Three Mile Island Seeks $1.6B Loan to Power Microsoft
It is an outlandish idea to reopen the Three Mile Island nuclear plant, which was closed for safety reasons, and will now largely benefit a singular company in Microsoft. New details show that this situation just got much weirder.
The owner of the nuclear property now is seeking a $1.6 billion loan guaranty from the federal government to help finance the plan to restart the plant. The Washington Post got hold of the loan guaranty application to the U.S. Energy Department from Constellation Energy. the current owner.
As it moves towards approval, the situation represents a development that should underscore the vulnerability of our spiraling need for electricity and the vulnerability of current resources.
The Pennsylvania nuclear plant was shut in 2019 after a partial meltdown in 1979, before harm became widespread. The reactor that Constellation plans to recommission sits next to the unit that has been dormant since.
If approved, it would be a taxpayer-backed loan that would give a major boost to an unprecedented bid to steer all the power from a U.S. nuclear plant to a single company — Microsoft — to power its data centers. Microsoft is among the industry leaders pursuing advances in artificial intelligence, a technology that consumes enormous amounts of electricity.
The loan guaranty has passed initial review, with the help of various political and energy leaders, including Pennsylvania Gov. Josh Shapiro.
The Business Deal
The company already has filed for upwards of $200 million in tax credits for the project; asking for loan guaranties is likely to intensify any debate. A loan guarantee would shift much of the risk of reopening Three Mile Island to taxpayers, who would cover any default. Such guarantees are typically used by developers to lower the cost of project financing.
According to the Post’s documents, this loan guaranty could be worth up to $122 million in borrowing costs for Constellation. The loan guarantee program gives applicants the option of borrowing directly from the U.S. Treasury, with the Energy Department still serving as the guarantor in the event of a default.
This type of tax credit is being extended to technology companies for energy from a solar or wind farm. Nuclear plants generate more electricity at a higher cost.
The Energy Department declined to comment on the application, citing confidentiality concerns. The risks are seen arising in the work to make a closed plant operational. The Energy Department closed a $1.5 billion loan guarantee on another nuclear plant restart in Michigan to power 800,000 homes.
Last month Constellation announced a deal under which Microsoft would purchase all the power from the plant by 2028.
Power from Three Mile Island would go to a general grid rather than to Microsoft directly but would be buying from that grid. On paper, at least, Microsoft would use the lack of emissions from a nuclear plant to offset other electricity accounting with carbon.
The Issues Raised
There are multiple issues in this case, among them the questions surrounding restarting a troubled plant and another about the propriety of a nuclear power plant to exist for one commercial client.
The broader issue here, of course, is that vast swaths of the United States are at risk of running short of power as electricity-hungry data centers and clean-technology and factories proliferate, leaving utilities and regulators seeking credible plans to expand the nation’s power grid. Virginia needs the equivalent of several large nuclear power plants to serve all the new data centers planned and under construction. Texas, where electricity shortages are already routine on hot summer days, faces the same dilemma.
We hear much more from our presidential candidates about fossil fuels and gasoline consumption than we do about either the growing chasm behind electricity grid needs or about the introduction of crypto-currency operations and artificial intelligence — and what it is doing to exacerbate electricity needs.
Indeed, it is probably wise for all to be looking at electricity as a set of value propositions to guide the setting of national policies about building power plants and protecting them from attack, power distribution issues or meltdowns.
Nuclear power proponents clearly think that nuclear sources should be part of the overall mix of energy sources — especially with rising demands from big data needs. If we need lots of new power sources, proponents argue, they should be from zero carbon sources.
Opening a closed plant for the benefit of one commercial customer seems especially dicey.
Constellation, headquartered in Baltimore, is one of the nation’s biggest energy companies, selling electricity and natural gas in 48 states. It owns 15 nuclear power plants.
Somehow, it doesn’t seem right that we need to use public money to front development to sustain private customers.