The US Federal Energy Regulatory Commission (FERC) has rejected a proposal that would have allowed an Amazon data centre to use more power from Talen Energy Corporation’s Susquehanna NPP.

In March, Talen sold its Cumulus data centre campus in Pennsylvania to Amazon subsidiary Amazon Web Services (AWS) for $650m. This included a long-term agreement to provide power from Talen’s adjacent 2,500 MWe Susquehanna NPP, which currently supplies power to the data centre. The transaction with AWS was expected to boost to Talen’s cash flow. After paying off debts, interest and other costs, Talen expected net proceeds of $361m from the deal.

The Cumulus campus is directly connected to the NPP. The data centre’s four substations have a total potential 960 MW of redundant capacity. This includes 200 MW currently associated with the Nautilus cryptocurrency facility, in which Talen will retain its 75% interest. According to Talen Energy’s investor presentation, it aimed to supply fixed-price nuclear power to AWS’s new data centre as it is built. AWS has minimum contractual power commitments increasing in 120 MW increments over several years.

In June, PJM Interconnection, which operates the eastern US grid, sought approval from FERC for an amended Interconnection Service Agreement (ISA) that would permit Talen to sell 480 MW to the data centre, an increase on the 300 MW under the original ISA, “without a material impact on the Transmission System”. However, other utility owners – American Electric Power Co and Exelon Corp – filed a complaint arguing that it could threaten grid reliability and raise customer rates. While PJM made the filing to enable the Amazon-Talen deal, it also warned that it was facing a potential shortfall of generating supply by 2030.

Commissioners voted 2-1 against the proposal that would have increased the amount of power supplied to AWS. The commissioners said the plan, which was an amendment filed by the regional grid operator on behalf of the parties, had not proved why the special contract should be allowed under federal rules. They said the plan would set a precedent and the issues should be reviewed more closely.

FERC Commissioner Mark Christie noted problems that can arise with co-location, including the “multifaceted issues” impacting the grid and consumer costs. The agreement for the Talen site would mean significant resources currently used for the regional grid would have to be diverted to the Amazon data centre. There was also concern about how the additional costs for distribution upgrades would be met. However, FERC’s response was not unanimous, with Chairman Willie Phillips saying the order was “a step backward” for both electricity reliability and national security.

The decision followed a FERC technical conference on the topic, which discussed the merits and challenges of co-locating data centres with existing plants, referred to as “behind-the-meter” demand. Phillips said that artificial intelligence and related technologies represented a generational opportunity for national security and economic growth.

Stu Bresler, PJM Executive Vice President of Market Services & Strategy said in a statement to the meeting that big consumers located at power plants may create reliability concerns and hinder proper planning. PJM has received requests from developers to co-locate 8.5 GW of large load at points on the grid serving existing power plants. “If behind-the-meter, co-located loads integrate faster than what can be reliably planned for, the industry should appreciate the potential future risks to reliable system operations,” he noted.

FERC’s decision is seen as a setback to efforts by big technology companies to feed to supply power to their data centres from nearby generators, given the massive power required for generative AI output.

However, Amazon is hedging its bets. In October it signed three new agreements to support the development of nuclear energy projects in the US including enabling the construction of several new small modular reactors (SMRs). An agreement with Energy Northwest, a consortium of state public utilities, will enable the development of four advanced SMRs. The reactors will be constructed, owned and operated by Energy Northwest, and are expected to generate roughly 320 MWe for the first phase of the project, with the option to increase to 960 MWe. “These projects will help meet the forecasted energy needs of the Pacific Northwest beginning in the early 2030s,” Amazon noted.

Amazon has also invested in US-based X-energy, which will supply advanced SMRs for the Energy Northwest project. The investment includes manufacturing capacity to develop the SMR equipment to support more than 5 GW of new nuclear energy projects utilizing X-energy’s technology. In Virginia, Amazon signed an agreement with utility company Dominion Energy to explore the development of an SMR project near Dominion’s existing North Anna NPP. This will supply at least 300 MWe to the Virginia region, where Dominion projects that power demands will increase by 85% over the next 15 years.