The AI-Driven Energy Surge Reshaping Power Infrastructure

The artificial intelligence revolution is fundamentally transforming global electricity demand. U.S. datacenters alone consumed 183 terawatt-hours (TWh) of electricity in 2024—more than 4% of the country's total electricity consumption and roughly equivalent to the annual electricity demand of Pakistan. By 2030, this figure is projected to surge 133% to 426 TWh.

This isn't merely incremental growth—it represents a fundamental shift in the energy landscape. According to the International Energy Agency, global electricity consumption for datacenters is projected to more than double by 2030, reaching approximately 945 TWh, or nearly 3% of total global electricity consumption. AI is the most important driver of this increase, with AI-optimized datacenters projected to more than quadruple their electricity demand by decade's end.

The scale becomes even more striking when examined regionally. In 2023, datacenters consumed about 26% of total electricity supply in Virginia, with significant shares in North Dakota (15%), Nebraska (12%), Iowa (11%), and Oregon (11%). In Ireland, datacenters account for approximately 21% of national electricity consumption, projected to rise to 32% by 2026.

This unprecedented demand creates both infrastructure challenges and urgency around sustainable power solutions. A typical AI-focused hyperscaler annually consumes as much electricity as 100,000 households, with the largest facilities under construction expected to use 20 times that amount.

Council Fire recognizes that datacenters represent critical infrastructure for the digital economy while simultaneously driving energy transition challenges. Our systems thinking approach helps organizations navigate the complex intersection of infrastructure development, renewable energy procurement, and regulatory frameworks—positioning datacenter operators to meet sustainability commitments while ensuring operational resilience.

Renewable Energy Procurement: Power Purchase Agreements (PPAs)

Understanding PPAs: Long-Term Renewable Energy Contracts

Power Purchase Agreements have emerged as the primary mechanism through which energy-intensive industries, particularly datacenters, procure renewable electricity. A PPA is a long-term contract—typically 10 to 20 years—between an electricity generator and a purchaser, where the buyer commits to purchasing power at a pre-negotiated price per megawatt-hour.

Technology companies with significant datacenter operations are responsible for more than 16,600 megawatts of the approximately 26,000 megawatts of total renewable capacity contracted under corporate PPAs in the United States. Datacenter hyperscalers including Meta, Amazon, Microsoft, and Google are among the largest corporate buyers of renewable energy globally, each having procured multiple gigawatts of renewable energy capacity.

Types of PPAs: Physical vs. Virtual

PPAs come in several structural forms, each addressing different operational and financial needs:

Physical PPAs allow buyers to take title to actual electricity produced by generating facilities through physical delivery via the grid. For renewable projects, buyers also acquire renewable energy certificates (RECs) produced by the facility. However, it's crucial to understand that even with physical PPAs, project output is pumped into the grid and mixed with all other energy—PPAs merely ensure an equivalent amount of renewable energy is being generated.

Virtual PPAs (VPPAs), also called financial PPAs, structure agreements where companies buy renewable energy from a provider's portfolio without direct attribution to specific projects. In "sleeved" PPAs, utility providers handle the PPA energy and supply additional power as required, simplifying operational complexity.

Baseload vs. Pay-as-Produced PPAs: Pay-as-Produced PPAs are typical for variable generation assets like wind and solar farms, with off-takers purchasing all electricity as generated. Baseload PPAs specify fixed electricity amounts delivered continuously or on schedule, with sellers managing variability through energy storage or supplementary sources.

Major Datacenter PPA Commitments

The scale of datacenter renewable procurement is staggering. In May 2024, Microsoft entered an agreement with Brookfield to deliver over 10.5 gigawatts of new renewable energy capacity between 2026 and 2030 across the United States and Europe. Meta recently signed deals supporting four new projects securing 791 megawatts of renewable capacity.

Amazon aims to use 100% renewable energy by 2025 and reach net-carbon-zero operations by 2040, having signed power purchase agreements with 44 renewable energy projects in nine countries, totaling 6.2 GW in 2021.

The Economic and Strategic Case for PPAs

PPAs offer datacenter operators several critical advantages:

Long-term price stability: Contracts with 10-20 year terms offer protection against price fluctuations. According to Deloitte, long-term PPAs reduce exposure to market volatility and provide budget certainty—essential for datacenter operators facing unprecedented capital expenditure requirements.

Sustainability credentials: As regulatory scrutiny intensifies under frameworks like the EU's Corporate Sustainability Reporting Directive (CSRD), PPAs provide transparent documentation of renewable energy procurement that satisfies investor expectations and compliance requirements.

Support for new renewable capacity: Unlike simply purchasing renewable energy certificates, PPAs directly finance the construction of new renewable projects, contributing to grid decarbonization.

Limitations and Criticisms of the PPA Model

Despite their popularity, PPAs face legitimate scrutiny. Critics argue that PPAs create an illusion of connecting datacenters with renewable energy without actual physical improvement, since renewable electrons mix into the grid alongside fossil fuel generation.

A fundamental mismatch exists: datacenters are baseload consumers requiring always-available electricity, while wind and solar provide intermittent generation. During winter, free-cooling systems reduce datacenter heat generation, often producing insufficient low-temperature heat for reuse precisely when renewable generation may be lowest.

Furthermore, datacenters are typically built near cities while large-scale renewable installations locate on coastlines (offshore wind) or countryside (solar), creating geographic disconnects that limit physical integration potential.

Market conditions in 2025 show more interest in shorter-term PPA deals and hybrid opportunities—combining solar with storage or wind with solar—reflecting recognition that pure renewable PPAs don't fully address 24/7 power needs.

Council Fire takes a pragmatic view of PPAs as valuable but insufficient tools. We help datacenter operators and their stakeholders design comprehensive energy strategies that combine PPAs with on-site generation, demand response capabilities, energy storage, and emerging technologies like SMRs—ensuring sustainability claims translate into actual grid decarbonization rather than accounting exercises.

On-Site Renewable Generation: Solar and Wind

Beyond PPAs, many datacenter operators pursue on-site renewable generation to directly reduce grid dependency and carbon footprint. On-site PPAs typically range from 500kW to 3MW and often involve rooftop solar panels or small-scale wind turbines that feed power directly to facilities.

Advantages of On-Site Generation

On-site renewable installations offer several benefits beyond off-site PPAs:

• Reduced transmission losses: Electricity generated and consumed on-site avoids the 5-10% energy losses typical in grid transmission

• Enhanced energy security: Facilities gain partial independence from grid disruptions

• Visible sustainability commitment: Physical renewable infrastructure demonstrates tangible environmental investment to stakeholders

• Potential backup power: When combined with battery storage, on-site solar can provide limited emergency power

Limitations and Challenges

However, on-site renewable generation faces significant practical constraints for datacenter applications:

Land requirements: Large-scale solar and wind installations require substantial space. According to research, nuclear technology's physical footprint is dramatically smaller—360 times less land than wind and 75 times less than solar for equivalent power generation.

Intermittency: On-site solar and wind cannot provide the 24/7 baseload power that datacenter operations demand, necessitating grid connection for reliable supply.

Power density mismatch: Modern AI datacenters operate at 40-250 kW per rack, compared to 10-15 kW for traditional facilities. On-site renewable capacity rarely matches these concentrated power demands.

Small Modular Reactors (SMRs): The Nuclear Renaissance for Datacenters

Understanding SMR Technology

Small modular reactors represent a fundamental reimagining of nuclear power for the 21st century. SMRs are advanced nuclear reactors with power capacity up to 300 megawatts electric (MWe)—about one-third the capacity of large traditional reactors. Even smaller microreactors generate up to 20 MWe and can be deployed for highly localized applications.

Unlike traditional reactors custom-built on-site over 5-10 years, SMR components are manufactured in controlled factory environments and shipped as standardized modules for assembly, reducing construction time to 24-36 months. This modular approach means facilities can be scaled incrementally—starting with core capacity and adding reactors as demand grows, much like datacenters themselves expand.

Why Tech Giants Are Betting on SMRs

Tech giants have committed over $10 billion to nuclear partnerships, with 22 gigawatts of SMR projects in development globally. The first commercial SMR-powered datacenters are expected online by 2030.

Google signed a deal with Kairos Power in October 2024 to develop multiple SMRs powering AI datacenters, with the first reactor targeted for operation this decade and additional units planned by 2035.

Amazon Web Services made the industry's largest SMR commitment, signing three separate deals including supply agreements with Energy Northwest and Dominion in Washington and Virginia, plus direct investment in X-energy to support construction of more than 5GW of new nuclear projects by 2039.

Microsoft signed a 20-year, 835MW power purchase agreement to restart and utilize Three Mile Island nuclear power plant for datacenter operations.

Oracle is designing a gigawatt-scale datacenter powered by a trio of SMRs, with building permits already secured.

The SMR Value Proposition for Datacenters

SMRs address critical datacenter energy challenges that renewables and PPAs cannot fully solve:

24/7 carbon-free baseload power: SMRs provide reliable baseload energy around the clock, matching datacenters' constant power demands without the intermittency of wind and solar.

Minimal land requirements: Water use in an SMR is around 60 L/MWh—far lower than concentrated solar power or traditional nuclear plants, both exceeding 3000 L/MWh.

Grid independence: On-site SMRs eliminate dependence on congested transmission infrastructure, reducing brownout risks and permitting delays that increasingly constrain datacenter expansion.

Long-term cost stability: Nuclear plants require high upfront capital expenditure but offer decades of stable operating costs, protecting operators from volatile energy markets.

Scalability aligned with datacenter growth: The modular nature allows incremental capacity additions—particularly valuable for colocation facilities serving multiple clients.

Current SMR Development Status

NuScale Power is the only company with fully licensed SMR designs in the United States, having received NRC approval for three reactor variants: VOYGR, VOYGR-4, and VOYGR-6. In June 2025, NuScale's uprated 77 MWe design received Standard Design Approval from the U.S. Nuclear Regulatory Commission—the second NuScale design approved and a crucial step toward 2030 deployment.

Globally, only China and Russia have operational SMRs as of 2024. Russia has operated the floating nuclear plant Akademik Lomonosov commercially since 2020, while China's pebble-bed modular high-temperature gas-cooled reactor HTR-PM connected to the grid in 2021.

The SMR market, valued at $6.3 billion in 2024, is projected to reach $13.8 billion by 2032, reflecting 9.1% compound annual growth driven by energy security needs, datacenter demand, and carbon reduction commitments.

Critical Limitations: Safety, Regulatory, and Economic Challenges

Regulatory Complexity and Timeline Uncertainty

Despite technological progress, SMRs must navigate multiple regulatory layers. In the United States, they require NRC design certification for safety, site-specific operating plan approval, and National Environmental Protection Act (NEPA) process clearance—potentially facing NIMBY lawsuits at each stage.

Regulatory approvals remain complex and time-consuming, with early projects requiring tight cost control to avoid financial pitfalls seen in previous nuclear ventures. The regulatory landscape varies significantly by country, creating challenges for companies seeking global deployment.

Licensing processes for First-of-a-Kind (FOAK) reactors can extend 7-10 years, though timelines shorten for subsequent nth-of-a-kind (NOAK) projects as regulators gain familiarity with approved designs.

Economic Realities: The Cost Question

Perhaps the most significant challenge facing SMRs is economics. Initially, SMRs will likely cost as much per kilowatt as large reactors, or perhaps even more, due to the economic penalty of small size—a reactor producing three times as much power doesn't require three times as much steel or labor.

Recent cost revelations are sobering. A 2024 Australian study estimated electricity from an SMR constructed from 2023 would cost roughly 2.5 times that from traditional large nuclear plants, falling to 1.6 times by 2030. The final investment decision in 2025 for a BWRX-300 SMR in Canada projected costs of CA$7.7 billion (US$5.6 billion) for initial construction, with CA$13.2 billion (US$9.6 billion) estimated for three additional units.

Independent analysis from the Institute for Energy Economics and Financial Analysis (IEEFA) concludes SMRs are "too slow, too expensive and too risky" based on cost escalations at leading U.S. projects. NuScale's signature Idaho project saw estimated costs balloon before ultimately being cancelled, while X-Energy effectively doubled projected all-in prices from $2.5 billion to $4.75-5.75 billion.

Safety Concerns and Public Acceptance

While SMR designs incorporate passive cooling systems and advanced safety features, several concerns persist:

Steam generator reliability: Some light water SMR designs place steam generators inside the reactor vessel, where replacement would be extremely difficult. Historical problems with steam generators led to premature shutdowns at San Onofre, California and Crystal River, Florida—raising questions about long-term reliability.

Containment robustness: SMRs feature smaller, less robust containment systems than current reactors, potentially increasing vulnerability to hydrogen explosions and other accident scenarios.

Nuclear waste: SMRs still produce radioactive waste requiring secure long-term storage—a persistent concern for critics and communities.

Public perception: Nuclear power's association with disasters like Chernobyl and Fukushima continues fueling skepticism, despite technological improvements. Public acceptance and community support remain critical factors requiring transparent engagement and demonstrated safety records.

Supply Chain and Fuel Constraints

Many SMR designs require High-Assay Low-Enriched Uranium (HALEU), with global supply chains currently insufficient for scaled deployment. The Department of Energy is addressing this, but companies may need to negotiate independent deals with foreign suppliers—adding complexity and geopolitical risk.

Council Fire brings experience navigating complex regulatory environments, stakeholder engagement challenges, and multi-year infrastructure planning horizons. For organizations evaluating SMRs as part of long-term energy strategy, we provide strategic guidance that integrates technical assessment, regulatory pathway planning, community engagement frameworks, and financial modeling—ensuring decisions align with organizational sustainability goals while managing inherent risks.

Alternative and Complementary Innovations

Battery Storage: Bridging Renewable Intermittency

Energy storage systems offer crucial flexibility for integrating variable renewable generation with datacenter baseload demands. The global liquid cooling market for energy-intensive applications is expected to reach $17.8 billion by 2027, reflecting growing recognition of thermal management's importance.

Battery storage enables datacenters to:

• Store excess renewable energy during peak generation periods

• Provide backup power during grid disruptions

• Participate in demand response programs that support grid stability

• Smooth renewable generation variability to approximate baseload supply

UK Power Networks announced in October 2025 a trial combining solar, battery storage, and datacenter waste heat recovery to reduce energy bills—demonstrating how integrated approaches can multiply sustainability benefits.

Waste Heat Recovery: Turning Byproduct into Resource

Datacenters represent massive heat generators, with nearly 100% of electrical energy consumed converted to heat. Traditionally rejected to the atmosphere, this represents both environmental impact and wasted opportunity.

Heat recovery isn't new—water-cooled chillers have been used for 80+ years. Applied to datacenters, the results can be transformative:

District heating applications: Stockholm Data Parks provides heat to 10,000+ apartment buildings through district heating networks. Microsoft is building a "datacenter region" in Finland expected to become the world's largest waste heat recycling scheme, heating Espoo and two neighboring municipalities.

Enhanced efficiency metrics: Recovering heat increases chiller efficiency, with Coefficient of Performance for Simultaneous Heating and Cooling (COPSHC) more than twice the cooling-only COP, outperforming natural gas boilers or electric heat.

Carbon reduction: Ireland's Tallaght District Heating Scheme saved 1,100 tonnes of CO2 in its first year by redirecting Amazon datacenter waste heat to local buildings.

Challenges and Considerations for Heat Recovery

Successful heat recovery requires addressing several practical issues:

Supply-demand matching: During summer, datacenters produce surplus heat when demand is lowest. Winter free-cooling reduces available heat precisely when heating needs peak. Heat pumps can boost temperature and quantity, but add energy consumption and complexity.

Geographic constraints: Heat recovery works best with nearby applications, as installing district heating networks is expensive. Piping to facilities one-quarter mile away might cost $750,000 or more.

Temperature requirements: Datacenter return air typically ranges 28-35°C (80-95°F)—relatively low-grade heat. High-temperature heat pumps can elevate this to 55-70°C (130-160°F) for district heating or industrial applications, with some Very High Temperature heat pumps reaching 140°C.

Economic viability: Initial investment must be weighed against ongoing costs, including energy used for heat recovery itself. However, waste heat can be sold to specific users, generating revenue and accelerating return on investment.

Policy and Regulatory Drivers

The UK's Energy Act 2023 introduces heat network zoning, requiring certain buildings to connect to local heat networks. Datacenters within these zones may be incentivized or mandated to supply heat, creating both compliance obligations and revenue opportunities.

The EU's AI Act requires 40% heat reuse efficiency for datacenters with capacity above 10 MW, establishing regulatory minimums that will increasingly influence design and site selection decisions.

Strategic Path Forward: Integrated Energy Solutions

The future of sustainable datacenter power lies not in single silver-bullet solutions but in carefully orchestrated combinations of technologies, procurement strategies, and operational innovations tailored to specific contexts.

Key Principles for Datacenter Energy Strategy

Match energy solutions to operational profiles: Facilities with relatively stable workloads may prioritize baseload nuclear or PPAs for predictable cost structures, while those with variable demand might emphasize battery storage and demand response capabilities.

Consider geographic and regulatory context: Site selection should account for renewable resource availability, grid capacity, regulatory frameworks for nuclear deployment, and proximity to potential heat reuse customers.

Plan for 2030 and beyond: With SMRs targeting commercial deployment by 2030 and electricity demand continuing to surge, energy strategies must balance near-term procurement needs with long-term transformation pathways.

Engage stakeholders proactively: Whether pursuing PPAs, SMRs, or heat recovery partnerships, transparent communication with communities, regulators, and investors builds trust essential for project success.

Measure holistically: Move beyond simplistic carbon accounting toward comprehensive sustainability metrics that capture energy efficiency, water use, waste heat recovery, and community benefits.

The Role of Systems Thinking

Datacenter energy challenges cannot be solved through technology procurement alone—they require systems-level approaches that integrate:

• Infrastructure planning across power generation, transmission, cooling, and heat recovery

• Financial modeling spanning capital expenditure, operating costs, carbon pricing, and revenue opportunities

• Regulatory strategy navigating interconnection queues, environmental reviews, and emerging mandates

• Stakeholder engagement building coalitions among utilities, communities, policymakers, and investors

• Capacity building ensuring organizations can manage increasingly complex energy portfolios

Council Fire specializes in precisely this kind of systems integration. We work with datacenter operators, utilities, municipalities, and investors to develop comprehensive energy transition roadmaps that:

• Assess feasibility across technical, economic, regulatory, and social dimensions

• Model scenarios comparing PPA portfolios, on-site generation, SMR partnerships, and hybrid approaches

• Navigate approvals for complex infrastructure requiring coordination across multiple jurisdictions and agencies

• Design stakeholder engagement processes that build community support and address concerns transparently

• Create implementation plans with realistic timelines, milestones, and contingency strategies

• Build organizational capacity to manage long-term energy transitions effectively

Conclusion: Powering the AI Future Responsibly

The datacenter industry faces an unprecedented challenge: powering exponential growth in AI and computing capacity while simultaneously achieving aggressive decarbonization targets. Meeting this dual imperative requires moving beyond simplistic narratives toward sophisticated, context-appropriate strategies that acknowledge tradeoffs and uncertainties.

Power Purchase Agreements remain valuable tools for financing new renewable capacity and demonstrating sustainability commitment, but their limitations—particularly regarding 24/7 power supply—must be honestly acknowledged. On-site solar and wind offer tangible benefits but cannot alone meet concentrated datacenter power demands.

Small Modular Reactors hold genuine promise for providing carbon-free baseload power aligned with datacenter operational needs, but face formidable economic, regulatory, and public acceptance hurdles that will take years to overcome. The first commercial deployments will provide crucial real-world validation—or cautionary lessons—for the broader industry.

Complementary innovations in battery storage, waste heat recovery, and demand response create opportunities to enhance sustainability performance while generating new value streams. The most successful strategies will creatively combine multiple approaches tailored to specific contexts.

Ultimately, sustainable datacenter power requires not just technology deployment but fundamental shifts in how we plan, finance, and govern critical infrastructure. It demands collaboration among datacenter operators, utilities, equipment manufacturers, policymakers, and communities. It requires patient capital willing to support long-term transformation alongside near-term operational needs.

Council Fire stands ready to guide organizations through this complex transition—bringing the systems thinking, stakeholder engagement capabilities, and strategic insight necessary to power the digital future responsibly.

Ready to Develop Your Sustainable Datacenter Energy Strategy?

Contact Council Fire to explore how renewable procurement, on-site generation, SMR evaluation, and waste heat recovery can advance your organization's sustainability goals while ensuring operational resilience and long-term competitiveness.

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