The Trump administration has announced a significant financial commitment, providing Constellation Energy with a $1 billion loan to facilitate the restart of a nuclear reactor at the iconic Three Mile Island facility. This move comes after tech giant Microsoft agreed to purchase all the electricity generated by the refurbished plant for two decades, primarily to power its burgeoning AI and data center operations.
Details of the Deal and Financial Context
Constellation Energy, which idled the 835-megawatt reactor in 2019, plans to use the federal loan to cover a substantial portion of the estimated $1.6 billion refurbishment project. The company anticipates the reactor will be back online and supplying power by 2028. While specific terms of Microsoft's agreement with Constellation remain undisclosed, analysts at Jefferies have estimated the tech company might be paying approximately $110 to $115 per megawatt-hour over the 20-year duration of the deal.
This estimated price point, while more economical than constructing an entirely new nuclear power plant, represents a considerable premium compared to renewable energy sources like wind, solar, and geothermal, even when these are equipped with utility-scale batteries for continuous 24/7 power, according to a comparison of energy costs from Lazard.
Tech Industry's Growing Nuclear Interest
Nonetheless, major tech companies have recently shown a growing interest in nuclear energy. This surge in demand is largely attributed to the skyrocketing power requirements of their data centers and advanced AI initiatives. Microsoft's competitor, Meta, for instance, secured its own deal with Constellation last summer, agreeing to purchase the "clean energy attributes" from a 1.1-gigawatt nuclear power plant in Illinois.
Three Mile Island's Unit 1 Revival
It's crucial to note that the reactor slated for restart at Three Mile Island is Unit 1, which began operations in 1974. This unit was taken offline in 2019 primarily due to its inability to compete with the low costs of natural gas. This is distinct from the infamous Unit 2, which experienced a partial meltdown in 1979.
The Role of the DOE's Loan Programs Office
The $1 billion debt facility is being administered through the Department of Energy's Loan Programs Office (LPO). Established under the Energy Policy Act of 2005, the LPO's mandate is to foster the growth of clean energy technologies. The LPO has a mixed but generally successful track record; while it famously provided a loan to Solyndra, a U.S. solar startup that failed during the Great Recession, it also supported Tesla with a $465 million loan in 2010, which the company repaid by 2013. Overall, experts cite a default rate of just 3.3% after recoveries for the LPO.
Recently, the LPO finalized a $1.6 billion loan to American Electric Power to upgrade approximately 5,000 miles of transmission lines. The Inflation Reduction Act, passed during the Biden administration, further expanded the LPO's capabilities by creating the Energy Infrastructure Reinvestment program. This program aims to restore existing power plants, provided they reduce pollutants or greenhouse gas emissions. The Trump administration largely maintained this program, rebranding it as the Energy Dominance Financing Program.
A Note on Program Naming
Interestingly, the Department of Energy's press release regarding this loan states that the EDF Program was created under the "Working Families Tax Cut Act," which appears to be an error. Congressional records indicate it was authorized under the "One Big Beautiful Bill Act."
