Key takeaways
- Nuclear co-location places a data center at an operating plant and connects it directly to the reactor's output rather than through the regional grid.
- Plant recommissioning goes further by restarting retired reactors, such as Constellation's Crane Clean Energy Center under a 20-year agreement with Microsoft.
- Both approaches offer firm, carbon-free, around-the-clock power, which is exactly what AI developers want.
- Co-location raises questions about who pays for grid services and whether removing existing generation from the market raises prices for other customers.
- Hyperscalers' willingness to fund restarts and litigate interconnection rules suggests nuclear will remain central to data center power planning.
As earlier articles on this site have shown, the surge in AI energy demand is pushing data center developers toward power sources beyond the conventional grid connection, to avoid long interconnection queues and permitting delays. We have already looked at fuel cells and behind-the-meter strategy; this article turns to nuclear power.
Nuclear is one of the key technologies that has gained attention in several ways. After decades in which major accidents and high costs pushed nuclear power to the margins in many countries, it is now attracting renewed interest as a source of firm power for the future.
Two nuclear trends are moving in parallel, and both are controversial. The first, nuclear co-location, connects a data center directly to an existing, operating reactor, bypassing the traditional grid. The second, plant recommissioning, goes further: it brings dead reactors back to life. Both promise something AI developers desperately want — firm, carbon-free, always-on power — but both are testing the limits of U.S. energy regulation, supply chains, and public trust.
Part 1: The Co-Location Controversy
How it works
Nuclear co-location means building a data center on or next to the site of an operating nuclear plant and wiring it directly to the reactor's generation, rather than pulling power off the regional transmission grid through a standard utility connection.
The most-watched example is Talen Energy's Susquehanna nuclear plant in Pennsylvania, where a 2.5-gigawatt, two-unit facility sits beside a data center campus now owned by Amazon Web Services. Talen originally arranged to feed up to 300 megawatts of "behind-the-meter" power straight from the plant to the data center — power that never touches the public grid at all.
Why hyperscalers want it this way
For companies like Amazon, Microsoft, and Google, co-location solves the single biggest headache in AI infrastructure: speed. Connecting a new data center to the regular grid can mean years in an interconnection queue, plus new transmission lines that take even longer to permit and build.
A behind-the-meter link to an existing reactor skips both. It also delivers exactly the kind of power AI training and inference clusters need — a steady, 24/7, carbon-free baseload, without the fuel price swings of natural gas or the intermittency of wind and solar. And it lets hyperscalers link near-term power supply directly to a plant's multi-decade operating license instead of the queue-dependent, uncertain grid.
Why it became a fight
The trouble is that a nuclear plant's output was, until recently, dedicated to serving the public grid — and everyone connected to that grid, including households and small businesses, effectively shares its costs and benefits. When several hundred megawatts get carved off for one customer, critics argue two things happen:
- Cost-shifting to ratepayers. If a large slice of a plant's low-cost generation is diverted to a single, deep-pocketed tech customer, other grid users may end up paying more to cover system costs, or lose access to power they were counting on. Consumer advocates and some state regulators worry this amounts to ordinary ratepayers subsidizing Big Tech's AI ambitions.
- Grid reliability concerns. Diverting large amounts of capacity — or exempting it from standard interconnection studies — raises questions about whether the wider grid still has enough resource margin, especially during heat waves or winter storms when every megawatt matters.
What FERC has done
In November 2024, the Federal Energy Regulatory Commission rejected an amended interconnection agreement that would have expanded the Susquehanna-to-Amazon co-located load from 300 MW to 480 MW. The vote was 2–1, with Commissioners Mark Christie and Lindsay See in the majority and then-Chairman Willie Phillips dissenting.
Christie's concern captured the stakes well: co-location arrangements "present an array of complicated, nuanced and multifaceted issues, which collectively could have huge ramifications for both grid reliability and consumer costs." Approving one deal, he warned, would set a precedent used to justify many more.
Talen didn't take the loss quietly — the company has been pressing an appeals court to reverse FERC's order, arguing regulators wrongly blocked its plant from supplying power directly to the AWS data center.
Meanwhile, rather than wait for that fight to resolve, Talen restructured the deal in 2025 into a "front of the meter" power purchase agreement for 1,920 MW with AWS — a structure that doesn't require FERC approval because it runs through the regular market rather than a special interconnection agreement.
FERC, for its part, decided the underlying rulebook needed fixing rather than litigating every deal one at a time. In December 2025, following a show-cause proceeding it opened in February 2025, FERC found that PJM's tariff was "unjust and unreasonable" because it lacked clarity and consistency on the rates, terms, and conditions for co-location arrangements.
FERC directed PJM, the nation's largest grid operator serving over 67 million Americans across 13 states and D.C., to build transparent rules for AI-driven data centers and other large loads co-located with power plants — rules meant to protect reliability and shield consumers from price volatility.
The fix FERC ordered is detailed: PJM must create three new transmission service options for co-located loads — an interim non-firm service, a new Firm Contract Demand service, and a new Non-Firm Contract Demand service — plus an overhaul of "behind-the-meter generation" rules, which FERC said no longer properly account for large loads in resource-adequacy planning.
PJM has been filing compliance updates through the first half of 2026, and FERC accepted parts of PJM's plan in April 2026 while sending other pieces, including PJM's attempt to redefine "co-located load," back for revision. In short: co-location isn't being banned, but it's being put on a much tighter regulatory leash — and the argument over who pays for what is far from over.
Part 2: Bringing Dead Reactors Back to Life
If co-location is controversial because it reroutes existing power, recommissioning is controversial because it tries to create new firm capacity almost out of thin air — by restarting reactors that were already shut down and, in some cases, midway through decommissioning. No commercial reactor had ever done this in the U.S. before. Two projects are now racing to be first.
Three Mile Island Unit 1 → Crane Clean Energy Center
Three Mile Island Unit 1 is a fully separate reactor from Unit 2, the reactor that partially melted down in 1979 in the country's most serious commercial nuclear accident. Unit 1 kept running safely for decades afterward and was only shut down in 2019 for economic reasons — it couldn't compete with cheap natural gas at the time.
In September 2024, Constellation Energy signed a 20-year power purchase agreement with Microsoft to bring the plant back as the newly named Crane Clean Energy Center, feeding Microsoft's data center power needs.
Constellation is pursuing a license extension to keep the plant running until at least 2054 — 80 years after it first opened. The timeline has actually moved up: Constellation now expects the plant could restart as early as 2027, ahead of the original 2028 target, pending an early interconnection approval from PJM.
Progress has been steady through 2026. The project is backed by a $1 billion federal loan that closed in November 2025, and the NRC has been working through environmental review and site inspections, with a preliminary finding that the restart would not significantly affect the environment. The NRC's target is to issue a decision on the reactivated operating license by May 2027, with fuel load and a return to commercial operation expected by late 2027.
Palisades Nuclear Plant, Michigan
Palisades tells a starker version of the same story. The plant permanently shut down in May 2022, and Holtec International bought it originally to decommission it. In August 2025, Palisades officially transitioned from decommissioning status back to operating status under NRC oversight, following the agency's July 2025 approval of Holtec's licensing package — a first in U.S. nuclear history.
But "first ever" comes with friction. Environmental groups sued in November 2025 to block the restart, arguing federal law prohibits a plant from resuming operations once it has entered decommissioning, though a federal court dismissed that challenge in mid-2026, clearing the way for the restart to continue. The mechanical side has been just as bumpy: inspectors found cracked steam generator tubes that needed specialized sleeve repairs, and the NRC flagged missing or incorrect documentation of safety-related equipment and required weld reports.
As of mid-2026, Holtec has cleared its major restart projects — including reassembling the turbine-generator — but has not committed to a firm restart date, saying only, according to a spokesperson, that it will restart "when the plant is ready for long-term operations." The company's founder has said he still hopes to restart before the plant's contractual deadline to supply power by March 2027.
The Hard Part: Why Restarts Are So Difficult
Both projects illustrate why recommissioning a nuclear plant is nothing like flipping a switch.
Regulatory scrutiny and relicensing. A shuttered reactor's operating license doesn't just wait in a drawer — the NRC treats a restart almost like relicensing a plant from scratch, requiring fresh environmental assessments, inspection regimes, and public hearings. Palisades needed a special exemption from a rule that otherwise bars a decommissioning plant from returning to service, and that exemption was itself the subject of a lawsuit.
Supply chain and refurbishment. Reactor-grade components — steam generator tubing, reactor vessel internals, specialized turbine parts — aren't off-the-shelf items. Manufacturing lead times can run into years, and equipment that sat idle for years often needs extensive inspection, repair, or wholesale replacement, as Palisades' cracked steam generator tubes and missing weld records showed.
Workforce. A plant's licensed operators are certified to that specific facility, and those licenses lapse once the operator stops actively running the plant. When Three Mile Island Unit 1 shut down in 2019, its trained crew dispersed. Constellation has had to rebuild an entire licensed operating organization, targeting over 600 new hires, while also restoring plant-specific training and simulator programs from the ground up.
Capital intensity. These are multi-billion-dollar undertakings. Three Mile Island's restart is backed by a $1 billion-plus federal loan on top of Constellation's own investment; Palisades drew on Department of Energy loan support as well. Unlike building a new gas plant, there's no way to right-size the spend — bringing a reactor back to full commercial-grade safety standards costs roughly the same whether the plant is 40 years old or 4.
The Bigger Picture
Co-location and recommissioning are really two answers to the same problem: AI data centers need enormous, reliable, clean power faster than the grid can normally deliver it. Co-location tries to solve that by rerouting power that already exists — which is why it collides head-on with questions of fairness and cost-shifting. Recommissioning tries to solve it by creating new capacity from old bones — which is why it collides with the brutal physical and regulatory realities of nuclear engineering.
Neither path is clean or easy, and regulators, courts, and communities are actively shaping the rules as these projects unfold in real time. But the fact that hyperscalers are willing to underwrite billion-dollar reactor restarts and fight FERC in federal court over interconnection agreements says something on its own: for an industry chasing gigawatts, nuclear's second act may be just getting started.
Sources
Independent analysis of power, grid and policy for AI data centers. Every article lists its sources. About the editor · Editorial policy
