Constellation Energy is preparing for a significant restart of the Three Mile Island nuclear power plant, which has received mixed reactions from analysts.
While Wall Street generally views the restart positively, Citi has expressed concerns about potential delays and cost overruns due to regulatory and physical challenges. Analyst Ryan Levine, who initiated coverage of Constellation, highlighted these risks. Despite this, the stock has experienced a significant increase this year, driven by the restart announcement on September 20. Most analysts maintain a buy or strong buy rating and predict a 23% upside.
The Three Mile Island plant in Pennsylvania has undergone extensive inspections and maintenance, with crucial equipment like steam generators and the main power generator deemed ready for operation. The steam generators were replaced in 2009, and the main generator received internal replacements over a decade ago. However, the plant's main power transformers need replacement, estimated to cost between $75 million and $100 million, with delivery expected in late 2026. Additionally, one cooling tower is undergoing refurbishment, and operator training for NRC certification is a critical step that will take approximately 18 months.
Constellation is currently prohibited from operating the plant or loading fuel into the reactor vessel, as it was permanently shut down. The company plans to file an exemption request with the Nuclear Regulatory Commission (NRC) in November, which, if approved, would mark the official start of restart activities. In February, Constellation intends to request a name change for the plant to the Crane Clean Energy Center. By mid-2025, the company will submit filings regarding the plant's technical specifications, environmental impact, emergency plan, and site security plan for NRC review, aiming to send an operational readiness letter by July 2027.
While the restart is seen as a positive development for the region's electric grid, community sentiment remains mixed. Older residents, particularly those who remember the 1979 accident at Unit 2, have concerns about the restart. However, the economic benefits are emphasized, with the restart expected to create approximately 3,400 jobs and provide 835 megawatts of carbon-free electricity, enough to power over 600,000 homes. This comes at a time when the region's electricity demand is outpacing supply, with PJM Interconnection warning of potential grid reliability issues.
Palisades, another nuclear facility, is set to become the first reactor to restart operations in the U.S. after a shutdown, with plans to nearly double its power capacity in the 2030s through the construction of small modular reactors. This next-generation technology has attracted investments from major tech companies like Amazon and Alphabet’s Google. While Constellation has not committed to building small modular reactors, the company is open to collaboration with the tech sector to develop new nuclear projects in the U.S. Hanson, a representative from Constellation, indicated that if major customers express interest in building new nuclear facilities, the company would be willing to explore partnerships. The nuclear industry has learned from past accidents and now has improved safety and operational standards.
As the demand for electricity continues to rise, driven by the expansion of data centers and the electrification of various sectors, the need for reliable power sources becomes increasingly critical. PJM has projected a nearly 40% surge in electricity demand by 2039, while 40 gigawatts of power generation is at risk of retirement by 2030. This scenario underscores the importance of the planned restart at Three Mile Island, which aims to bolster grid reliability and meet future energy needs.
In the context of these developments, Microsoft has committed to purchasing electricity from Unit 1, ensuring that the power will contribute to the grid rather than directly serving its data centers. This approach aligns with the company's strategy to enhance grid stability while securing energy for its operations. Constellation is providing regular updates to Microsoft regarding the plant's restoration status, highlighting the collaborative efforts between traditional energy providers and tech companies in addressing the evolving energy landscape.