After his research with integrated circuits in the mid-1960s, a young California engineer named Gordon Moore arrived at the conclusion that the number of transistors on a semiconductor would double every two years. What would become his eponymous “law” now governs the compounding growth of computing power. This unstoppable growth has now made artificial intelligence a reality in modern lives. Providing stable and reliable energy for this enormous and ever-growing computing infrastructure is an equally staggering task. This future augmented (and likely diffused) grid will also present new and challenging risks to data center operators, power generators and investors involved therein.
Growth in computing data centers nationally and internationally powering AI has led to not only significant investment from the private and public sector, but also new and old, creative solutions to generate and transmit safe and reliable electricity. This insatiable need for power creates challenges for utilities and AI computing firms, but also opportunities for investors and firms to provide on-site, nested power solutions. It seems likely that the need for electricity generation will be met through conventional gas, coal, nuclear and renewables, but also new technology in battery storage and small reactor nuclear sources. Strengthening the grid will also require continued and expanded work for contractors, from construction to installation to maintenance and repair.
While anticipating the ultimate need for new-generation assets to keep pace with increased demand is challenging, most experts believe the need for growth is real and considerable. A recent study by Bain estimates that growing data center power consumption will require $2 trillion in investments in energy generation resources. Bain also estimates that U.S. utilities will need to increase their generated capacity by 26% by 2028.
In addition to significant construction of new assets, there also remain regulatory hurdles to immediate progress. In a recent study on future supply and demand challenges for the utility industry, the ICF points out the challenges in Regional Transmission Organizations (e.g., PJM, MISO) in project approval:
In recent years, the average grid interconnection timeline for new generation projects has increased to five or more years, up from an average of four. Close to 2,500 GW of generation and storage capacity remain in interconnection queues across the country.
NERC has pointed out similar regulatory and permitting delays in transmission as well. Of the 160 projects in planning or under construction over the coming decade, 68 projects totaling 1,230 miles of new transmission are currently delayed by permitting issues. These challenges often shift the burden of reliable electricity generation from traditional utilities to many AI firms themselves to create their own microgrids.
The utilities have begun numerous long-term capital investments to meet the ultimate demand. Duke Energy recently announced a nearly 14% increase in its five-year capital expenditure plan to $83 billion to meet rising demand from population growth in the U.S. Southeast and the expansion of data centers and advanced manufacturing. Duke will lean on natural gas, adding nearly five gigawatts of power generation by the end of 2029.
In an industry marked by constant disruption and a break-neck pace of innovation, many technology firms won’t sit by and wait for regulated utilities and RTOs to solve this looming problem. Microsoft was an early mover, dedicating considerable investment ($10 billion) to construct 10.5 gigawatts of electricity generation. For contextual reference, this capacity could power roughly 2 million homes. Other large tech firms continue to invest in varied either to supplant reliance on local utilities or provide enhanced reliability with nested power solutions.
Private equity and other strategic investors have also recognized the likely disconnect between power supply and demand. Global investment in power grids alone totaled $390 billion in 2024, per Bloomberg.
Nuclear energy is increasingly recognized as a powerful solution to meet the escalating 24/7 power demands of hyperscalers and data centers, particularly in the quest for clean and reliable energy sources. As the digital economy expands, the need for constant energy supply to support high-performance computing, data storage and cloud services has surged. Traditional energy sources are often unable to provide the necessary reliability, availability and sustainability required by these massive facilities. In contrast, nuclear energy emerges as a low-carbon, high-capacity option that can deliver consistent power output, thus allowing hyperscalers to maintain operations without interruption, even during peak demand periods.
Several key players have entered the nuclear energy landscape to capitalize on this opportunity. Major electric utilities such as Exelon and Dominion Energy are investing heavily in existing nuclear plants while exploring new technologies, including small modular reactors (SMRs) and advanced reactor designs. Additionally, tech giants like Google and Microsoft are increasingly committing to carbon-neutral energy sources for their data centers and have begun collaborating with nuclear developers to establish frameworks for integrating nuclear energy into their operations. These industry alliances demonstrate a growing recognition of nuclear power’s potential role in achieving carbon-neutral goals while ensuring the robust energy supply needed for tech giants to thrive.
Progress in the nuclear sector is evident through the development of new reactor technologies designed specifically for the demands of modern energy consumers. Innovative designs, such as the NuScale small modular reactor, provide adaptable energy generation capabilities and incorporate safety features that enhance their appeal over traditional nuclear options. These advancements aim to lower capital costs, improve operational flexibility and diversify energy portfolios, making it easier for hyperscalers to integrate nuclear power into their energy mix. Simultaneously, increased regulatory support for new nuclear projects is fostering a conducive environment where utility companies and private sector investors can collaborate on expanding the nuclear footprint in the clean energy landscape.
However, the nuclear industry faces several challenges that could impede its deployment as a mainstay for future energy needs. Public perception and historical concerns surrounding nuclear safety and waste management continue to play a significant role in shaping the discourse around nuclear energy. Additionally, the lengthy approval processes for new plants and the substantial upfront capital required pose significant hurdles for investment and development. Addressing these challenges will require concerted efforts in public engagement and education, as well as streamlining regulatory frameworks to facilitate the timely roll-out of cleaner nuclear technologies.
Ultimately, as hyperscalers and data centers strive for sustainable energy solutions to support their expanding operations, nuclear energy stands poised to play an essential role. The convergence of technological advancements, public-private collaboration and a dedicated focus on reducing carbon emissions is paving the way for a cleaner, more reliable energy future. By harnessing the strengths of nuclear energy alongside renewable sources, the energy industry can create a robust infrastructure that supports the growing digital economy while making meaningful progress toward global sustainability goals.
Data centers face multiple operational risks, including data loss and corruption due to a sudden power loss that prevents an orderly shutdown, underscoring the importance of a reliable electric power supply. Hardware damage is another concern, as circuits and components like servers and storage devices can malfunction or fail due to abrupt or accidental shutdowns. Unplanned outages can lead to service interruptions, long recovery and restart periods and significant reputational damage. Cooling system reliability is necessary for operations to avoid overheating, which can result in data loss, malfunctions, or electrical equipment failures. Fire hazards also pose a significant risk to data center operations. As is so common today, data centers are vulnerable to cybersecurity threats, including hacking attempts and other cyber risks. Finally, many areas of the country have long queues for grid interconnection supply approvals, which might delay the targeted start-up date for a new data center, risking the loss of the project to another site or a competitor.
To mitigate those operational risks, consider implementing these measures or guidance. Backup power systems should be designed to match the reliability standards of hospitals or nuclear facilities, where electric supply reliability is similarly critical. Redundant power supplies should be incorporated to avoid single points of failure by using separately fed grid supplies from independent sources to minimize the occurrence of simultaneous supply failures. Emergency backup power sources, such as internal combustion engine-generators or simple cycle gas turbine generators, should be connected in parallel to the primary supply to ensure uninterrupted power during primary supply outages. Fire risk can be mitigated by minimizing the use of combustible materials in the design and using clean agents for fire suppression to avoid damaging data center equipment and following strict maintenance of electrical systems. Cooling systems should be designed with redundant, dual systems to prevent single points of failure. Uninterruptible Power Supplies (UPS) should be provided for short-term temporary power (less than an hour) to allow controlled shutdowns, minimizing data loss or equipment issues if both primary and backup power are lost. Regular testing of UPS and backup power systems should be conducted periodically, as well as audits of the local grid supplier. Continuous monitoring and alarming systems should be implemented both locally and offsite to ensure prompt response to any issues. Cybersecurity measures should be implemented, especially during construction and assembly when equipment is easily accessed, and applicable parts of NERC’s CIP cybersecurity standards should be considered. Finally, periodic cyber risk audits and ongoing cybersecurity training for staff should be conducted to ensure they are aware of the latest threats and best practices.
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not 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 would like more information regarding your insurance coverage, please do not 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).
