AI puts a strain on the power supply: Amazon pays $650 million to a nuclear power plant

Data centers are energy guzzlers. The Germans alone consume more than the city of Berlin. Tendency? Rising. The training of AI models in particular is just beginning. This puts a strain on the power supply. That’s why Amazon is knocking on the door of a nuclear power plant.

Data centers are hungry. On electricity. Millions of searches on Google and countless routes on Google Maps have to be processed, videos streamed and transfers made every day. In Germany, data centers will have consumed almost 20 billion kilowatt hours (kWh) of electricity in 2023. That’s almost twice as much as the entire city of Berlin (12.5 billion kWh) needed per year, writes the Borderstep Institute for Innovation and Sustainability in its annual Evaluation. 3.7 percent of German electricity consumption already goes to rooms or entire buildings in which computer hardware controls our everyday lives.

And the route is clear: our lives are becoming a little bit more digital every day. This requires more data centers with more power that consume more electricity. But this can lead to significant problems.

Ireland, for example, has built a lot of new data centers in recent years, says Ralph Hintemann from the Borderstep Institute in the ntv podcast “Learned something again”. Within just five years, their share of electricity consumption has tripled. “The real problem they had was that they could no longer supply the new data centers with power without endangering the security of the network. Then they stopped a number of new construction projects. Now they are slowly starting again, but are demanding that the data centers serve the network act, i.e. run your own power supply units when there is too little power in the network.

Computing power is growing exponentially

There are currently between 521 and 3,000 data centers in Germany – depending on whether you count the smaller server rooms of individual companies or just the large halls that are operated by IT groups and cloud companies such as Amazon, Google, Microsoft or SAP. Their electricity consumption has more than doubled since 2010 and consumption will continue to rise due to new projects, such as Microsoft’s planned AI parks in North Rhine-Westphalia. By 2030 it could reach 30 billion kilowatt hours per year, which would be almost three times as much as Berlin.

Nevertheless, the German electricity supply is unlikely to be at risk. Also because particularly hungry applications rarely take place in this country, such as the training of extensive AI models with the ultra-fast chips from the new stock market darling Nvidia. The computing power for the largest and best language models has increased exponentially and doubled since 2012 every 3.4 monthsthe AI ​​pioneers at OpenAI warned back in 2018.

This high-performance training is carried out where electricity and therefore the operation of data centers are particularly cheap. For example in the geothermal paradise of Iceland, where a kilowatt hour of energy only costs five cents. In Iceland, the weather conditions are particularly friendly to training because the comparatively low temperatures mean that less electricity is required to cool the data centers.

However, most AI models are trained in the USA, where the OpenAI partners from Microsoft and Google operate mega data centers. According to Australian telecom provider Cloudscene, the United States is currently facing 5381 large data centers. That’s ten times as many as in second-placed Germany.

A $100 billion data center

Germany’s future plans also seem tiny compared to the USA: Microsoft wants to build three data centers in the Rhenish district for 3.2 billion euros. In the USA, Microsoft and OpenAI are planning a super data center for 100 billion US dollars. Competitor Amazon is not going anywhere: the e-commerce giant wants to do so in the next 15 years $150 billion in new data centers invest in order to be able to cope with the demand for AI applications from the in-house cloud subsidiary AWS. The financial and business portal Bloomberg reported this at the end of March reported.

The electricity consumption of German data centers also seems meager compared to the USA. While 20 billion kilowatt hours flow into the operation of digital and mobile applications in this country, the USA has 130 billion kilowatt hours. By 2030, it will be mainly AI applications that will cause demand to triple (390 billion kWh), according to the consulting firm Boston Consulting Group calculated has. That would be about 7.5 percent of all American electricity consumption, or as much as 40 million U.S. households need.

Mains connection suspended for months

This hunger for electricity is not without consequences, as Amazon found out the hard way: the AWS parent built its first large data centers in Virginia. The state borders the US capital Washington, DC and is an important hub for private and business data traffic, in the immediate vicinity of ministries and government agencies but also for the state.

Amazon’s new investment program plans to invest billions more in Virginia, according to Bloomberg. However, there were already difficulties with the local power supply in the metropolitan region in 2022. Due to high utilization, Dominion Energy could no longer guarantee reliable deliveries suspended the network connection of new data centers for months. Electricity demand in the region is expected to double again in the next 15 years, and further supply problems are inevitable.

These may be annoying for new data centers, but they would be a catastrophe for existing ones. Because the services of the operators or cloud providers are needed 24 hours a day and 365 days a year, says Ralph Hintemann in the podcast. Depending on the data center, a company’s entire production or a bank’s financial transactions could depend on it. “These are cost-intensive areas in which a failure can quickly lead to millions or billions in damages.”

According to Hintemann, enormous effort is being made to prevent possible failures. “You often have a dual supply from two different substations. If there is no power on one line, the data center can be supplied from the other,” he says. The same applies to emergency generators: “They typically have more than necessary in case one doesn’t work.”

Amazon is building on a nuclear power plant site

The need to run 24/7 makes it complicated to build new data centers using renewable energy such as wind and solar. They suffer from dark calms and windless days. Batteries are making rapid technological progress, but so far they cannot be used cost-effectively.

Amazon has therefore made two groundbreaking decisions. The AWS parent is building new data centers in US states like Mississippi, where few people live and therefore there are no supply problems. Amazon is also relying on nuclear power: the cloud company had one at the beginning of March Deal with the operator of the nuclear power plant Susquehanna Steam Electric Station closed in the rural state of Pennsylvania: Amazon is allowed to build a data center right next to the nuclear power plant for $650 million. Amazon will be supplied with electricity around the clock at a fixed price for ten years. If the operation of the 40-year-old nuclear power plant is extended, Amazon will also be allowed to extend the supply contract twice for ten years each.

The deal is a financial lifeline for Talen Energy: the cash-strapped nuclear power plant operator had to file for bankruptcy just two years ago. When debts, interest and fees are paid, 361 of Amazon’s 650 million will go into Talen Energy’s coffers – a profit margin of 55 percent.

Nuclear power stocks are suddenly booming

Nuclear power “fits the bill”, describes The US stock market magazine “Barron’s” describes the business: It is ideal for operating data centers because, unlike wind and sun, it is available around the clock, but still does not emit any CO2 into the air – another challenge for the expansion of cloud and computing capacities: Companies like Amazon, Google or Microsoft have to avoid emissions and meet climate targets despite huge electricity bills. That is why fossil technologies such as natural gas are not an alternative.

This development has already arrived on the stock market: shares of American nuclear power plant operators enjoyed price gains of more than 90 percent each last year, as “Barron’s” writes. Decommissioned nuclear power plants also benefit: the operator of the Palisades nuclear power plant in the US state of Michigan received a billion-dollar loan from the US Department of Energy at the end of March to bring it back online – until at least 2051.