The AI revolution will require a massive build-out of new infrastructure.

That means more chips, more data centers, more electrical equipment… and far more power. As businesses continue to grasp AI’s potential, we continue to see more and more announcements with facilities now measured in gigawatts (GWs).

OpenAI alone has announced partnerships with the semiconductor world representing nearly 30GW of new data center demand, and most believe we’re still in the early innings of the build-out. The question is, where will all of that power come from?

We see three options:

• Build new generation. That's already happening. But given the explosion of demand, if you want a new gas turbine, you won’t see it until after 2029. New nuclear will take even longer, extending into the 2030s. And renewables, while faster to install, are not able to provide the primary power required for data centers given their intermittent nature.

• Contract with a regulated utility. Regulated utilities have predetermined Return on Equity they can earn. Generally, working with a regulated utility means longer interconnection studies, potential political pushback, and strict regulatory guidelines that dictate who can connect and when.

• Partner with an independent power producer (IPP). Over the past 12 months, many hyperscalers have turned to IPPs, which own generation assets, set their own electricity prices, and can often move faster than regulated utilities. We are seeing hyperscalers willing to pay 3-4x the regulated or market rate for expedited access to these large energy resources.

The universe of IPPs is not very large, and we are seeing in early agreements that many are choosing to go nuclear. Nuclear generation is baseload energy (24/7), clean, and produces a lot of power in one location. Amazon announced a transaction with Talen Energy in March 2024; Microsoft partnered with Constellation Energy in September 2024 to bring the Crane Clean Energy Center (formerly Three Mile Island) back online; and as recently as this October, NextEra Energy unveiled plans to restart its Duane Arnold nuclear plant in conjunction with Google.

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