Nuclear energy stocks have been all the rage in 2024 as investors look to profit from companies driving the artificial intelligence revolution. However, the market is running out of reasonable places to look in this area. Hyperscalers are quickly gobbling up the excess nuclear power capacity that American companies have to offer. Companies like Constellation Energy NASDAQ: CEG mothballed facilities are even being reopened to meet demand.
New full-size nuclear power plants cost tens of billions of dollars to build. Additionally, it could be a decade or more before builders complete them and put them into use. In this regard, other solutions appear. Small modular reactor (SMR) inventories have been among the most sought after in the market. These companies are looking to build smaller reactors that can be launched faster and at lower cost. However, the economic feasibility of these reactors still remains a big question. Moreover, there are currently exactly zero SMRs in effect in the United States.
As hyperscalers look to minimize carbon emissions from their data centers, energy companies are offering a workaround. Their idea is to combine natural gas and carbon sequestration technology to make their energy solutions low-carbon or carbon-neutral. Hydrogen will also play a role. Below I detail three firms taking steps to implement this plan.
Exxon Mobil: Oil and gas giant also dominates carbon capture
ExxonMobil today
(As of 12/17/2024 ET)
- 52 week range
- $95.77
▼
$126.34
- Dividend yield
- 3.67%
- P/E ratio
- 13.45
- Target price
- $129.68
During a special teleconference on December 11, the largest US oil and gas company Exxon Mobil New York Stock Exchange: goldhas announced its ambitions to power data centers. To do this, the company plans to use “low-carbon natural gas.” It will use its carbon sequestration technology to capture and store more than 90% of the carbon dioxide generated by powering the data center.
Exxon Mobil is a company that is particularly well positioned to deliver on these kinds of promises. It already owns the world’s largest carbon capture and storage network. The company has pipeline and storage infrastructure along the Gulf Coast and has 6.7 million tons of carbon sequestration contracts per year. This gives the company strong expertise in this area.
A key benefit of Exxon’s plan is that power will be “isolated.” This means that it is not connected to the public power grid. This gives Exxon and its potential customers full control and means they won’t have to worry about broader network outages. It also means they will face significantly less regulation, allowing them to build and upgrade much faster.
GE Vernova: make deals while the iron is hot
GE Vernova today
(As of 12/17/2024 ET)
- 52 week range
- $115.00
▼
$357.09
- Target price
- $314.35
The next player to throw his hat into this ring is G.E. Vernova. New York Stock Exchange: GEV. The Company is not a utility or electricity producer; instead, it produces the equipment that these companies install in their factories. GE Vernova is well known for its expertise in natural gas. The company’s gas turbines are one of the largest, if not the largest, source of its overall revenues. The company has reportedly signed several contracts to sell gas turbines that will power data centers.
Carbon capture technology isn’t currently a big part of GE Vernova’s business, but it plans to make it so. Next year, the company aims to devote half of its research and development spending to long-term projects such as SMRs and carbon capture. The company’s CEO describes the near future of these gas plants as “unrelenting gas” at the end of the decade. Essentially, these data centers may not turn on carbon capture for about five years. After that time, GE Vernova plans to help these firms integrate carbon capture to help them meet sustainability goals.
Entergy: Solid proof that natural gas isn’t going away anytime soon
Entergy today
(As of 12/17/2024 ET)
- 52 week range
- $48.08
▼
$79.04
- Dividend yield
- 3.21%
- P/E ratio
- 9.12
- Target price
- $77.40
The most concrete example of the future of natural gas data centers comes from Entergy. New York Stock Exchange: ETR. The company signed a $10 billion deal with Meta Platforms. NASDAQ: META build the largest hyperscaler data center. They will locate three natural gas plants in Louisiana that will supply the data center with nearly 2.3 gigawatts of electricity. An interesting caveat is that hydrogen, which is completely carbon-free, can immediately make up up to 30% of the fuel source. Over time, factories will be able to switch to 100% hydrogen fuel.
For now, both companies will not connect the data center to carbon capture technology. They will bring it in over time. However, Meta will help finance carbon capture at the Lake Charles gas plant and help build 1.5 GW of additional solar power. This aims to reduce Meta’s overall carbon footprint. The facility hopes to be operational by 2028 or 2029.
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