US Closes $1.5 Billion Loan To Resurrect Shuttered Michigan Nuclear Power Plant

The world was abuzz two weeks ago when we learned that the notorious Three Mile Island nuclear power plant – site of the worst nuclear accident in U.S. history – would restart to power Microsoft data centers. As we said at the time, that was only the beginning, as the staggering electricity needs of the coming AI revolution – which we dubbed “the next AI trade” earlier in the year, meant that much more nuclear capacity will have to be either built from scratch or reopened.

Sure enough, the US said on Monday that it closed a $1.52 billion loan to resurrect Holtec’s Palisades nuclear plant in Michigan, and a senior Biden administration official said it could take two years to reopen the plant (longer than the company predicted). The Biden administration has called for a tripling of U.S. nuclear power capacity as U.S. power demand surges and worries about climate change mount. The Trump administration, should it take over in November, will be even more aggressive about the coming US nuclear renaissance.

“Palisades is a climate comeback story,” Ali Zaidi, the White House climate adviser, told reporters in a call, adding that nuclear power supports high-paying union jobs.

The renewed push for nuclear will include the reopening of major commercial reactors that have been shut for decommissioning, including the abovementioned Three Mile Island. And even though restarting shut nuclear plants is a complicated and expensive process never before accomplished in the country, it would take less time than building new power plants from scratch.

The $1.52 billion in financing from the Department of Energy’s Loan Programs Office, was accompanied by funding for nonprofit electric cooperatives to purchase power from Palisades. Deputy U.S. Agriculture Secretary Xochitl Torres Small announced more than $1.3 billion in public funding to power cooperatives Wolverine and Hoosier Energy.

Nuclear reactors generate emissions-free power, which is valued as electricity demand soars for the first time in decades on growth in artificial intelligence, electric vehicles and cryptocurrencies.  The chart below shows data center power consumption, by providers/enterprises in gigawatts (left) and in share percent (right).

As noted back in April, electricity peak demand and energy growth rates are increasing in North America after being flat for years. Load growth had already electrification trends and electric vehicles, but annual peak demand growth was still only up 0.9%. With the increased focus on data centers, industrial facilities, and other near-term investments, this is likely to be an underestimate considering that in just one year (2023), the forecast of cumulative electricity growth over the next 5 years increased from 2.6% to 4.7% driven by major utilities further revising up their estimates.

Nuclear critics, however, point out that the U.S. has not agreed on a permanent place to bury radioactive nuclear waste.

Palisades still needs licensing from regulators and the senior U.S. official said that means it could take “a couple of years to turn back on”. Holtec has estimated a comeback in the fourth quarter next year.

Palisades Nuclear Plant in Michigan

Patrick O’Brien, a Holtec spokesperson, said Palisades was on target for “repower” in October or later in 2025.

Still, the plant has been shut since 2022 and needs work. The U.S. nuclear regulator said this month that preliminary results from inspections “identified a large number of steam generator tubes with indications that require further analysis and/or repair.” Steam generators are sensitive components of a nuclear power plant that require meticulous maintenance.