NorthWestern Energy’s 2025 Nuclear Pivot: Can SMRs Power the AI Data Center Boom?

Industry Adoption: NorthWestern Energy’s Strategic Shift from Fossil Fuels to Nuclear Ambitions for Data Centers

Between 2021 and 2024, NorthWestern Energy (NWE) initiated a strategic pivot to capitalize on the energy demands of the data center industry. This early phase was characterized by tactical, incremental agreements to serve high-density loads. The utility secured deals with partners like Atlas Power Group for an initial 75 MW load and an unnamed developer for a 50 MW load, with plans to use its existing and planned fossil fuel assets as the primary power source. This included advancing the 175 MW Yellowstone County Generating Station (a natural gas plant) and controversially, acquiring additional shares of the Colstrip coal-fired plant. During this period, next-generation clean energy solutions like Small Modular Reactors (SMRs) were merely an exploratory concept, a distant possibility for future-proofing the grid.

The landscape shifted dramatically in 2025, marking a critical inflection point. The scale of industry demand exploded, moving from incremental additions to an existential challenge for the utility’s capacity. Landmark letters of intent (LOIs) were signed with Quantica Infrastructure for up to 1,000 MW and with Sabey Data Centers and Atlas Power for a combined 400 MW. This potential 2,250 MW of new demand—nearly triple NWE’s entire Montana peak load—rendered the initial fossil-fuel-centric strategy untenable. This exponential demand, coupled with intense regulatory scrutiny from the Montana Public Service Commission (PSC) and pressure from environmental groups, forced a strategic re-evaluation. The cornerstone of this new strategy was the announced $3.6 billion all-stock merger with Black Hills Corp., a move explicitly designed to create a larger, more financially robust entity capable of undertaking the immense capital investments required. Consequently, SMRs transitioned from a vague, long-term option to a strategic necessity. With data center giants like Amazon actively pursuing their own SMR solutions, NWE’s adoption of a nuclear strategy is no longer a choice but a competitive imperative to provide the massive, reliable, and ultimately clean baseload power this new customer class demands.

Table: NorthWestern Energy’s Strategic Investments for Data Center Load

Table: NorthWestern Energy’s Data Center Partnership Timeline

Geography of NorthWestern Energy’s Data Center Strategy

Between 2021 and 2024, NorthWestern Energy’s activities were geographically concentrated within its existing service territories, primarily focusing on development sites in Montana, such as Butte. The generation strategy to support this initial growth was similarly localized, centered on the Yellowstone County natural gas plant and the Colstrip facility, both in Montana. The company’s SMR exploration was notionally tied to South Dakota, but it remained a state-specific, siloed consideration rather than part of an integrated regional plan.

From 2025 onward, the geography of NWE’s strategy has regionalized and expanded significantly. While the major data center load centers remain in Montana (Yellowstone County and Butte), the merger with Black Hills Corp. transforms NWE into a premier utility spanning eight states. This geographic expansion is critical, as the strategy to power the Montana data centers now involves a regional asset base, including a planned natural gas plant in Aberdeen, South Dakota, and the potential SMR site in the same state. Furthermore, NWE’s participation in the 420-mile North Plains Connector transmission project underscores a shift from a localized to an interconnected regional grid strategy. This new geography introduces a significant risk: a potential mismatch where Montana reaps the economic development benefits of the data centers, while the costs and grid impacts of the required generation build-out are distributed across a multi-state ratepayer base, a key point of contention for regulators.

Technology Maturity of NorthWestern Energy’s Power Strategy

In the 2021–2024 period, NorthWestern Energy’s technology strategy for new loads was firmly rooted in commercially mature, dispatchable fossil fuels. The company invested in reciprocating natural gas engines for its Yellowstone County Generating Station and moved to acquire additional capacity from the decades-old Colstrip coal plant. These choices reflect a conservative approach focused on proven, reliable technologies to meet near-term demand. During this time, SMRs were relegated to the “emerging technology” bucket—a technology in the conceptual, pre-commercial stage for NWE, with no concrete investment or development timeline.

Beginning in 2025, while the underlying technology readiness level of SMRs has not changed, their strategic validation for NorthWestern Energy has matured dramatically. The sheer scale of the 1,000 MW Quantica LOI makes it clear that intermittent renewables alone cannot provide the necessary baseload power, elevating SMRs from a theoretical option to a necessary long-term solution. This shift is validated by the actions of NWE’s own target customers; Amazon’s direct partnership with X-energy to develop SMRs for its data centers serves as a powerful market signal that nuclear is the intended end-state for powering AI. For NWE, the exploration of a $1.2 to $1.6 billion SMR project is no longer a forward-looking R&D exercise but a critical step in aligning its long-term generation portfolio with the explicit needs and clean energy goals of its most important future customers.

Table: SWOT Analysis of NorthWestern Energy’s Data Center Strategy

Forward-Looking Insights and Summary

The data from 2025 clearly signals that NorthWestern Energy has embarked on a high-stakes, transformative gamble. The year ahead will be defined by the company’s ability to navigate a treacherous regulatory environment that holds the power to derail its entire data center strategy. The most critical signal to watch is the forthcoming ruling from the Montana Public Service Commission on the complaint filed by Earthjustice; this decision will determine if and how NWE can allocate the colossal infrastructure costs without burdening existing ratepayers, a verdict that will make or break the current agreements.

Market actors should also pay close attention to the “large load” tariff NWE is expected to file in late 2025. The structure of this tariff will reveal the utility’s proposed solution to the cost allocation problem and will become the central battleground for regulators, consumer advocates, and the company. Concurrently, the finalization of the Black Hills merger is a non-negotiable milestone required to provide the financial firepower for this ambition. While the SMR discussion provides a compelling long-term narrative, the immediate strategic challenge is bridging the five-to-ten-year gap until nuclear becomes viable. In the coming year, expect NWE to aggressively defend its near-term use of fossil fuels as a necessary bridge, while any announcement of a specific SMR technology partner or a concrete development timeline would be a powerful signal that the company is serious about its long-term clean energy transition. The central question for 2026 is whether NWE can successfully thread the needle between its immense growth opportunity and the powerful regulatory and ESG headwinds threatening to unravel it.

Frequently Asked Questions

Why did NorthWestern Energy’s strategy for data centers change so drastically in 2025?
The strategy shifted in 2025 because the scale of demand from the data center industry exploded. Initial plans were for incremental loads, but the signing of landmark letters of intent (LOIs) for a potential 2,250 MW of new demand—an amount nearly triple the utility’s entire Montana peak load—made the original fossil-fuel-centric strategy untenable and forced a move toward much larger-scale solutions.

What is the purpose of the merger with Black Hills Corp.?
The $3.6 billion all-stock merger was explicitly designed to create a larger, more financially robust company. This increased scale is considered essential to undertake the immense capital investments, estimated at a combined $7.4 billion, required to build the massive infrastructure needed to power multi-gigawatt data center campuses.

How will NorthWestern Energy power these new data centers before SMRs are operational?
In the near-term, NorthWestern Energy plans to use its fossil fuel assets as a ‘bridge’ technology. This includes acquiring 592 MW of additional capacity from the Colstrip coal plant, utilizing the 175 MW Yellowstone County Generating Station (natural gas), and planning for a second natural gas plant in South Dakota to provide the necessary dispatchable baseload power until long-term clean energy like SMRs becomes viable.

Are Small Modular Reactors (SMRs) an immediate solution for NorthWestern Energy?
No, SMRs are a long-term strategic goal, not an immediate solution. The article notes that SMRs transitioned from a vague concept to a ‘strategic necessity’ for the company’s future. However, it also points out there is a ‘five-to-ten-year gap’ until nuclear technology becomes viable, and the current SMR project is still in an ‘exploratory’ phase.

What are the biggest risks to NorthWestern Energy’s data center strategy?
The most significant threats are regulatory and market-related. The strategy faces intense opposition from the Montana Public Service Commission (PSC) over how the massive infrastructure costs will be allocated without burdening existing ratepayers. Additionally, there is market risk, highlighted by the cancellation of the 600 MW Ardent TAC data center project, and a strategic risk in relying on fossil fuels in the short term, which may conflict with the clean energy goals of their data center clients.