As interconnection queues swell and approval timelines stretch to five years or more, data center developers are increasingly turning to behind-the-meter generation to secure reliable power. While natural gas offers the fastest path, its carbon footprint clashes with net-zero commitments. Small modular reactors are emerging as a compelling carbon-free alternative. This article examines the current state of SMR deployment for data centers and the key regulatory considerations developers should keep in mind.
The Power Problem
American data centers consumed approximately 4% of total U.S. electricity in 2023, a figure projected to reach as high as 12% by 2028 as artificial intelligence workloads proliferate. A single large-scale AI training facility can demand 150-500 megawatts of continuous power. Yet FERC’s interconnection queues now contain over 2,600 gigawatts of proposed generation – more than twice the nation’s installed capacity – with average approval timelines stretching to five years.
These delays have driven data center developers toward behind-the-meter generation strategies: building or contracting for dedicated power sources that bypass the queue entirely. Natural gas is the fastest, most commercially proven option. But a 500 MW gas plant operating at 60% capacity factor emits roughly 1.5 million tons of CO₂ annually – a figure fundamentally at odds with the net-zero commitments that most major data center operators have made. Renewable behind-the-meter generation faces its own challenges: intermittency requires oversizing, storage, or backup, often making it more expensive and complex than gas.
This sustainability paradox – needing reliable power now while committing to decarbonization – is fueling serious interest in advanced nuclear technology, particularly small modular reactors (SMRs).
What SMRs Offer – and Where Things Stand
SMRs offer a potentially compelling package for data center power: carbon-free baseload generation, high projected capacity factors, compact site footprints relative to equivalent wind or solar installations, and modular factory fabrication that proponents contend will shorten construction timelines.
However, commercial SMR deployment remains in its early stages, and projected cost and timeline advantages have yet to be proven at scale. NuScale Power’s cancellation of the UAMPS Carbon Free Power Project in November 2023 – after years of development – illustrated the gap between aspiration and execution.
Several developers are nonetheless moving forward with data-center-focused plans. X-energy has partnered with Amazon, which anchored approximately $500 million in Series C-1 financing, targeting up to 5 GW of new nuclear capacity by 2039. NuScale has announced plans to deploy its NRC-certified SMR technology for data center operator Standard Power at two facilities in Ohio and Pennsylvania, targeting nearly 2 GW of clean energy for data center loads. And TerraPower broke ground on its 345 MW Natrium demonstration reactor at a retired coal plant in Kemmerer, Wyoming, in June 2024.
Realistic industry projections place first commercial SMR units in the early 2030s, though most industry observers suggest that mid-2030s is more likely for broad commercial availability.
The Regulatory Landscape
Developers considering SMR-powered data centers should anticipate navigating several overlapping regulatory regimes:
NRC Licensing. All commercial nuclear facilities require Nuclear Regulatory Commission licensing – a multi-year process addressing safety, security, environmental impacts, and design certification. This is the most significant timeline constraint for any SMR project.
FERC Jurisdiction. SMRs interconnected to the transmission system will likely trigger FERC jurisdiction over wholesale sales, consistent with the principles FERC has articulated in recent orders addressing co-located data center loads – including the November 2024 Talen Energy order and the December 2025 PJM co-located load order. However, radial-connected SMRs serving dedicated loads may avoid wholesale jurisdiction depending on how the arrangement is structured.
State Siting. States retain authority over siting and economic need for generation facilities, and the landscape varies considerably. Wyoming and Utah maintain nuclear-supportive regulatory environments – TerraPower’s Kemmerer project reflects Wyoming’s receptiveness. Colorado added nuclear to its statutory definition of “clean energy” in 2025, making it eligible for clean energy project financing. Texas has moved most aggressively, establishing a $350 million Texas Nuclear Development Fund in June 2025 – described by Governor Greg Abbott as the largest state-level nuclear commitment in the country – following its Advanced Nuclear Reactor Working Group’s release of a comprehensive deployment roadmap in November 2024.
Self-Supply Classification. SMRs purpose-built to serve data centers likely constitute self-supply exempt from utility regulation, provided sufficient ownership integration exists between the generation facility and the consuming load. How ownership and offtake arrangements are structured from the outset will be critical to maintaining this classification.
What Developers Should Be Doing Now
Although commercial SMR deployment is years away, the groundwork – site identification, NRC pre-application engagement, state regulatory positioning, and corporate partnership structures – requires significant lead time. A few practical considerations:
First, jurisdictional selection matters. Texas’s ERCOT market avoids FERC wholesale jurisdiction entirely and now offers dedicated nuclear funding. Wyoming’s minimal regulatory barriers and existing advanced nuclear presence create a supportive ecosystem. Developers should match jurisdictional frameworks to project characteristics and timelines early in the planning process.
Second, transaction structure determines regulatory outcomes. The recent FERC orders on co-located loads make clear that how ownership, interconnection, and power delivery are arranged dictates whether federal wholesale jurisdiction is triggered. Thoughtful structuring at the outset is far less costly than retrofitting a deal after the fact.
Third, regulators are increasingly attentive to large loads that island themselves from the grid. Developers planning SMR-powered data centers should consider voluntary grid support commitments – demand response, emergency generation, reliability contributions – that build goodwill and may prove decisive in siting proceedings.
Finally, the regulatory frameworks for SMRs serving dedicated loads remain largely undeveloped. Current rules assume grid-connected facilities selling to multiple customers. Developers and energy providers have a meaningful opportunity to help shape these emerging frameworks through comment proceedings and direct regulatory engagement – including the national rulemaking on large load interconnection that Secretary of Energy Chris Wright directed FERC to initiate in October 2025.
Davis Graham’s Clean Energy & Sustainability Group counsels clients across a broad range of clean energy matters, including project development, permitting, and regulatory compliance. Contact R.J. Colwell or a member of the group for guidance on structuring SMR-powered data center projects or navigating these evolving regulatory pathways.