart the reactor.
“That is not cheap for electricity,” he said. “It’s a healthy premium to what you would pay if you just bought grid power.”
--With assistance from Dina Bass.
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