Working Paper（26-001J）Grid Governance in the AI Era

This paper analyzes the trend of hyperscalers investing in nuclear power to support data centers (DCs) in the U.S. and analyzes the problems of applying this model to Japan.

Hyperscalers like Microsoft and Google are increasingly entering into Power Purchase Agreements (PPAs) and investing in next-generation reactors to secure stable, low-carbon energy. These firms are evolving into "prosumers" who influence grid operations and capacity.

While some argue Japan should follow the U.S. lead to revitalize its nuclear industry, several critical issues remain:

Breadth of challenges in nuclear power utilization: 
Beyond financing, nuclear power faces complex hurdles such as nuclear waste management, safety governance, and social trust—none of which can be solved simply by finding new investors. Even if DCs drive up demand, fundamental challenges remain, including issues of transparency and accountability in decision-making, addressing long-term and various uncertainties, or the unfairness arising from the discrepancy between those who benefit from the energy and those who bear the risks.

Lack of overall policy and strategy: 
Japan needs a flexible digital infrastructure strategy that considers diverse technical options and social values, rather than just reacting to U.S. trends. The development of DCs is not an isolated issue, and should be discussed as part of a comprehensive, long-term development strategy for digital infrastructure, aimed at realizing Japan’s vision for society and the role of digital transformation (DX) within it. Securing human resources capable of leading such a strategy is an urgent priority for Japan.

Significant Impact of DCs on the Grid:
Integrating DCs into the existing national grid requires not only  increasing power generation capacity, but also far-reaching upgrades to transmission capacity and functions necessary for grid stability. The possibilities and challenges of DC development should be considered through a holistic view of the entire power system.

The primary task for Japan is to reconstruct its institutions for grid governance, which has remained fragmented since market liberalization. Taking into account the broader range of stakeholders and risks relating to the bulk power system, Japan needs to establish a clearer division of roles between the public and private sectors,  while developing a pool of "pi-shaped" talent capable of considering the emerging challenges of the DX.

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Table: Overview of major nuclear deals by hyperscalers in the U.S.

Box 1 (Acceleration of advanced reactor development in the U.S.)
Under the Trump administration, the U.S. is actively pushing to quadruple nuclear capacity by 2050 by aggressively streamlining regulatory processes. However, this  has raised concerns regarding feasibility, the lowering of safety standards, and lack of transparency.

Box 2 (Social Responsibility and regulation of DC development)
Local opposition is growing in areas where DCs are increasingly accused of causing power shortages and higher electricity rates. Consequently, tech giants are being pressured both institutionally and normatively to be "good grid citizens" by contributing to grid stability and demand-side flexibility.

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