How a shuttered power plant in Michigan could pave the way for more nuclear energy

The Palisades Power Plant on the shores of Lake Michigan had become a piece of history, a relic of an era when nuclear energy was viewed as the future.

The reactor in Covert, Michigan, about 70 miles of southwest of Grand Rapids, ceased operations in May 2022 after providing power to the industrial Midwestern state for more than 40 years.

The closure was part of a decade-long wave of reactor shutdowns in the U.S., as nuclear power struggled to compete against cheap, abundant natural gas in the wake of the shale boom and the rapid expansion renewable energy.

Plus, the power source had long been controversial, with opponents who feared the consequences of waste produced by the process or the potential of radiation leaks in the event of an accident.

But Palisades is now poised to become the first reactor in U.S. history to reopen after shutting down. Lawmakers on both sides of the political divide, tech companies and leading utilities increasingly view nuclear as a crucial source of reliable, carbon-free energy to supply rising electricity demand in the U.S. while slashing emissions to address climate change.

Holtec International, the privately held owner of the Palisades, aims for the plant to resume operations by the end of 2025 with the support of up to $1.5 billion in loans from the Department of Energy and $300 million in grants from the state of Michigan.

The plans to reopen Palisades are under review by the Nuclear Regulatory Commission. If successful, Palisades could provide a road map for other mothballed plants to resume operations such as Three Mile Island in Pennsylvania.

“It’s a bridge to our small modular reactor program,” Kelly Trice, president of Holtec, said in a nod to its long-term plan to nearly double the facility’s power generation in 2030 with small modular reactors. The new technology, which could become the first of its kind on the U.S. grid, promises to speed deployment of nuclear plants in the future.

“Our goal is to be able to increase plants in the country and elsewhere in the world with small modular reactors,” he said.

Florida-based Holtec bought Palisades in 2022 with the intention of dismantling it. The previous owner, Entergy, shut down the facility as its finances deteriorated under the strain of competing with cheap natural gas.

But Michigan Gov. Gretchen Whitmer made restarting Palisades a priority, saying it could support the state’s push to produce all of its energy from clean sources by 2040. Whitmer signed bipartisan legislation that provided state funding and supported Holtec’s application for federal financing.

“It was not shut down for so long that it was irreversible,” Trice said. “This plant actually had a 10-year period where we weren’t going to do heavy decommissioning work.”

A restart of Palisades could mark a turning point for the nuclear industry after a decade in which a dozen reactors have shut down across the country. The 800-megawatt reactor would provide enough power for more than 800,000 homes.

The U.S. is facing historic growth of electricity demand from data centers that support artificial intelligence, the return of domestic manufacturing, and the electrification of vehicles as well as the broader economy. Data centers and electric vehicles alone are expected to boost demand by 290 terawatt hours by 2030 — the equivalent of the electricity consumption of Turkey, according to a recent report from Rystad Energy.

Nuclear is the most dependable energy source, generating maximum power 93% of the time without emitting carbon dioxide. It’s nearly four times more reliable than solar and three times more than wind, according to the Energy Information Administration.

Executives at some of the largest utilities have warned that failure to meet this demand could jeopardize U.S. economic growth. Southern Company CEO Chris Womack said in June that the U.S. needs to a build a significant number of new nuclear plants to meet the country’s growing power demand. The U.S. and a coalition of more than 20 other countries pledged in December to triple nuclear energy by 2050.

But building new nuclear plants is slow and expensive. Sometimes plants can get mired in legal challenges. Southern recently completed the first new plant in decades, but the project was years behind schedule and billions of dollars over budget.

Trice said restarting a reactor can be “easier, cheaper and faster” than building a new one, though he emphasized that this depends on how far the decommissioning process has progressed.

“There are a few other plants that have talked to us about how to do it,” the executive said. “And we’re hopeful that they will. From that regard, maybe it becomes a model on a few plants where that fits.”

Holtec hopes to expand Palisades with two 300-megawatt small modular reactors, or SMRs, which would nearly double its capacity to 1,400 megawatts — enough power for 1.4 million homes.

The company aims to break ground before the end of 2027, Trice said. He expects the first SMR would come online in mid-2030.

“Our goal is to be on the grid first,” Trice said.

SMRs are viewed as an important path to expand nuclear power because they promise to reduce capital costs, a major hurdle to building new plants. They use a pressurized water reactor, like traditional plants. However, SMRs are prefabricated in pieces and then assembled at the construction site.

“It’s a smaller, simpler plant in comparison — it’s easier to operate,” Trice said.

Once the first SMR is built, Holtec plans to build an order book to “continually manufacture components for whatever plant is needed,” he said. “We’ve had more utilities than I can count contact us and want to be on the list,” Trice said.

The Big Tech companies are also showing growing interest in nuclear, including Holtec’s SMR program. As the tech giants build out power-hungry data centers to support AI, they are still hoping to meet their climate goals.

“We’ve talked to pretty much all of them, especially the big ones have talked to us,” Trice said. “They’re all interested in carbon-free, green, baseload power.”

Constellation Energy, the largest U.S. operator of nuclear plants, has hinted that Palisades could serve as a model for a restart of Three Mile Island near Middletown, Pennsylvania. The company owns the Unit 1 reactor at the facility, which ceased operations in 2019. (Unit 1 is not the reactor that partially melted down in 1979 in the worst nuclear accident in U.S. history.)

“We’ve obviously seen what happened with Palisades. I think that was brilliant,” CEO Jose Dominguez said on Constellation’s first-quarter earnings call in May.

Constellation is considering a “number of different opportunities” and Three Mile Island “would probably be certainly one of those that we would think about,” Dominguez said.

“We’re at a point where we believe that it is technically feasible,” Kathleen Barrón, Constellation’s chief strategy officer told CNBC regarding a Three Mile Island restart. “But there are a number of economic and commercial and regulatory questions that we’re still evaluating.”

NextEra Energy, the largest renewables operator in the U.S., is weighing whether to restart the Duane Arnold Energy Center in Palo, Iowa. It ceased operations in August 2020.

“There would be opportunities and a lot of demand from the market if we were able to do something with Duane Arnold,” NextEra CEO John Ketchum said on a second-quarter earnings call on July 24.

“We’re looking at it,” Ketchum said. “But we would only do it if we could do it in a way that is essentially risk free with plenty of mitigants around the approach. There are a few things we would have to work through.”

But Palisades, Three Mile Island and Duane Arnold ceased operations relatively recently. Finding more plants to restart could prove difficult, said Doug True, chief nuclear officer at the Nuclear Energy Institute.

“It gets harder and harder,” True said. “A lot of these plants have already started the deconstruction process that goes with decommissioning and the facility wasn’t as thoroughly laid up in a way that was intended to restart in any way.”

Three Mile Island and Duane Arnold would “require a lot of thought and effort to see what it’s going to take to get those back online,” True said.