Is nuclear a viable power solution for data centres?

A familiar scene has been playing out across the data centre industry: a developer builds a new facility, and the capacity gets leased even before construction is complete. As companies race to keep up with demand for new facilities to store the data that fuels our digital economy and AI models, a major constraint is holding back growth — power availability.

The rapidly expanding data centre industry is putting more strain on an electric grid that is already feeling the pressure of electric vehicle adoption, a manufacturing resurgence, ageing infrastructure and extreme weather events. Global data centre power consumption could reach as high as 1,000 terawatt hours in 2026 — more than double what the sector consumed in 2022, according to the International Energy Agency. 

In Australia, data centres are expected to use 8% (2,500 megawatts) of the electricity on the country’s power grid, up from 5% in 2024, according to Morgan Stanley. The United States could exceed its grid supply by 2033 due to a 20% annual increase in data centre power demand, JLL research has found.

“While nuclear power is fervently debated in Australia, and reactors banned in several states, the fundamental issue remains that we are on a pathway to a power shortage and data centres are a major contributing factor,” says Matthew Lee, JLL’s director of industrial and data centre occupier services in Australia. “The inevitable options are limiting power allocations, expanding power networks or adding new power sources.”

Regulatory obstacles, cost barriers and public misperceptions about safety are challenges stand in the way of the broad adoption of nuclear energy. But can data centre operators overcome the hurdles? Answering that question starts with understanding how the industry has evolved over the past several decades.

Nuclear reactors have come a long way since 1951, when a power plant in the United States became the first to produce usable electricity using atomic energy. In recent years, power producers have embraced new designs that make nuclear energy safer and more reliable.

“Newer designs aren’t quite set-and-forget, but they require a lot less operator intervention than the reactors of the past, which reduces the risk of human error and increases reliability and safety, says Don Dermond, vice president, commissioning, JLL. “Modern reactors also have inherent safety mechanisms, such as negative temperature coefficients that reduce reactivity as the reactor gets hotter.”

Additionally, building a massive power plant is no longer the only way to harness nuclear energy’s potential. Developers are designing small modular reactors that typically have a generating capacity of up to 300MW, about one-third of traditional nuclear reactors.

Modular reactors can be small enough to be deployed on or next to a data centre site, making it less vulnerable to grid failure and cyberattacks, thus improving data security and operational resilience. Another plus for nuclear: the reactors produce more zero-carbon electricity than renewable energy sources within the same land area.

“A nuclear reactor is not only carbon-free, but it requires a substantially smaller footprint than wind and solar, and its output isn’t dependent on the weather,” Dermond says.

While the sector has come a long way, more changes are on the horizon. Some experts believe recent advances in nuclear fusion could be a game changer. Nuclear fusion reactors use a different process than today’s fission reactors, offering significant advantages. They are inherently safe and produce no radioactive waste. The technology is not yet commercially viable, but several companies are working to change that.

How data centres are taking advantage of existing nuclear power

According to the World Nuclear Association, nuclear energy supplies about 9% of the world’s electricity today and that number is quickly increasing. The International Energy Agency estimates that an additional 29 gigawatts of nuclear capacity will come online by 2026, increasing global nuclear generation by nearly 10%.

Some data centre operators are trying to lock down that capacity by co-locating new facilities next to existing nuclear power plants. In early 2024, a major cloud service provider purchased a 960MW data centre campus adjacent to and directly powered by a nuclear power plant in Pennsylvania. 

Many view such initiatives as a win-win. The data centre locks down a stable, long-term power source while avoiding transmission and grid fees. The supplier company secures a long-term customer at a price higher than it could charge by selling energy to the grid. However, the arrangements are not without controversy. Opponents of these deals say data centres are removing energy supply from the grid, which could raise prices for other customers and reduce reliability.

While existing nuclear power plants are a stable, reliable source of zero-carbon electricity, there is only so much capacity to go around. Data centre companies hope new technologies like small modular reactors will fill the gap in the coming years and many players are striving to make them commercially viable as quickly as possible. The International Energy Agency estimates that companies in over 20 countries are developing more than 85 small modular reactor designs and concepts.

Among them, the UK, where Westinghouse and Community Nuclear Power Limited committed in 2023 to four reactors, costing US$1bn each, with plans to be operational within a decade.

In September 2024, data centre company Oracle announced plans to build a A$100m AI-enhanced data centre in Australia powered by three small nuclear reactors.

Overcoming obstacles

Despite the many benefits of nuclear energy, building new generating capacity requires navigating a minefield of challenges, including the regulatory landscape.

Countries continue to evolve their stance on nuclear energy and adjust regulations to support the implementation of newer, safer technologies. Asia is the primary driver of nuclear power growth, but political stances vary throughout Europe, according to the International Energy Agency. Some countries, such as Germany, are phasing out nuclear power, but 11 other European Union member states launched an alliance to cooperate on nuclear energy and add 50 GW of nuclear capacity by 2050. Meanwhile, the U.S. is providing substantial support for the development of small reactors.

Companies that successfully jump through the regulatory hoops and secure capital – mainly from private equity and venture capital firms – still face another huge challenge in convincing communities that new nuclear projects are safe and clean. The tragic events of Chernobyl and Fukushima still loom large. However, these were black swan events that don’t represent the lower risk profile of modern nuclear plants, says Dermond.

“One of the biggest problems I see is winning over hearts,” says Dermond. “The industry must effectively communicate how today’s nuclear plants are inherently safer and the role nuclear can play in a low-carbon future.”

Partnering to tackle power scarcity

Even with the regulatory, cost and public perception challenges, the potential of nuclear power is an exciting development for the data centre industry. The construction of new plants around the world will make it possible for more companies and investors to align their power needs with their resiliency and sustainability goals.

JLL’s data centre experts understand the challenge of power scarcity and data centres’ unique operational and sustainability requirements. Our industry-leading team can help advise on power issues to ensure new data centre facilities or developments get reliable onsite generation and storage solutions, as well as bridge power to meet peak power needs. Our complete data centre offering can also identify opportunities to reduce energy consumption and costs, achieve net-zero targets and make the most of scarce energy resources.

Contact us today for more information about how JLL can help address your data centre’s energy needs.