Arizona utilities are winding up for more nuclear power, but energy-hungry tech companies have grander plans: private mini-reactors beyond regulatory reach.
Greater Phoenix is now the third-fastest-growing hub in the U.S. data center industry, with Amazon, Google, Microsoft and Facebook parent Meta already snatching up hundreds of acres in Laveen, Mesa, Goodyear and El Mirage. By 2030, these energy-hungry AI server farms are projected to consume enough electricity to power 4.4 million homes.
Arizona’s utility companies are attempting to get ahead of the demand. In February, APS, SRP and Tucson Electric Power (TEP) announced a joint initiative, funded by a $900 million grant from the Department of Energy, to study the statewide expansion of nuclear power, considered best suited for data centers because of its always-on, high-density capabilities.
But other, more aggressive plans are also in the works. One controversial proposal to meet that demand is now advancing through the Arizona Capitol: House Bill 2774, introduced by Rep. Michael Carbone, would allow large industrial energy users, like data centers, to install their own small modular reactors, or SMRs – without undergoing environmental review or county zoning approvals in rural areas, in order to fast-track development.
The so-called “nuke-boxes” are 400 times smaller on average than the large-scale nuclear reactors at Arizona’s Palo Verde Generating Station but produce up to 1/8th the power – still enough to juice up to three hyperscale facilities like those operated by the tech titans. But regulatory complexity, high financial risk, unproven real-world performance and public skepticism have so far prevented any SMRs from being built and operated in the U.S. – although Google, Amazon and data center giant Equinix have already inked deals with SMR developers.
If passed, the legislation would make Arizona the first state to give them the green light, affording private SMRs the same light-touch regulatory environment that welcomed Waymo’s autonomous ride-hailing service before any other state (and weathering almost two dozen accidents and traffic violations in exchange).
“There’s so much red tape,” says Carbone, the Republican house majority leader. “China, Russia, Germany and Canada are building these as we speak. Arizona could be a leader in this technology, bringing dollars and jobs to rural communities.”
Arizona’s utilities are exploring the technology too, but only as part of a robust energy mix.
“We’re in the earliest stages,” says TEP regulatory communications specialist Joseph Barrios. “We’re looking at all options, including SMRs, to ensure reliable service as we retire some of the coal-fired resources and expand renewables.”
Derek Seaman, director of resource acquisition at APS, says the same. “We want to have every single technology available, and SMRs would be one of those. We’re exploring what new nuclear would look like on our system.”
But critics warn of risks. “SMRs are still unproven, very expensive, and come with unique safety and waste concerns,” says Edwin Lyman, director of nuclear power safety at the Union of Concerned Scientists. “Cutting corners on regulation is especially dangerous.”
The red tape-cutting Arizona house bill has appeal for regulation-averse, privatization-friendly GOP lawmakers. But it’s likely to face resistance – not only from Democrats, but possibly also from rural Republicans leery of nuclear reactors in their backyards.
“While SMRs could be part of Arizona’s energy future, this bill removes critical oversight, limiting public input on safety, water use and environmental impacts,” says Arizona State Senator Rosanna Gabaldón, the Democratic minority whip. “Other energy projects must go through this review. SMRs should not get special treatment before proving their viability in Arizona.”
Sandy Bahr, director of the Sierra Club’s Grand Canyon Chapter, calls HB2774 “outrageous,” adding, “Arizona has sunshine in abundance. We should focus on solar, not dangerous, water-intensive technologies.”
Seaman insists that APS is still heavily invested in solar and wind. “We’re looking at everything, whether it’s solar, thermal resources, batteries or a new nuclear resource.” Barrios concurs: “This isn’t an either-or conversation. It’s about building a balanced, realistic energy strategy.”
But the data centers themselves may have some sway in the decision. Even if the legislation is killed, tech companies have considerable influence with utilities.
“The data center developers are out there cutting checks to the power companies to assist them with their infrastructure upgrades,” says Mark Bauer, director of the Phoenix-based Data Center Solutions group for global real estate company JLL, who’s negotiated more than $3 billion in local data center developments.
“These are billions of dollars of infrastructure costs that would typically be borne by the power company but are now being supported and paid for by the heavy power-using data centers.
“We’re at the front end of the discussion about how to partner with the utility companies to bring SMRs to market,” Bauer adds. “But it’s got legs.”
— Jimmy Magahern
