Nuclear and small modular reactor power for AI data centers

In short

Nuclear power is one option to meet the enormous electricity appetite of AI data centers. Small modular reactors (SMRs) and advanced reactors offer factory built, scalable, carbon free electricity. The Inflation Reduction Act provides a production tax credit of up to 1.5 cents per kilowatt hour (adjusted for inflation) or an investment tax credit of 30 percent, which new zero emission nuclear projects may qualify for along with other zero emission technologies. 26 U.S.C. § 45Y, 26 U.S.C. § 48E. The Nuclear Regulatory Commission (NRC) finalized a new optional licensing rule, Part 53, in March 2026, designed to make technology neutral reviews faster. 10 C.F.R. Part 53. FERC directed PJM to establish rules for AI-driven data centers and other large loads co-located with generating facilities. FERC PJM order. Several large power purchase agreements have been signed. Amazon announced a power purchase agreement with Talen Energy representing approximately $18 billion in notional revenue over 17 years. Talen investor presentation.

What are small modular reactors and advanced nuclear reactors?

Small modular reactors (SMRs) are nuclear reactors with an electrical output of about 300 megawatts or less per unit. They are designed to be built in factories and shipped as modules to the site. IAEA. Microreactors are an even smaller subset, often viewed as those generating less than 10 MWe, and they can be manufactured essentially complete and transported to a site. Law firm analysis

The Nuclear Energy Innovation and Modernization Act, as amended by the ADVANCE Act of 2024, defines an advanced nuclear reactor as a nuclear fission reactor or fusion machine with significant improvements compared to commercial nuclear reactors under construction as of the date of enactment of the Nuclear Energy Innovation and Modernization Act. Nuclear Energy Innovation and Modernization Act as amended by the ADVANCE Act Many SMRs and microreactors qualify as advanced reactors under this definition.

Gen III+ SMRs are nuclear fission reactors that use light water as a coolant and low enriched uranium as fuel, have a single unit net electrical power output between 50 and 350 megawatts electric as part of a single unit or multi unit plant with no restriction on total plant power output, maximize factory fabrication approaches, and include significant improvements compared to reactors operating on December 27, 2020. DOE Gen III+ SMR Q&A

How does the NRC license advanced reactors?

The NRC licenses civilian nuclear reactors under the Atomic Energy Act. 42 U.S.C. §§ 2011 to 2297h-13 There are now three main licensing routes.

Traditional licensing paths: Parts 50 and 52

For decades, the NRC licensed reactors under two frameworks. Part 50 requires a construction permit followed by a separate operating license. Part 52 allows an applicant to seek a combined construction and operating license (COL), along with design certifications and early site permits. 10 C.F.R. Part 50, 10 C.F.R. Part 52

NuScale Power’s 50 MWe SMR design received the first ever SMR design certification under Part 52 in July 2022, effective February 2023. NRC press release, NuScale design cert In May 2025, NuScale also obtained a standard design approval (SDA) for its uprated 77 MWe design. An SDA is a staff level approval that can be referenced in a future license application, but it does not carry the same binding legal force as a design certification. NuScale SDA, SDA letter

The new Part 53: risk informed and technology inclusive

On March 25, 2026, the NRC approved 10 C.F.R. Part 53, the first new reactor licensing regulation since 1989. It is an optional, risk informed framework that does not replace Parts 50 and 52. Part 53 final rule, NRC press release Key features include technology neutral safety standards based on probabilistic risk assessments instead of prescriptive requirements, a requirement for a systematic risk evaluation to identify potential failure modes, an option to site a reactor in a higher population area if the applicant shows that the societal benefits outweigh the additional risk, a new concept of generally licensed reactor operators for designs that can self mitigate without individually licensed operators, and consolidated license types with the ability to license a first of a kind reactor without a generic design certification first.

All of these features come from the final rule. Part 53 final rule

Executive Order 14300: deadlines and reform

On May 23, 2025, President Trump signed an executive order directing the NRC to reform its operations. NIA fact sheet, EO 14300 Under the order, the NRC must propose new rules within 9 months and publish final rules within 18 months (by November 23, 2026). The NRC must also decide on applications for new reactor construction and operating licenses within a maximum of 18 months. These deadlines aim to cut licensing times sharply.

What special rules apply to microreactors?

Microreactors have a dedicated regulatory push. The ADVANCE Act requires the NRC to develop strategies and guidance for microreactors covering eight areas, including staffing and operations, safeguards and security, transportation of fueled microreactors, and siting. NRC Regulatory Activities The NRC has begun an Integrated Microreactor Activities Plan to implement these requirements.

The Part 53 generally licensed operator concept fits microreactor designs well. Because such designs are intended to operate with minimal human intervention, removing the need for a round the clock licensed operator reduces cost and accelerates deployment.

What federal tax incentives support nuclear power for AI data centers?

Three tax credits in the Inflation Reduction Act directly benefit nuclear generation.

Existing nuclear plants, Section 45U. For reactors placed in service before August 16, 2022, the zero emission nuclear production tax credit provides up to 1.5 cents per kilowatt hour (about $15 per megawatt hour), adjusted for inflation. The credit phases down if the plant’s gross receipts exceed 2.5 cents per kilowatt hour. It is available through 2032. 26 U.S.C. § 45U

New zero emission plants, Section 45Y production tax credit (PTC). For facilities placed in service after December 31, 2024, the clean electricity production tax credit provides a base rate of 0.3 cents per kilowatt hour or an alternative rate of 1.5 cents per kilowatt hour for facilities meeting prevailing wage and apprenticeship requirements, each inflation adjusted, for the first 10 years of operation. Under current law, the credit phases out for facilities whose construction begins after 2032, with the credit reduced to 75 percent for construction starting in 2034, 50 percent in 2035, and eliminated for construction starting after 2035. A 10 percent bonus applies if the facility is on a brownfield site or in an energy community. 26 U.S.C. § 45Y(g)(7), 26 U.S.C. § 45(b)(11)(B)

New zero emission plants, Section 48E investment tax credit (ITC). As an alternative to the PTC, a new facility can claim an investment tax credit equal to 30 percent of its qualified capital costs. The same phaseout and bonus rules apply. A project must choose between the PTC and the ITC. It cannot claim both. 26 U.S.C. § 48E

Congressional budget reconciliation targeted these credits in 2025. The One Big Beautiful Bill Act, enacted July 4, 2025, accelerated the phaseout for wind and solar but left the nuclear credits intact, so the Section 45U, 45Y, and 48E credits described here remain in effect as of May 2026.

The IRA also allows tax exempt entities to receive the full credit value as a direct payment (elective pay), and it lets developers sell credits to other taxpayers (transferability). These tools help entities with little to no tax liability monetize clean energy tax credits. CRS report on tax credit transfers and direct pay

How did FERC change the rules for nuclear and data center colocation?

FERC has jurisdiction over wholesale power sales and transmission under the Federal Power Act. Two recent orders shape how AI data centers can connect directly to nuclear plants.

Susquehanna Order (November 2024). FERC rejected a proposed behind the meter colocation arrangement that would have allowed an Amazon AI data center to draw power from the Susquehanna nuclear plant in Pennsylvania. The Commission found that PJM failed to meet its high burden of demonstrating that the proposed non conforming provisions were necessary deviations from the standard interconnection agreement, and noted the filing left multiple important questions unresolved. FERC order Petitions for review of the Susquehanna order were filed in the Fifth Circuit in January 2025 and later transferred to the Third Circuit. As of May 2026, the court has not yet issued a decision. This order prompted many developers to pivot to front of the meter power purchase agreements.

PJM Colocation Order (December 18, 2025). FERC determined that PJM’s tariff lacked clear rules for colocated loads and was therefore unjust and unreasonable. The Commission directed PJM to create three new transmission services, namely Firm Contract Demand, Non-Firm Contract Demand, and Interim Non-Firm. It also required an overhaul of the behind the meter generator (BTMG) rules, with a three year transition period. FERC fact sheet, FERC order, Law firm analysis, Law firm analysis Compliance filings were due in early 2026, and a paper hearing with briefing deadlines through April 2026 is ongoing.

For an AI data center developer in PJM, connecting to a nuclear plant now means choosing one of these new transmission service categories. Outside PJM, similar regulatory reforms are likely. The Susquehanna experience also makes clear that behind the meter arrangements face substantial legal risk. The $18 billion Talen-AWS deal was restructured from behind the meter to front of the meter after the Susquehanna order. POWER Magazine, POWER Magazine, Utility Dive, Talen investor presentation, Utility Dive, Talen press release, FERC order, Talen investor presentation, Power Magazine

What is the status of the high assay low enriched uranium (HALEU) fuel supply?

Many advanced nuclear reactors need high assay low enriched uranium, or HALEU. HALEU is uranium enriched between 5 and 20 percent in the isotope uranium 235. Until recently, the United States had no commercial production. That is beginning to change, as the first domestic HALEU production gets underway under a DOE demonstration project. DOE, DOE article

Centrus Energy completed delivery of 900 kilograms of HALEU to the Department of Energy (DOE) by June 2025. The company received a Phase III contract extension through June 2026 valued at approximately $110 million. Centrus news, DOE, Centrus news

In October 2024, DOE awarded deconversion contracts worth up to $800 million and enrichment contracts worth up to $2.7 billion over 10 years to several companies, aiming to build a domestic HALEU supply chain. DOE HALEU deconversion contracts, DOE HALEU enrichment contracts Under the Fiscal Year 2024 National Defense Authorization Act, DOE must make 21 metric tons of HALEU available by June 30, 2026, with phased targets. Power Mag, 42 U.S.C. § 16282(h)(2) In April 2025, DOE allocated the first round of HALEU to five advanced reactor developers, namely TRISO-X, TerraPower, Kairos Power, Radiant Industries, and Westinghouse. Power Mag

Executive Order 14299 directs DOE to release at least 20 metric tons of HALEU into a readily available fuel bank for private sector projects authorized to construct and operate at DOE owned or controlled sites and regulated by DOE for powering AI and other infrastructure. Executive Order This directly links fuel supply to the AI data center mission.

While commercial HALEU supply is still limited, the combination of federal contracts and executive mandates is building a domestic pipeline. Off take agreements for SMR powered AI data centers should account for the timing and pricing of fuel deliveries.

What federal programs and executive orders are accelerating deployment?

DOE demonstration and first mover programs

The Advanced Reactor Demonstration Program (ARDP) plans to invest up to $3.2 billion, subject to future appropriations, in cost shared partnerships to support TerraPower’s Natrium reactor and X-energy’s Xe-100 design. DOE ARDP award announcement The Gen III+ SMR Program, funded with $900 million, awarded $400 million each to TVA (for a GE Hitachi BWRX-300 at Clinch River) and Holtec Government Services (for two SMR-300 reactors at Palisades) in December 2025. About $94 million of the remaining $100 million was allocated for fast follower awards in May 2026. DOE Gen III+ SMR Program, DOE press release

The May 2025 executive orders

On May 23, 2025, President Trump signed four nuclear focused executive orders. This fact sheet covers the four nuclear energy executive orders signed on May 23, 2025. NIA fact sheet

• EO 14299 directs the U.S. Army to operate a reactor at a domestic military base by September 30, 2028. It also directs DOE to designate sites for advanced reactors to power AI infrastructure, with a goal of operating the first reactor within 30 months (by November 23, 2027). The order directs the Secretary of Energy to initiate the process for designating AI data centers at DOE facilities as critical defense facilities where appropriate and provides that the electrical infrastructure, including nuclear and non-nuclear power generation infrastructure, needed to operate them shall be considered defense critical electric infrastructure. Executive Order 14299 In 2025, DOE selected four sites to host privately funded AI data centers paired with on site power, namely Idaho National Laboratory, the Oak Ridge Reservation, the Paducah Gaseous Diffusion Plant, and the Savannah River Site, and issued requests for applications for them in September and October 2025. DOE site selection
• EO 14302 requires starting construction of 10 new large reactors and 5 gigawatts of uprates to existing reactors by 2030. It also directs the Department of Energy to develop a plan within 120 days to increase domestic uranium conversion and enrichment capacity. NIA fact sheet

Defense led microreactor programs

The Department of Defense is driving early microreactor deployment. Project Pele, a prototype transportable nuclear reactor, broke ground at Idaho National Laboratory in August 2024 and is scheduled for delivery in 2026. DoD release The Advanced Nuclear Power for Installations (ANPI) program announced eight eligible vendors in April 2025 and aims to have one or more microreactors operating on U.S. military bases by 2030. DIU, Air Force announcement The DOE separately launched the Energy Reactor Pilot Program in June 2025, selecting nine vendors for fast track licensing. EIA article The Army’s Janus Program, building on Project Pele, selected nine bases for potential microreactor siting, including Fort Benning, Fort Bragg, and Fort Hood. EIA article

Military programs can provide regulatory precedents and help build the supply chain for commercial SMRs serving AI data centers.

What real world SMR and nuclear data center deals are under way?

A wave of agreements between nuclear developers and AI data center operators has emerged. The table below summarizes major public deals as of May 2026.

Many of these agreements are non binding or early step. The cancellation of the NuScale Carbon Free Power Project with UAMPS in November 2023, after costs rose from $5.3 billion to $9.3 billion, shows the economic risks of first of a kind SMRs. Power Mag, IEEFA, E&E News, NuScale, IEEFA

Key takeaways

• SMR licensing is in flux. The new Part 53 rule and EO 14300 deadlines could shorten licensing timelines, but the framework is still untested. Project sponsors should evaluate both traditional Part 50/52 and new Part 53 pathways.
• Tax credits are significant and bankable. The IRA’s 30 percent ITC or $15 per MWh PTC, plus elective pay and transferability, can transform project economics. The choice between PTC and ITC must be made early. Watch for potential legislative changes.
• FERC’s new colocation rules create hurdles and opportunities. The PJM order provides a roadmap, but compliance filings and litigation are ongoing. AI data center developers should model the cost of new transmission services and monitor similar proceedings in other regions.
• Fuel supply risk is real. HALEU production is only beginning. Off take agreements should include fuel availability and pricing provisions. Federal allocations and the executive order HALEU commitment may benefit projects at DOE sites.
• Executive orders add momentum and compressed timelines. The November 2027 target for the first AI infrastructure reactor at a DOE site is aggressive but could accelerate the entire sector. Site designations remain unconfirmed.
• Big deals are announced, but few are binding. The gap between memorandum and final contract remains wide. Early cancellation of the NuScale-UAMPS project shows that cost overruns can unravel even advanced projects.
• Military microreactor programs can provide a fast track to operational experience and regulatory data that later benefits commercial AI data center projects.

Frequently asked questions

Q:What is the difference between an SMR and a traditional large nuclear reactor?

A:SMRs generate up to about 300 megawatts electric per unit and are built in factories. Traditional reactors typically exceed 1,000 megawatts and are constructed on site. SMRs can be added in smaller increments to match load growth.

Q:Does the NRC’s new Part 53 replace the old licensing rules?

A:No. Part 53 is an extra optional pathway. A developer can still use Part 50 or Part 52. Part 53 offers a risk informed, technology neutral alternative designed to be faster.

Q:How long does it take to license a new SMR?

A:Under EO 14300, the NRC must decide on combined construction and operating license applications within a maximum of 18 months. Traditional reviews have taken three to five years or longer. Part 53 is expected to be quicker, but actual timelines are not yet proven.

Q:Can an AI data center be built right next to a nuclear plant and directly connect?

A:Yes, it is physically possible, but the grid connection must comply with FERC rules. FERC’s recent orders discourage behind the meter connections without proper transmission service arrangements. In PJM, new colocation services must be used, and behind the meter generator rules are being overhauled.

Q:What tax credit is best for a new SMR project?

A:It depends on the project’s cost structure. The 48E ITC (30 percent of qualified capital costs) suits high capex projects with tax equity partners. The 45Y PTC (up to $15 per MWh) may be better for projects with low operating costs and high utilization. Many AI data center backed projects may prefer the ITC because it provides an immediate capital offset.

Q:Who supplies the nuclear fuel for an SMR project powering an AI data center?

A:Typically the reactor vendor or project developer contracts for fuel. However, HALEU supply is still nascent. Some AI data center operators, like Meta, have agreed to prepay for fuel to support development.

Q:Are any commercial SMRs operating in the United States today?

A:No. The first advanced reactor construction began in 2024 with TerraPower’s Natrium project, and the first NuScale design certification was approved in 2022. Several demonstration and commercial projects are targeting operation between 2027 and 2030.

Q:What happened to the NuScale-UAMPS project?

A:The Carbon Free Power Project in Idaho was canceled in November 2023. Estimated costs rose from $5.3 billion to $9.3 billion, and there were not enough subscriber commitments to make the project economical. This illustrates the financial challenge of first of a kind SMRs.

Q:How does FERC regulate a direct wire from a nuclear plant to an AI data center?

A:FERC regulates the wholesale sale and transmission of electricity. If an AI data center buys power directly from a nuclear plant, that transaction falls under FERC’s jurisdiction. FERC must find that the arrangement is just and reasonable and does not unfairly shift costs to other customers. The Susquehanna order and PJM colocation order set the current regulatory framework.

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Junde Liu, JD, LL.M. (Taxation) candidate at UF Law. Originally published on Compute Law Blog. This article is general information and does not constitute legal advice. Reading it does not create an attorney client relationship. The reader should not act on the basis of any content here without first consulting a licensed attorney in the relevant state. Last reviewed for accuracy May 23, 2026.