In this blog, we delve into the trends and opportunities associated with data centers and their power requirements, emphasizing the role SMR’s can play and the initiatives aimed at supporting their development and deployment.
Demand surge driven by AI
Based on the projections from various industry reports, the data center market is expected to grow significantly due to advancements in AI, increased data consumption, and cloud services expansion. Projections estimate a compound annual growth rate (CAGR) of about 12.8% through 2025, with robust global growth continuing through 2030. In Europe, demand for data centers is expected to rise from 10 GW to around 35 GW by 2030, requiring USD250 to USD300 billion in infrastructure investment, excluding power generation, IT equipment, and upstream investments, according to McKinsey.
In response, data center operators, developers, investors, and lenders are rapidly expanding their capacity and funding to accommodate the same.
A recent example of the growth potential is the Stargate joint venture, with contributions from SoftBank, OpenAI, and Oracle, among others, which seeks to invest up to USD500bn in AI infrastructure in the US over four years, with USD100bn to be deployed immediately. Read our A&O Shearman article on President Trump’s rescinding of the AI Executive order that made this possible here. The EU has launched its Competitiveness Compass, which among other includes an initiative to establish ‘AI Gigafactories'.
The challenge meeting data center power usage demands
As data center demand and power consumption are projected to rise significantly, stakeholders must balance the need for efficient energy usage and an underdeveloped electricity grid network with the challenges in power supply.
Embracing SMR’s
In addition to the more common sources of renewable power, recently SMR’s have emerged as a potential (long-term) solution to the power challenges faced by data centers. These smaller, quicker-to-construct reactors offer a stable, low-carbon power supply, significantly reducing the carbon footprint of data centers.
SMR’s come in various types, ranging from light water to molten salt and liquid metal cooling. Their output is in the range of 30 to 400 MW. For comparison, the power consumptions of the currently operational larger hyperscale data centers gets into the 100 – 150 MW zone, while noting that their sizes keep growing.
The development of SMR’s is still ongoing, with many designs in various stages of development, from conceptual design to detailed design and construction. In 2024, two SMR’s were in operation; in the Russian Federation and in China respectively.
The potential benefits of SMR’s make them a promising solution for the future. They can be strategically located near data centers which would get around the issues and delays with upgrading the electricity grid networks. Furthermore, SMR’s can provide consistent, reliable power, complementing renewable energy sources and enhancing energy security. SMR’s can be a game-changer for AI data centers. The power production profile of an SMR matches to a large extent the typically fairly continuous power demand profile of a data center. While the initial capital costs for building SMR’s can be high, the long-term operational costs are assumed to be relatively low.
Example: Dutch SMR initiative
The European Commission launched the European Industrial Alliance for SMR's in February 2024 to enhance Europe's nuclear industry competitiveness. The Dutch government, through its coalition agreement and its SMR program launched in March 2024, is involved in SMR development. Key achievements include publishing the SMR knowledge module, enhancing stakeholder knowledge and engagement, initiating simulations, and analyzing local and regional energy needs.
Next legal SMR steps
The above initiatives will certainly accelerate the development of SMR’s. From a legal point of view, we would suggest to add the following items to the government’s to-do-list:
- Update nuclear permit requirements – from other nuclear markets (including the U.K) we know that SMR’s come with different (technical) requirements for their permits. Uncertainty as well as changes to those technical requirements have caused delays and cost-overruns. Therefore, the sooner the technical requirements are made available, the better. In this respect, it is promising to report that the Dutch Authority for Nuclear Safety and Radiation Protection (ANVS) has started a 'New Nuclear Initiatives' program to develop expertise that can be applied to both small and large nuclear power plant permits.
- Revisit nuclear decommissioning regulations – These regulations are designed to ensure the safe dismantling of nuclear facilities and the proper management of radioactive materials. We suggest to tailor these regulations for decommissioning of SMR’s.
- Seek optimization of modularity into nuclear regular framework – The current Nuclear Energy Act of 1963, including its 75+ regulations, might well suffice for the first batch of SMR’s. On the longer term, however, it should be considered whether the benefits of modularity into the production of SMR’s can also be applied to navigating the regular framework. For example, by providing shortcuts or otherwise speeding up approval processes for application of identical SMR elements.
- Joined locations data centers and SMR’s – Consider early designation of locations for the combination of data centers and SMR’s.
- Check capacity radioactive waste storage – Although not a mere legal recommendation, a very detailed regime on managing radioactive waste is in place. Among other, it focusses on long-term safety and environmental protection. In evaluating radioactive waste options linked to the Dutch plans of 4 large new build nuclear power plants, extra SMR waste should also be taken into account.
