Comparing Microsoft and Google's nuclear investment strategies

In late September, Microsoft announced it would finance an effort to restart a shuttered nuclear reactor at Three Mile Island in Pennsylvania, at a cost of $16 billion. The deal made the OpenAI investor the first tech company to tap large-scale nuclear specifically for its data center energy needs.

The deal signaled that hyperscalers are getting serious about nuclear. But Microsoft’s peers aren’t necessarily following the same strategy. That was made clear by Google’s investment, announced yesterday, in small modular reactors.

Google is not only targeting a different technology — it's also taking an “orderbook” approach, purchasing electricity from multiple reactors that will be developed by Kairos Power.

Google’s approach may appear inherently riskier than Microsoft’s. SMRs haven’t been commercialized, and the technology central to the deal hasn't yet been built. The first reactor won’t be online until 2030. 

However, Google is betting that the SMR approach may lead to faster construction and more predictable timelines, as well as more flexible deployment compared to traditional reactors. According to the Department of Energy, SMRs may have an easier time reaching “Nth-of-a-kind” stage — meaning that the kinks have been largely worked out and the new technology has come down the cost curve.

Large reactors, the agency said, are “difficult to construct in a manner that reaches NOAK cost given megaproject issues and a proliferation of different designs.” And, according to the agency’s recent report, it takes more capacity to bring large reactors down the learning curve.

Distinct approaches

While the approaches by both Google and Microsoft to procuring nuclear power send positive signals to the nuclear industry, Nuclear Innovation Alliance executive director Judi Greenwald said they target very different end goals — and will have different impacts.

Microsoft’s decision to fund the reopening of a single, existing, large-scale reactor is likely to be relatively low cost, and will come online sooner than the series of reactors Google and Kairos plan to build, Greenwald said. “The Microsoft deal is going to get more near-term clean power, probably with less cost uncertainty.”

The disadvantage with that approach, she added, is that there is that there aren’t that many reactors available to be restarted. While we know what those existing reactors cost and a lot of the requisite machinery already exists, it means that Microsoft’s strategy simply isn’t targeting NOAK.

No matter how cost effective and streamlined the project ends up being, “there just aren’t that many places to replicate it,” Greenwald said.

Greenwald describes Google's deal as more of a “collaboration” to share the risk of the first few reactors. “Google is sharing some of the risks of that development, but will also reap the benefits, because they’ll get the later set of these reactors, once they’ve brought their costs down,” she said.

The range of nuclear technologies that companies are tapping for data centers is related to how quickly they predict they’ll need that power, explained Steve Swilley, vice president of nuclear research and development at the Electric Power Research Institute.

Tech companies and utilities that need to move quickly — as in, they need power in the next five years — are more likely to tap existing nuclear resources, Swilley said.

Those looking for power beyond the decade “have a lot more options on the table,” he added. “You could probably sit back and wait a little bit, to let some of these things play out, and then triangulate where you need to be.”

In its nuclear liftoff report, however, DOE said that the “wait and see” approach could be problematic for the broader industry. “‘Waiting to see’ the results of the first deployments would likely lead to missing decarbonization targets and missing out on opportunities for establishing a strong U.S. nuclear industrial base,” the report concluded.