U.S. energy regulators have blocked a power agreement underpinning Amazon Web Services’ planned data center campus connected to a Pennsylvania nuclear plant.

The decision not only puts the future of Amazon’s nuclear campus in jeopardy but also raises doubts about the viability of a growing number of similar data center projects being considered across the country.

In March, AWS and Talen Energy announced a $650M deal in which the cloud computing behemoth acquired 1,200 acres adjacent to Talen’s 2.5-gigawatt Susquehanna Steam Electric Station in Berwick, Pennsylvania, one of the largest nuclear power plants in the country. AWS hopes to build as many as 15 data centers on the Luzerne County site, largely for artificial intelligence, which would be powered by nearly one gigawatt of electricity purchased directly from the nuclear plant next door.

But now, the Federal Energy Regulatory Commission has rejected an agreement between Talen and regional grid operators needed for the “behind-the-meter” deal with AWS to move forward. In a 2-1 decision filed Friday, FERC commissioners expressed concern that Amazon would be taking power that previously supplied the regional grid, potentially raising electricity prices for other consumers and increasing the risk of grid instability.

“These co-location arrangements are a fairly new phenomenon that entails huge ramifications for grid reliability and consumer costs,” FERC Commissioner Mark Christie wrote in the decision. “Given these ramifications, the Commission truly needs to ‘get it right’ when it comes to evaluating co-location issues.”

The impact of FERC’s order could extend well beyond AWS’s plans in rural Pennsylvania. The company's deal with Talen was the first of its kind between a nuclear operator and a data center firm, and it provided a model that other utilities have quickly sought to replicate in markets across the U.S.

Dominion Energy indicated over the summer that it may develop a data center campus connected directly to the Millstone Power Station, its nuclear plant in Waterford, Connecticut. Constellation Energy suggested in July that it is in talks with firms interested in building data centers adjacent to its Calvert Cliffs Nuclear Power Plant in Maryland. Meanwhile, power provider Vistra is reportedly considering behind-the-meter deals with data center operators in Texas and Ohio.

In their written order, FERC commissioners indicated that the decision to block Talen’s agreement was driven, at least in part, by the desire to avoid setting a precedent that would trigger a wave of similar projects before the consequences were fully understood.

“Speaking for myself, I have an open mind about the many serious issues pertinent not just to this particular proposal, but also to the issues that may be relevant to other co-location proposals,” Christie wrote. “Were we to approve this proposal at this time … we would be setting a precedent that would be used to justify identical or similar arrangements in future cases.”

The growing interest in siting data centers at legacy nuclear plants comes as the Department of Energy has called for expanded production at old nuclear facilities specifically to help meet growing electricity demand from data centers.

A DOE report released last month identified 186 operating or recently retired coal and nuclear sites across the U.S. potentially suitable for repowering with new nuclear reactors. The report says the plants could add as much as 95 gigawatts of power production capacity to U.S. grids.

The Biden Administration has framed these efforts as a national security issue, needed to ensure that power shortages don’t create an infrastructure bottleneck that jeopardizes the nation's position as the global AI leader. It’s a position that was cited by FERC’s lone dissenting commissioner, Willie Phillips, who argued that the commission was jeopardizing the country’s AI leadership.

"It is a step backward for both electric reliability and national security," Phillips wrote.