Nuclear power is being sought after by tech companies, but some utilities are putting up obstacles.

• Nuclear plants are being directly connected to data centers by power companies such as Constellation Energy and Vistra.
• As investors view a potential opportunity for their nuclear power plants to fuel the tech industry, the value of Constellation and Vistra shares has increased.
• But connecting data centers directly to nuclear plants already faces controversy.
• Some utilities have challenged an agreement between Amazon and Talen Energy.

Nuclear plants are becoming more attractive to tech companies as a source of clean energy for powering artificial intelligence, leading to opposition from some utilities due to concerns about the impact on the electric grid.

In some cases, data centers, which are computer warehouses that run the Internet, require as much power as a nuclear reactor in the U.S., which is equivalent to a gigawatt or more.

The U.S. competitiveness and national security are dependent on data centers, as the country faces competition from adversaries such as China in the development of AI, according to Joe Dominguez, CEO of , which manages the largest nuclear fleet in the U.S.

Large demand loads that require zero-emission energy are similar to nuclear power plants, according to Dominguez, who spoke on Constellation's second-quarter earnings call Tuesday. Constellation, based in Baltimore, operates 21 of the 93 reactors in the U.S.

The shares of Constellation Energy, a company based in Dallas and owner of six reactors, have surged 58% this year, making it the sixth-best stock in the S&P 500. This growth is due to investors placing a higher value on the company's nuclear power capacity to meet the increasing demand for data centers.

As coal plants are retiring and domestic manufacturing is expanding, tech companies are constructing data centers despite the increasing power supply constraints.

In late July, PJM Interconnection, the largest grid operator in the U.S., warned that power supply and demand are becoming increasingly tight due to the slow pace of construction of new generation sources. PJM serves 13 states primarily in the Mid-Atlantic region, including the world's largest data center hub in northern Virginia.

According to Dominguez of Constellation, co-locating data centers with nuclear plants is the most efficient and cost-effective method for supporting the expansion of data centers, without requiring consumers to bear the expense of constructing new transmission lines.

"According to Dominguez, the idea of accumulating enough power to power a gigawatt data center in any location that doesn't have decades of time is unbelievable. This is a significant amount of power to attempt to concentrate."

Amazon's nuclear agreement

But co-locating data centers next to nuclear plants already faces controversy.

In March, Web Services purchased a data center powered by the 41-year-old Susquehanna nuclear plant in Pennsylvania for $650 million. However, the agreement to directly sell power to the AWS data center from the nuclear plant is facing opposition from utilities and , who have filed complaints at the Federal Energy Regulatory Commission (FERC).

The deal between Amazon and Talen sets a precedent that will lead to less available power in the PJM grid area as resources "flee to serve load that benefits from but does not pay for the transmission system."

FERC received a filing from the utilities in June stating that this action would harm existing customers. Talen Energy has rejected these claims as "absolutely false," arguing that the utilities are hindering progress.

"Talen's co-location arrangement with AWS addresses the new demand for power resulting from the rapid emergence of artificial intelligence and data centers, according to a June statement."

AWS has been asked by FERC to provide additional details about the service agreement it has with Talen. FERC is hosting a conference in the fall to explore challenges related to linking large electricity consumers directly to power plants.

Kathleen Barrón, chief strategy officer at Constellation, stated on the power company's recent earnings call that it is a great opportunity for stakeholders to interact with commissioners in an informal setting like a conference, rather than in litigation, during the fall FERC meeting.

Shopping for nuclear power

In FERC filings, both Constellation and Vistra have endorsed the AWS-Talen agreement, with their CEOs stating on their earnings calls this week that a combination of co-location and traditional grid connection will be necessary to meet demand.

Several tech companies have expressed interest in partnering with Constellation to house their data centers at one of its facilities, according to Barrón's statement to CNBC.

Vistra is currently conversing with customers about co-location and is in the process of conducting due diligence on several sites, as stated by CEO Jim Burke on Thursday. Given the ongoing dispute in the PJM region regarding co-location, data center developers may decide to closely examine Texas, which operates its own grid known as ERCOT, according to Burke.

Burke mentioned Comanche Peak, one of Vistra's nuclear plants, during the second-quarter earnings call, stating that there is interest in it. Comanche Peak, located 50 miles from Fort Worth, Texas, has two reactors with a capacity of 2.4 gigawatts, which can power 1.2 million homes in typical conditions and 480,000 homes in peak periods, according to Vistra.

The Dominion service region, which encompasses northern Virginia, is a hub for the data center boom and has expressed interest in connecting a data center to the Millstone nuclear plant in Connecticut.

"CEO Robert Blue stated on Dominion's second-quarter earnings call that the company continues to explore the option of co-location, but only if it makes sense for all parties involved, including Dominion, potential counterparties, and stakeholders in Connecticut."

Kelly Trice, president of Holtec International, a privately held nuclear company based in Florida, stated that the U.S. should prioritize balancing the energy demands of data centers with those of all consumers. Holtec is currently working to restart the Palisades nuclear plant in Michigan and has also engaged in discussions with tech companies regarding nuclear energy.

"Trice warned CNBC that if we're not careful, the hyperscalers and data centers could take all the power, leaving consumers with nothing. The key is to strike a balance where consumers receive what is rightfully theirs."

"Trice stated that the United States has not yet begun grappling with the issue, but he believes we are approaching a close point."