A power company CEO says that the notion of nuclear power as an energy source for data centers is being exaggerated.

• Andrés Gluski, CEO of AES Corporation, stated that the excitement over nuclear power has been somewhat exaggerated.
• AES supplies electricity to large tech companies, including Amazon, Microsoft, and Google, accounting for over 40% of its backlog.
• Gluski stated that renewables are the future, but natural gas will be required as a transitional fuel.

The CEO of a major power provider for large tech companies told CNBC in an interview Monday that the excitement over nuclear energy as a power source for data centers is "exaggerated."

Renewable energy is the future, but natural gas will also be used as a transition fuel, according to CEO Andrés Gluski. However, nuclear power faces challenges in meeting the growing power demand from data centers, Gluski added.

According to AES's recent earnings presentation to investors, more than 40% of its 12.7 gigawatt backlog originates from customers such as Amazon, Microsoft, and Google, making AES a major power provider for large tech companies building out data centers.

Some experts predict a resurgence of nuclear power due to rising energy demand resulting from AI, data centers, re-industrialization, and electric vehicles. Although nuclear energy is dependable and emissions-free, new projects face lengthy development times and high costs.

Gluski stated that the "euphoria" surrounding nuclear power is somewhat exaggerated. The amount of existing nuclear energy that merchant power providers can re-contract to sites such as data centers is limited, the CEO pointed out.

What is the cost of new nuclear power plants in the future, Gluski questioned, noting that only one such plant has been constructed in the U.S. in many years and it exceeded its budget.

'The future is going to be renewable'

The second of two new nuclear reactors at Vogtle Plant in Georgia was completed in April, despite being seven years late and twice as expensive as initially projected, according to the Energy Information Administration. These reactors, operated by Georgia Power, mark the first newly-built nuclear units in the U.S. in over 30 years, as stated by the Department of Energy.

"The Street predicted that you won't build renewables, but it's all going to be nuclear," Gluski said. "It's going to be natural gas and renewables, but the majority of it will be renewables," the CEO stated.

Under construction, renewables account for 89% of AES' gross power generation, with gas making up the remaining 11%. Currently, AES' gross power generation is split between renewables (54%), natural gas (27%), and coal (17%).

The recent agreement between Microsoft and Brookfield Asset Management for 10.5 gigawatts of renewable energy between 2026 and 2030 is a sign of the future, according to Gluski. This agreement, described by Microsoft and Brookfield as the largest renewable purchase ever between two corporate partners, demonstrates the growing commitment to sustainable energy practices.

"Renewable energy will be the future because it is cheaper, cleaner, and easier to site, as Gluski stated."

Natural gas vs. renewables

The natural gas industry sees data centers as a significant contributor to demand growth, contending that renewables will require a backup power source when they are not generating enough power due to weather conditions.

Gluski stated that we need natural gas to support renewables until batteries are widely available and affordable enough to replace it.

According to an April report from Goldman Sachs, the demand for power from data centers in the U.S. is expected to more than double to 8% of the total electricity consumption by 2030. The investment bank predicts that natural gas will supply 60% of the demand growth, while renewables will account for 40%.

The CEO stated that battery prices are decreasing and there is an abundance of battery storage ready to be connected to the grid, with solar power being the largest source of energy dispatched during certain hours in California, according to Gluski.

"Renewables are the key to achieving 100% energy production, but it requires a significant increase in renewable energy sources," he stated.

Nearly twice the installed capacity of the U.S. power plant fleet is represented by renewables and storage in line for connection at the end of 2023, while gas accounts for just 3%, according to Lawrence Berkeley National Laboratory.

Gluski stated that AES has been providing hourly matched renewable energy to data centers for the past two years and can continue to do so today.

In 2021, Google signed an agreement with AES to power its Virginia data center campus with 90% carbon-free energy on an hourly basis using a combination of wind, solar, hydro, and battery storage resources.

An agreement with Amazon has enabled the power company to increase its solar and storage capacity in Kern County, California, to two gigawatts, with the project expected to be operational from 2025 to 2026. This project is the largest solar and storage project in the U.S., according to AES.

According to its first quarter earnings presentation, the power company has signed agreements to provide Amazon with 3.1 gigawatts of power, Microsoft with 1.7 gigawatts, and Google with 800 megawatts.

"Gluski stated that all of them desire to be part of an energy transition. However, he does not see anyone advocating for building gas and coal plants to power their data centers, except in a temporary situation until renewable energy sources become available."

Over the past three months, AES stock has increased by 26%, while its year-to-date growth stands at 6%. Out of Wall Street analysts, 67% consider AES stock a buy, 25% have a hold on it, and 8% rate it as a sell.