As data centers continue to expand and multiply to meet the demands of our digital world, the importance of dependable, sustainable and versatile energy sources has never been more critical. The data center industry’s need for power is only growing, especially with the rapid advancements of technology like AI and cloud computing. To meet these challenges, data center companies are exploring a wide range of energy options, from nuclear to wind, solar and other clean energy sources.
The deployment of nuclear power, particularly through small modular reactors (SMRs), presents a steady and efficient energy source that can seamlessly integrate with intermittent renewables such as solar and wind. While the construction of these plants may come at a premium, their low operational costs and impressive power capacity make them an appealing choice for data centers with a non-negotiable need for round-the-clock electricity. Recent alliances by Constellation Energy with Microsoft and Talen Energy with Amazon Web Services underscore the surging enthusiasm for nuclear power as a dedicated energy source for data centers. SMRs can offer the important added benefit of directly assisting with the cooling needs of AI data centers. Direct heat exchange systems and combined heat and power (CHP) systems can integrate SMRs with data center cooling, using reactor heat for efficient cooling. Absorption chillers and thermal energy storage can also help to reduce water consumption and provide sustainable cooling solutions. Lastly, co-located proximity and infrastructure synergy between SMRs and data centers also helps to improve cooling efficiency and reduce water usage.
We are witnessing a surge in the utilization of wind and solar energy by data centers, driven by a genuine concern for our planet. The appeal of these renewable resources lies in their capacity to deliver clean power, although their weather-dependent nature makes them less reliable as stand-alone providers. However, data centers are adapting to integrate these eco-friendly options into their energy mix, reducing their environmental impact as they do so. The scalability and economic viability of solar and wind technologies position them as commendable solutions for the increasing power needs of data centers in the United States.
Beyond nuclear, wind and solar, other clean energy resources play a vital role in addressing the growing energy needs of data centers. Battery storage and energy efficiency technologies can be deployed quickly to help meet the increasing demand for electricity, while the scaling up of next-generation geothermal energy technologies can provide clean, reliable power to data centers. These clean energy solutions help to meet immediate demand while contributing to long-term goals of achieving net zero emissions by 2050.
Building and operating SMR-powered AI data centers will involve unique risks and challenges that may require tailored insurance policies be designed to cover a range of potential issues, from construction-related risks to operational liabilities.
During the construction phase, builders risk insurance is essential to protect against various hazards. This coverage typically includes property damage to the construction site, materials and equipment, addressing risks such as fire, theft, vandalism and certain natural disasters. Given the involvement of SMR technology, the policy should also cover nuclear-specific risks, such as radioactive contamination or incidents during the installation of the SMR.
Additionally, builders risk insurance should cover financial losses due to project delays caused by covered events, ensuring the project can continue without significant financial strain. Liability coverage for accidents or injuries to workers and third parties, as well as coverage for subcontractors and soft costs (e.g., architectural fees, legal expenses), is crucial. The policy should extend to the testing and commissioning phase, providing protection until the project is completed and operational.
Once the data center is operational, a comprehensive insurance package is necessary to address ongoing risks, including:
Effective risk management will involve collaboration between data center developers, builders, owners, operators, SMR manufacturers and insurers. Clear agreements on risk sharing and responsibilities are essential to ensure all parties are adequately protected. The responsibility for purchasing and owning these insurance contracts falls on data center operators or owners, who must ensure comprehensive coverage to protect their investments and operations. Partnerships with SMR manufacturers and energy providers might include shared responsibilities or specific insurance requirements to address the unique risks associated with nuclear power.
As we continue to push the boundaries of what is possible, we must also consider how we’ll power the next generation of data centers. By expanding our energy frontier and integrating nuclear, wind, solar and other clean energy technologies, we can ensure a more sustainable and reliable energy future. The way forward is clear — by adopting these innovative solutions, data centers can enhance grid reliability, minimize their environmental impact and support the evolution of the power system to meet the rising demands of our digital world.
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein isn’t intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you’d like more information regarding your insurance coverage, please don’t hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
