Not all data centers run at full power all the time. Maybe they are paying for 100% of the capacity and taking about half of the energy. I have no idea if the other half of the energy will be sold on the market or not generated.
Is it possible Microsoft is willing to pay a premium to secure power that might otherwise not be available on the scale they expect to need it? Do we all agree wind and solar are not sufficient to meet future power needs, especially for data centers and AI?
I've read in a couple of places that MS will buy all the power, and in one or two places that others will be able to buy some of it.
I would rather my tax dollars go to boost nuclear although I would much prefer NO tax dollars to go to any source. It also pleases me to see TMI rise from the ashes.
The next step is not to let ALARA push up the cost further; it is for us to push the NRC to reduce regulation and bring the cost down, encouraging the development of more nuclear.
Microsoft is paying Constellation, but it’s not ‘buying the power.’ Constellation will put the energy onto the regional power grid, where Microsoft also has some data centers plugged in a hundred miles away.
Microsoft is paying $800 million/year, yes? 800 MW x $115/MWh x 8,760 hours/year. Also, Constellation almost certainly uses a much higher discount rate than 6%. Probably a WACC of 10%+.
Yeah, I don't understand how this "transfer" is going to work. There's a lot they have not told us. We will just have to wait and see, but still looks to me like you and I are subsidizing Microsoft's venture into AI.
My discount rate is real. 6% real is something like10% nominal. I reran at 10% real and got the breakeven rate up to 8 cents. Such returns would not exist in a competitive market with a firm PPA, but then of course we have regualtory uncertainty, or rather we have ALARA. So perhaps we can justify these discount rates as insurance against ALARA ratcheting.
Mocrosoft is greedy and will take whatever handout they can lobby for with their huge campaign contributions. It has nothing to do with negotiation. Nobody in the Government is negotiating for the best interests of "we the people". We better find some soon, or we all will be working for the Government, whether we like it or not. Power will soar to 50 cents per kWh when the data centers come on line in earnest and no more power generation is being allowed, so, yes, Microsoft is getting a great deal and Constellation is getting a great deal as well. Win-win. Just how the free enterprise system is supposed to work. Getting the government out of the way of business is a huge win for "we the people".
Tone is important. You are close to the edge here.
The problem is not Microsoft. The problem is us. Nuclear proponents lobbied for and welcomed tax credits for nuclear. We voted in the politicians who voted for all the subsidies and mandates. Unless we change our behavior, we have no one to blame but ourselves.
Yes. $2,400 pre kWh is cheaper than coal or natural gas plants per kWh. In natural gas and coal plants, 80% of the retail power cost is fuel cost. In nuclear power plants, it is about 5%.
The $1.6 billion to restart the reactor is the best deal around (except if they just kept it going). The major data center power users are willing to pay upwards of 50 cents per kWh, so 11 cents is an unbelievable bargain for them (follow-on deals will be more). Microsoft does not need any subsidies, but has shown that they are lobbying for all they can get as evidence of their greed. So, yes, Constellation can produce electricity at about 3 to 4 cents per kWh (including debt service), so sales at 11 cents is a smoking deal.
What the article fails to realize (and all recent economic exchanges fail to realize) is that the price of something is only related to its cost in that if something sells for less than its cost, it will not be produced (for long). When asked why they constantly raise their prices, Disney Corp's answer was: "because people will pay more". This is the same for any commodity (basic economics 101). Prices will soar for electricity once the data centers start opening in earnest (doubling, at least, the US demand in a decade or a decade and a half). So, low supply, high demand equals high prices as the residential and other industrial customers are outbid for electricity. This will generate a huge resurgence of private nuclear power coming on line which will roll right over the NRC since people will be up in arms because they think (rightfully so) that nuclear power should be cheap.
Recycling in fast reactors could lead to 1 cent per kWh retail or less. So, our vision has only been boosted by this eventuality and will be more popular as the price goes up. Human nature to get the best deal (profit) will overcome the human nature to accept the status quo (comfort) by far. It will be a great ride, but electricity will be very expensive for a while.
Remember, the Vogtle reactors that just came on line cost about $10,000 per kWh (mostly for Government caused delays and redesign demands). Most critics point to this as a reason to eschew nuclear power. However, they, too, forget the economics of free enterprise. If it is too expensive, nobody will invest in the business. However, there is about $20 billion in private funding sunk in at least 50 nuclear reactor companies without a hope of getting revenue for a decade (thanks to the NRC). So a lot of investors have put their money where their perception of profit is. Also, Vogtle is profitable even besides the huge cost acceleration caused mostly by Government meddling.
So, $2,400 per kWh is a smoking deal, especially with the power purchase agreement at 11-15 cents per kWh. Win, win for seller and buyer, just as it is supposed to be in a free enterprise system.
Only in a monopolistic market is price set by what people are willing to pay. In a competitive market, price is set by a combination of the demand curve and what suppliers can profitably offer. In any properly functioning market, there are plenty of people willing to pay more than the price if they had to. It's called consumer surplus. That's Economics 101.
"rolling over the NRC" is not going to happen unless we make it happen. The first step is a well defined alternative in which the regulator's actual goal (not stated goal) is to find a balance between cost and release harm. The second step is to elect politicians which will implement that system.
You are right, of course. If we do not get some brave representation that care more for us than themselves and their ambition, nothing will change. The oligarchs will not change.
Sorry I somehow read oil in oligarchs. Talk about confirmation bias. But I'm going to let
the comment stand. The problemis not the oligarchs. Its the regulation which we put in place.
Strongly disagree with your last sentence. . Big Oil made an enormous bet on nuclear in the 1960's. They saw the vision. And they took an immense hit when nuclear failed to live up to its promise. Pls see https://jackdevanney.substack.com/p/big-oil-and-nuclear-power
They did not foresee how nuclear was going to be derailed by auto-genocidal regulation. They were very badly burned.
But if we ever get our regulatory errors corrected, I confidently predict that Big Oil will be once again nuclear's Big Investor and more importantly the Big Doer. Already some of this is happening. Dow Chemical and X-Energy. Natura Resources and molten salt.
My point is that the American Petroleum Institute harbors a great resistance to nuclear power as evidenced by their support for the Sierra Club and Greenpeace (and others) as well as their direct support of wind and solar power. It was the regulation and big government intervention that doomed nuclear power in the '70s and following. What I criticize them for is manipulating free enterprise to support fossil fuel to the exclusion of nuclear power. What they should do is embrace nuclear power as a follow-on transition to future energy. Maybe they were burned (but others were as well), but it only seemed to push them into more lobbying to manipulate law instead of more innovation to improve the human condition through innovation. This, to me, is greed and is the very thing free enterprise is meant to temper. I just think they found that they made more money by lobbying for favorable spending, so they gave up any path to innovation. If government continues to bow to the lobbying to the exclusion of making a level playing field for all through law, we will continue our destructive process into monopoly. In short, the oligarchs drive the regulation to favor their benefit over others, not through "making a better mouse trap", but by preventing better mouse traps to be made by influencing a very weak and greedy cadre of DC operatives (who, as you correctly noted, we did elect) to regulate better mouse traps out of profitability. They certainly pile regulation on the barrier to nuclear power and use the NRC to slow-roll its realization. They influence the "regulatory errors" to stack the deck in their favor. The sheer advantage of nuclear power will be the thing that overcomes this abyss as the advantages are explored by visionaries, as is happening between Dow and X-Energy. It is not strange that they try to gain unfair advantage, but it is strange that "we the people" tolerate it. So, the oligarchs will not change their pursuit of easy money through manipulation, as you noted, but people will suffer from it until they cannot stand it any more. Such is the human condition and the thing I am rallying against.
So you did mean oiligarchs! Makes me feel much better.
Please read the piece on Big Oil. Oil had no role in fostering the late 1960's and 1970's regulation that killed nuclear. In fact, they were one of its worst victims. The emphasis some pro-nukes put on natural gas interests recent efforts against bandaid subsidies is misplaced,
and distracts us from the real problem. We dont need subsidies. We need a whole new regualtory system. I worked in the Oil Patch for 25 years. I can assure you if someone says "Let's rid ourselves of the NRC", very few in that industry will disagree.
Steve,
You've stepped over the line. Blackrock is an asset manager. Few oligarchs are communists,
certainly not Gates nor Buffet. Pls reword or your comment will be deleted.
Not all data centers run at full power all the time. Maybe they are paying for 100% of the capacity and taking about half of the energy. I have no idea if the other half of the energy will be sold on the market or not generated.
Is it possible Microsoft is willing to pay a premium to secure power that might otherwise not be available on the scale they expect to need it? Do we all agree wind and solar are not sufficient to meet future power needs, especially for data centers and AI?
I've read in a couple of places that MS will buy all the power, and in one or two places that others will be able to buy some of it.
I would rather my tax dollars go to boost nuclear although I would much prefer NO tax dollars to go to any source. It also pleases me to see TMI rise from the ashes.
The next step is not to let ALARA push up the cost further; it is for us to push the NRC to reduce regulation and bring the cost down, encouraging the development of more nuclear.
Where are the data centers going? Transmission costs are probably cheap, compared to locating somewhere else?
Microsoft is paying Constellation, but it’s not ‘buying the power.’ Constellation will put the energy onto the regional power grid, where Microsoft also has some data centers plugged in a hundred miles away.
Microsoft is paying $800 million/year, yes? 800 MW x $115/MWh x 8,760 hours/year. Also, Constellation almost certainly uses a much higher discount rate than 6%. Probably a WACC of 10%+.
Mitchell,
Yeah, I don't understand how this "transfer" is going to work. There's a lot they have not told us. We will just have to wait and see, but still looks to me like you and I are subsidizing Microsoft's venture into AI.
My discount rate is real. 6% real is something like10% nominal. I reran at 10% real and got the breakeven rate up to 8 cents. Such returns would not exist in a competitive market with a firm PPA, but then of course we have regualtory uncertainty, or rather we have ALARA. So perhaps we can justify these discount rates as insurance against ALARA ratcheting.
Mocrosoft is greedy and will take whatever handout they can lobby for with their huge campaign contributions. It has nothing to do with negotiation. Nobody in the Government is negotiating for the best interests of "we the people". We better find some soon, or we all will be working for the Government, whether we like it or not. Power will soar to 50 cents per kWh when the data centers come on line in earnest and no more power generation is being allowed, so, yes, Microsoft is getting a great deal and Constellation is getting a great deal as well. Win-win. Just how the free enterprise system is supposed to work. Getting the government out of the way of business is a huge win for "we the people".
Steven,
Tone is important. You are close to the edge here.
The problem is not Microsoft. The problem is us. Nuclear proponents lobbied for and welcomed tax credits for nuclear. We voted in the politicians who voted for all the subsidies and mandates. Unless we change our behavior, we have no one to blame but ourselves.
Yes. $2,400 pre kWh is cheaper than coal or natural gas plants per kWh. In natural gas and coal plants, 80% of the retail power cost is fuel cost. In nuclear power plants, it is about 5%.
The $1.6 billion to restart the reactor is the best deal around (except if they just kept it going). The major data center power users are willing to pay upwards of 50 cents per kWh, so 11 cents is an unbelievable bargain for them (follow-on deals will be more). Microsoft does not need any subsidies, but has shown that they are lobbying for all they can get as evidence of their greed. So, yes, Constellation can produce electricity at about 3 to 4 cents per kWh (including debt service), so sales at 11 cents is a smoking deal.
What the article fails to realize (and all recent economic exchanges fail to realize) is that the price of something is only related to its cost in that if something sells for less than its cost, it will not be produced (for long). When asked why they constantly raise their prices, Disney Corp's answer was: "because people will pay more". This is the same for any commodity (basic economics 101). Prices will soar for electricity once the data centers start opening in earnest (doubling, at least, the US demand in a decade or a decade and a half). So, low supply, high demand equals high prices as the residential and other industrial customers are outbid for electricity. This will generate a huge resurgence of private nuclear power coming on line which will roll right over the NRC since people will be up in arms because they think (rightfully so) that nuclear power should be cheap.
Recycling in fast reactors could lead to 1 cent per kWh retail or less. So, our vision has only been boosted by this eventuality and will be more popular as the price goes up. Human nature to get the best deal (profit) will overcome the human nature to accept the status quo (comfort) by far. It will be a great ride, but electricity will be very expensive for a while.
Remember, the Vogtle reactors that just came on line cost about $10,000 per kWh (mostly for Government caused delays and redesign demands). Most critics point to this as a reason to eschew nuclear power. However, they, too, forget the economics of free enterprise. If it is too expensive, nobody will invest in the business. However, there is about $20 billion in private funding sunk in at least 50 nuclear reactor companies without a hope of getting revenue for a decade (thanks to the NRC). So a lot of investors have put their money where their perception of profit is. Also, Vogtle is profitable even besides the huge cost acceleration caused mostly by Government meddling.
So, $2,400 per kWh is a smoking deal, especially with the power purchase agreement at 11-15 cents per kWh. Win, win for seller and buyer, just as it is supposed to be in a free enterprise system.
Ronald,
Only in a monopolistic market is price set by what people are willing to pay. In a competitive market, price is set by a combination of the demand curve and what suppliers can profitably offer. In any properly functioning market, there are plenty of people willing to pay more than the price if they had to. It's called consumer surplus. That's Economics 101.
"rolling over the NRC" is not going to happen unless we make it happen. The first step is a well defined alternative in which the regulator's actual goal (not stated goal) is to find a balance between cost and release harm. The second step is to elect politicians which will implement that system.
You are right, of course. If we do not get some brave representation that care more for us than themselves and their ambition, nothing will change. The oligarchs will not change.
Steven,
Steven,
Sorry I somehow read oil in oligarchs. Talk about confirmation bias. But I'm going to let
the comment stand. The problemis not the oligarchs. Its the regulation which we put in place.
Strongly disagree with your last sentence. . Big Oil made an enormous bet on nuclear in the 1960's. They saw the vision. And they took an immense hit when nuclear failed to live up to its promise. Pls see https://jackdevanney.substack.com/p/big-oil-and-nuclear-power
They did not foresee how nuclear was going to be derailed by auto-genocidal regulation. They were very badly burned.
But if we ever get our regulatory errors corrected, I confidently predict that Big Oil will be once again nuclear's Big Investor and more importantly the Big Doer. Already some of this is happening. Dow Chemical and X-Energy. Natura Resources and molten salt.
My point is that the American Petroleum Institute harbors a great resistance to nuclear power as evidenced by their support for the Sierra Club and Greenpeace (and others) as well as their direct support of wind and solar power. It was the regulation and big government intervention that doomed nuclear power in the '70s and following. What I criticize them for is manipulating free enterprise to support fossil fuel to the exclusion of nuclear power. What they should do is embrace nuclear power as a follow-on transition to future energy. Maybe they were burned (but others were as well), but it only seemed to push them into more lobbying to manipulate law instead of more innovation to improve the human condition through innovation. This, to me, is greed and is the very thing free enterprise is meant to temper. I just think they found that they made more money by lobbying for favorable spending, so they gave up any path to innovation. If government continues to bow to the lobbying to the exclusion of making a level playing field for all through law, we will continue our destructive process into monopoly. In short, the oligarchs drive the regulation to favor their benefit over others, not through "making a better mouse trap", but by preventing better mouse traps to be made by influencing a very weak and greedy cadre of DC operatives (who, as you correctly noted, we did elect) to regulate better mouse traps out of profitability. They certainly pile regulation on the barrier to nuclear power and use the NRC to slow-roll its realization. They influence the "regulatory errors" to stack the deck in their favor. The sheer advantage of nuclear power will be the thing that overcomes this abyss as the advantages are explored by visionaries, as is happening between Dow and X-Energy. It is not strange that they try to gain unfair advantage, but it is strange that "we the people" tolerate it. So, the oligarchs will not change their pursuit of easy money through manipulation, as you noted, but people will suffer from it until they cannot stand it any more. Such is the human condition and the thing I am rallying against.
So you did mean oiligarchs! Makes me feel much better.
Please read the piece on Big Oil. Oil had no role in fostering the late 1960's and 1970's regulation that killed nuclear. In fact, they were one of its worst victims. The emphasis some pro-nukes put on natural gas interests recent efforts against bandaid subsidies is misplaced,
and distracts us from the real problem. We dont need subsidies. We need a whole new regualtory system. I worked in the Oil Patch for 25 years. I can assure you if someone says "Let's rid ourselves of the NRC", very few in that industry will disagree.
Probably because of NORM in drilling pipes that results from exploration and production of NG ?
OK. Delete it. I guess we can agree to disagree.
Hi Jack. I think you listed $80M/yr for the MS payment. I assume you meant $800M/yr? Thanks.
Right. Should have been 800. Thanks.