EQT鈥檚 Rice: Three Mile Island Restart Not 鈥楴eedle-Mover鈥� vs. Natgas

Microsoft Corp. will pay as much as $130 per megawatt-hour for the resurrected plant鈥檚 electricity that will carry a 鈥渃arbon-free鈥� label and a new name: Crane Clean Energy Center.

Nissa
Darbonne
Oil and Gas Investor

A Microsoft Corp. deal to restart the Three Mile Island nuclear plant to power new data centers is 鈥渘ot a needle-mover鈥� against natural gas demand growth from the AI boom, EQT Corp. president and CEO Toby Rice told Hart Energy.

Microsoft reported the news Sept. 20. EQT is the largest U.S. natural gas producer, surfacing 5.6 Bcfe/d in the second quarter.

Rice told Hart Energy on Sept. 24, 鈥淭here鈥檚 only 3 GW [gigawatts] of nuclear potential if we restart all facilities that could be restarted.鈥�

Meanwhile, new power demand to fuel鈥攁nd cool鈥攄ata centers is estimated at 75 GW, he said. So, the Three Mile Island restart is 鈥渘ot a needle-mover.鈥�

Rice pointed to a Nuclear Energy Institute (NEI) tally of the decommissioning status of U.S. nuclear plants. Among these, the ones still being maintained (listed as SAFSTOR) produced some 12 GW gross of thermal power when they were operating.

鈥淏ut only approximately 30% of that thermal energy becomes electricity,鈥� Rice said, since 鈥渟team turbines aren鈥檛 efficient.鈥�

So that leaves 鈥渙nly 4 GW of net electricity鈥� potential from nuclear restarts and 鈥渢hat includes the [nearly 1 GW] Three Mile Island.鈥�

The NEI defines the 鈥淪AFSTOR鈥� category as in 鈥渄elayed decon鈥� (decontamination) status. It is a plant that is 鈥渕aintained and monitored in a condition that allows the radioactivity to decay; afterwards, it is dismantled,鈥� according to the NEI.

Three Mile Island re-branding

Microsoft signed a 20-year power-purchase agreement (PPA) with Baltimore-based Constellation Energy Group that will result in restarting the storied plant鈥檚 Unit 1 that it expects will generate 835 megawatts (MW), net.

The plant, which became uneconomic in the wake of new Appalachian natural gas supply beginning in the aughts, was shuttered in 2019. Located on the Susquehanna River, it is south of the Pennsylvania capital, Harrisburg.

Constellation reported it has labeled the restarted plant鈥檚 power 鈥渃arbon-free鈥� and renamed the facility the 鈥淐rane Clean Energy Center.鈥�

The electricity is within the interconnected eastern U.S. power grid that includes Virginia鈥檚 鈥淒ata Center Valley,鈥� which is currently the world鈥檚 largest data-center region.

A partial meltdown of Three Mile Island鈥檚 one-year-old Unit 2 reactor in 1979 resulted in U.S. sentiment turning against nuclear facilities. The unit was shuttered while Unit 1 remained in operation.

Sentiment further grew after the 1983 release of the movie 鈥淪ilkwood鈥� about worker contamination at a plutonium pellets plant in Oklahoma.

Three Mile Island 鈥淯nit 1 is a fully independent facility and its long-term operation was not impacted by the Unit 2 accident,鈥� Constellation reported Sept. 20 in its announcement of the Microsoft deal.

The target date for the plant鈥檚 restart is 2028, it added.

Stephen Tusa, electric equipment analyst for J.P. Morgan Securities, wrote after the news, 鈥淭his move underscores the critical role of nuclear power in meeting future energy needs, especially for tech companies with constant power demands.鈥�

$100/MWh

The nuclear deal comes at a price, noted Julien Dumoulin-Smith, power and utilities analyst for Jefferies.

The $110/megawatt-hour (MWh) range is 鈥渉igher even than investors' expectations for a behind-the-meter contract,鈥� he reported Sept. 23.

鈥淭his shows a nuclear plant can sign a high-price long-term PPA without having to be co-located with a data center or even actually deliver electricity to the offtaker,鈥� Dumoulin-Smith wrote.

鈥淚t also underscores the significant premium some customers are willing to pay for a virtual PPA with zero-carbon attributes.鈥�

Can such a high premium be won by other power marketers? That 鈥渞emains be seen,鈥� he added.

What鈥檚 clear, though, is 鈥渢he deal confirms and expands the data center thesis, and it raises overall investor expectations for how much capacity can realistically be contracted and at what price, while making regulatory risk relatively less relevant.鈥�

All-in, $130/MWh

David Arcaro, analyst with Morgan Stanley, also noted the price tag, calculating it as some $100/MWh.

That is 鈥渁 substantial premium to market power prices of about $50/MWh,鈥� he wrote on Sept. 23.

In addition, Microsoft鈥檚 deal has it 鈥渟till receiving power directly from the grid, paying an approximately $30/MWh transmission charge on top of this payment to Constellation,鈥� he wrote.

鈥淔rom our perspective, we think this shows that Microsoft was willing to pay a $130/MWh all-in power price for nuclear power.鈥�

The numbers bode well to incent power developers to market more nuclear deals.

鈥淲e think this means upside for future nuclear deals,鈥� Arcaro wrote. 鈥溾€� We're now incorporating a $120/MWh total price for future potential nuclear deals, up from our prior $80/MWh assumption.鈥�

Further, 鈥渇uture data center contracts with nuclear plants could come at an even higher price when co-located, given the time advantage of building at an existing plant.鈥�

He raised his price target on Constellation shares by $80 to $313.

Oracle goes SMRs

Separately, Austin, Texas-based Oracle reported Sept. 9 that it plans a more than 1 GW data center powered by three SMRs (small modular nuclear reactors) and 鈥渁lready have 鈥榖uilding permits,鈥欌€� TD Cowen analyst Marc Bianchi wrote in a Sept. 20 note.

The type of reactor was not revealed, he added.

But based on the size, each would need to be more than 300 MW units, which are models designed by GE-Hitachi, Westinghouse, Holtec and TerraPower鈥檚 Natrium.

鈥淗owever, given the sparse details, NuScale and X-energy, despite having smaller reactor designs, could also be an option, given the abilities to combine reactor modules into larger plants,鈥� Bianchi wrote.

He added that the nuclear industry appears to have a tailwind 鈥渁s announcements from data centers using nuclear power continue to materialize.鈥�

Among the 162 cloud data centers Oracle operates and has under construction currently, the largest is an 800 MW project underway that 鈥渨ill contain acres of Nvidia GPU clusters for training large-scale AI models,鈥� Oracle Chairman Larry Ellison said in an earnings report Sept. 9.

鈥楤ubbling along鈥�

Jeff Merrifield, chairman of the U.S. Nuclear Industry Council, told Hart Energy this spring that reviving nuclear power use in the U.S. 鈥渉as been bubbling along for some period of time.鈥�

Merrifield served on the U.S. Nuclear Regulatory Commission beginning in 1998 when appointed by President Clinton and named to a second term in 2002 by President Bush through 2007.

Currently, he leads the Pillsbury law firm鈥檚 nuclear energy practice.

SMRs have gained particular interest recently, he said.

Mobile reactors are in use already. 鈥淲e have a lot of portable reactors,鈥� Merrifield noted. 鈥淧eople just don't think about them: Every U.S. submarine has a nuclear power plant.鈥�

The specs on those are classified, but what鈥檚 public is that the U.S. Navy design for submarines is roughly a 20 MW plant and is a pressurized-water reactor.

鈥淏ut it is of a much different design than anything in the civilian world,鈥� he added.

Aircraft carriers use two plants, each of which generates roughly 40 MW. Altogether, the U.S. Navy has about 100 sub-and carrier-based mobile reactors in operation.

鈥淲e've been deploying mobile nuclear power plants as a country for 60-plus years.鈥� The design being considered for use in oil and gas operations 鈥渋s something we have a lot of experience with.鈥�

The first one deployed by the U.S. outside of strictly military purposes was a 15 MW to 20 MW reactor at McMurdo Sound in Antarctica as part of the U.S. Army nuclear power program.

Another was a barge-mounted reactor deployed in the Panama Canal; another, a tractor-borne mobile reactor deployed in Greenland.

鈥淪o we've been doing this for many years.鈥�

And, he added, 鈥渋f you can have a power source that you can bring in on the back of a tractor trailer and provide the power you need for that remote operation, that's a pretty desirable thing.鈥�

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原文链接/HartEnergy

EQT’s Rice: Three Mile Island Restart Not ‘Needle-Mover’ vs. Natgas

Microsoft Corp. will pay as much as $130 per megawatt-hour for the resurrected plant’s electricity that will carry a “carbon-free” label and a new name: Crane Clean Energy Center.

Nissa
Darbonne
Oil and Gas Investor

A Microsoft Corp. deal to restart the Three Mile Island nuclear plant to power new data centers is “not a needle-mover” against natural gas demand growth from the AI boom, EQT Corp. president and CEO Toby Rice told Hart Energy.

Microsoft reported the news Sept. 20. EQT is the largest U.S. natural gas producer, surfacing 5.6 Bcfe/d in the second quarter.

Rice told Hart Energy on Sept. 24, “There’s only 3 GW [gigawatts] of nuclear potential if we restart all facilities that could be restarted.”

Meanwhile, new power demand to fuel—and cool—data centers is estimated at 75 GW, he said. So, the Three Mile Island restart is “not a needle-mover.”

Rice pointed to a Nuclear Energy Institute (NEI) tally of the decommissioning status of U.S. nuclear plants. Among these, the ones still being maintained (listed as SAFSTOR) produced some 12 GW gross of thermal power when they were operating.

“But only approximately 30% of that thermal energy becomes electricity,” Rice said, since “steam turbines aren’t efficient.”

So that leaves “only 4 GW of net electricity” potential from nuclear restarts and “that includes the [nearly 1 GW] Three Mile Island.”

The NEI defines the “SAFSTOR” category as in “delayed decon” (decontamination) status. It is a plant that is “maintained and monitored in a condition that allows the radioactivity to decay; afterwards, it is dismantled,” according to the NEI.

Three Mile Island re-branding

Microsoft signed a 20-year power-purchase agreement (PPA) with Baltimore-based Constellation Energy Group that will result in restarting the storied plant’s Unit 1 that it expects will generate 835 megawatts (MW), net.

The plant, which became uneconomic in the wake of new Appalachian natural gas supply beginning in the aughts, was shuttered in 2019. Located on the Susquehanna River, it is south of the Pennsylvania capital, Harrisburg.

Constellation reported it has labeled the restarted plant’s power “carbon-free” and renamed the facility the “Crane Clean Energy Center.”

The electricity is within the interconnected eastern U.S. power grid that includes Virginia’s “Data Center Valley,” which is currently the world’s largest data-center region.

A partial meltdown of Three Mile Island’s one-year-old Unit 2 reactor in 1979 resulted in U.S. sentiment turning against nuclear facilities. The unit was shuttered while Unit 1 remained in operation.

Sentiment further grew after the 1983 release of the movie “Silkwood” about worker contamination at a plutonium pellets plant in Oklahoma.

Three Mile Island “Unit 1 is a fully independent facility and its long-term operation was not impacted by the Unit 2 accident,” Constellation reported Sept. 20 in its announcement of the Microsoft deal.

The target date for the plant’s restart is 2028, it added.

Stephen Tusa, electric equipment analyst for J.P. Morgan Securities, wrote after the news, “This move underscores the critical role of nuclear power in meeting future energy needs, especially for tech companies with constant power demands.”

$100/MWh

The nuclear deal comes at a price, noted Julien Dumoulin-Smith, power and utilities analyst for Jefferies.

The $110/megawatt-hour (MWh) range is “higher even than investors' expectations for a behind-the-meter contract,” he reported Sept. 23.

“This shows a nuclear plant can sign a high-price long-term PPA without having to be co-located with a data center or even actually deliver electricity to the offtaker,” Dumoulin-Smith wrote.

“It also underscores the significant premium some customers are willing to pay for a virtual PPA with zero-carbon attributes.”

Can such a high premium be won by other power marketers? That “remains be seen,” he added.

What’s clear, though, is “the deal confirms and expands the data center thesis, and it raises overall investor expectations for how much capacity can realistically be contracted and at what price, while making regulatory risk relatively less relevant.”

All-in, $130/MWh

David Arcaro, analyst with Morgan Stanley, also noted the price tag, calculating it as some $100/MWh.

That is “a substantial premium to market power prices of about $50/MWh,” he wrote on Sept. 23.

In addition, Microsoft’s deal has it “still receiving power directly from the grid, paying an approximately $30/MWh transmission charge on top of this payment to Constellation,” he wrote.

“From our perspective, we think this shows that Microsoft was willing to pay a $130/MWh all-in power price for nuclear power.”

The numbers bode well to incent power developers to market more nuclear deals.

“We think this means upside for future nuclear deals,” Arcaro wrote. “… We're now incorporating a $120/MWh total price for future potential nuclear deals, up from our prior $80/MWh assumption.”

Further, “future data center contracts with nuclear plants could come at an even higher price when co-located, given the time advantage of building at an existing plant.”

He raised his price target on Constellation shares by $80 to $313.

Oracle goes SMRs

Separately, Austin, Texas-based Oracle reported Sept. 9 that it plans a more than 1 GW data center powered by three SMRs (small modular nuclear reactors) and “already have ‘building permits,’” TD Cowen analyst Marc Bianchi wrote in a Sept. 20 note.

The type of reactor was not revealed, he added.

But based on the size, each would need to be more than 300 MW units, which are models designed by GE-Hitachi, Westinghouse, Holtec and TerraPower’s Natrium.

“However, given the sparse details, NuScale and X-energy, despite having smaller reactor designs, could also be an option, given the abilities to combine reactor modules into larger plants,” Bianchi wrote.

He added that the nuclear industry appears to have a tailwind “as announcements from data centers using nuclear power continue to materialize.”

Among the 162 cloud data centers Oracle operates and has under construction currently, the largest is an 800 MW project underway that “will contain acres of Nvidia GPU clusters for training large-scale AI models,” Oracle Chairman Larry Ellison said in an earnings report Sept. 9.

‘Bubbling along’

Jeff Merrifield, chairman of the U.S. Nuclear Industry Council, told Hart Energy this spring that reviving nuclear power use in the U.S. “has been bubbling along for some period of time.”

Merrifield served on the U.S. Nuclear Regulatory Commission beginning in 1998 when appointed by President Clinton and named to a second term in 2002 by President Bush through 2007.

Currently, he leads the Pillsbury law firm’s nuclear energy practice.

SMRs have gained particular interest recently, he said.

Mobile reactors are in use already. “We have a lot of portable reactors,” Merrifield noted. “People just don't think about them: Every U.S. submarine has a nuclear power plant.”

The specs on those are classified, but what’s public is that the U.S. Navy design for submarines is roughly a 20 MW plant and is a pressurized-water reactor.

“But it is of a much different design than anything in the civilian world,” he added.

Aircraft carriers use two plants, each of which generates roughly 40 MW. Altogether, the U.S. Navy has about 100 sub-and carrier-based mobile reactors in operation.

“We've been deploying mobile nuclear power plants as a country for 60-plus years.” The design being considered for use in oil and gas operations “is something we have a lot of experience with.”

The first one deployed by the U.S. outside of strictly military purposes was a 15 MW to 20 MW reactor at McMurdo Sound in Antarctica as part of the U.S. Army nuclear power program.

Another was a barge-mounted reactor deployed in the Panama Canal; another, a tractor-borne mobile reactor deployed in Greenland.

“So we've been doing this for many years.”

And, he added, “if you can have a power source that you can bring in on the back of a tractor trailer and provide the power you need for that remote operation, that's a pretty desirable thing.”

Comments
Comments

Add new comment

This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.

About text formats