From Large to Small Modular Reactors
Nuclear power plants tend to be massive projects. Output is in the gigawatts, investments are required in the tens of billions, and construction times are in years if not decades. This causes a few problems:
- It is difficult to find money out of government funding due to the massive time lag between the start of the project and the date of the first power production.
- It is not a good match for small countries or remote areas, and requires to some extent the entire power grid to be adapted to the nuclear power plant.
- When something goes wrong, instead of a localized incident, it can become a continent-wide disaster.
- Each massive project is a custom experimental design, blocking the industry from developing any sort of standardization in its production process.
Overall, it could be said that the traditional approach to nuclear power suffers from 2 weaknesses: too high costs, and too high risks.
Some of this could be solved by 4th generation nuclear power plants, which use new and safer designs. But another approach called SMR (Small Modular Reactors) is looking at a new way to split atoms to generate power and solve both problems at once.
Source: IAEA
The demand for more nuclear power is now exploding, driven by a mix of energy-hungry AI data centers and the realization that renewable intermittent production is an issue until we scale up battery systems sufficiently, which might take decades.
Why Using SMRs
The central idea of SMRs is that instead of white elephant giant & custom projects, nuclear reactors should be built in the same way we built planes and ships:
- A standardized template allows the reuse of the same design countless times, spreading out the R&D costs.
- This also means the interchangeability of spare parts and less training costs over time.
- Manufactured and assembled in series, in a dedicated factory, allowing for experience to build up and economy of scales.
- Moved to sites where they are needed from the factory.
In theory, this should provide radical economies of scale, as every extra reactor produced reuses previous skilled labor, machinery, standard setup, etc. For example, an SMR reactor should take around three years to be built instead of the usual 5-10 years (sometimes 15-20 years in the worst cases, like the Vogtle plant in Georgia).
Another factor is that smaller reactors simply produce less energy on a per-unit basis. This means that out-of-control chain reactions leading to catastrophes like Chernobyl are inherently less likely.
When combined with 4th generation nuclear tech improvement, this can make SMRs several orders of magnitude safer than the older designs.
Lastly, because SMRs are made of several sub-units, it allows for great flexibility in the final power output, without having to perform a complete redesign each time.
The lower output also opens new applications, like on-site energy production for industrial sites or military bases, which could help decarbonize operations that are almost impossible to power with renewable alone.
“With SMRs, we have opened up a whole spectrum of customers.”
Rolls Royce CEO
As a final bonus, the smaller size of SMRs allows for them to be installed on the site of “normal” fossil-fuel power plants, like decommissioned coal plants, making them reuse the already existing grid infrastructure as well as reducing the land demand for the project. At least, as long you got approval from the Nuclear Regulatory Commission (NRC) for the nuclear power plant Emergency Planning Zone, as the company NuScale did after a grueling 7-year process to get the approval.
Source: NuScale
NuScale Power Corporation (SMR -6.85%)
NuScale’s Competitive Position
NuScale is one of the leading contenders in the race to mass-produce SMRs in Western countries, with only Russian and Chinese state companies ahead.
Notably, NuScale is the sole SMR technology certified by the U.S. Nuclear Regulatory Commission (NRC).
Founded in 2007, the company was very early in betting on SMRs, at a time when nuclear energy in general looked like it was on a trajectory of permanent decline, especially after the 2011 Fukushima incident. So far, it has invested $2B in its technology and production process.
With 6 reactors currently in production, the company is heading towards its first commercial delivery, which is expected to be achieved around 2030.
A Modular, But Known Design
NuScale’s reactors VOYGR can be carried from the factory to power plant sites on the back of a very large truck. They each produce a 77 MWe (Mega Watts equivalents) or electrical capacity, with up to 12 modules possible by plant (924 MWe)
Source: NuScale
These reactors are expected to have a 60+ years lifespan.
The technology behind it is the tried-and-tested light-water nuclear (LWR) reactor. While it may be less innovative than other designs using thorium, high pressure, etc., this has helped secure regulators’ approval and de-risk the development process.
It also leverages the existing nuclear power supply chain, from sensors to uranium fuel assemblies, reactor cranes, and control systems.
Source: NuScale
These SMRs are also “walk-away safe”, meaning that they stay safe even with no human intervention, cooling down naturally if not maintained.
This includes another feature: an unlimited “coping period,” defined as the time between normal operations and irreversible damage to the reactor in case of an unscheduled shutdown. Most other light-water nuclear (LWR) reactors have a coping period of a few days, making them inherently less safe in case of a catastrophe.
NuScale reactors can also be restarted without an active power grid, a common limitation of most other reactor designs.
Source: NuScale
Applications
Power Grid
The obvious main application of nuclear power plants is producing electricity for the power grid. As efforts to decarbonize our energy mix are growing, so is the need for more electricity. This is because a lot of energy consumption today is not yet electrified, like transportation (gas-powered cars) or heating (oil or gas-fueled furnaces).
As NuScale’s SMRs can be implemented on the site of decommissioned coal power plants, they require very little investment in extra grid infrastructure to replace fossil fuel plants.
AI
The demand for power from data centers is expected to jump from 3-4% of total electricity consumption in 2023 to 11-12% in 2030. This is equivalent to the current electricity consumption of 1/3rd of US homes.
An extra issue is that considering the tens or even hundreds of billions of dollars of capital invested in these data centers, continuous operations are a must. As we are talking of GW-scale consumption, relying on unstable and variable renewables can be a risky proposition.
This is why all big tech companies are now scrambling to imitate Microsoft with its deal for re-opening an entire nuclear power plant and lock its entire output for its AI data centers, and secure in advance stable nuclear power for themselves.
Industrial Applications
A lot of industrial processes require very high temperatures, often in the form of ultra-hot steam. This can for example include the production of paper, ammonia (a fertilizer and key component of explosives), steel, plastics, or even seawater desalination (one 77 MW reactor can provide the energy for 77 million gallons/290 million liter of water per day).
Source: NuScale
Currently, this sort of process, especially the one requiring the highest temperature, is in the immense majority powered by fossil fuels, especially natural gas.
This in theory can be advantageously replaced by nuclear power plants, especially as the electricity generation is already a result of the production of ultra-hot supercritical steam by the reactor core.
However, the traditional design of nuclear power plants had an output that was just too large to be easily integrated with a normal industrial operation like a steel mill. The regulatory and space constraints, as well as the lack of off-the-shelves modular designs, were a problem as well.
SMRs are able to alleviate all these objections at once, with lower output per unit, lower regulatory burden, and more flexible designs. NuScale reactors are expected to be able to produce 500,000 pounds of steam per hour, at 1,500 psia & 500°C.
Hydrogen
As hydrogen is considered an alternative to fossil fuels, the way to produce the energy for hydrogen generation is still discussed. On the one hand, renewables could be cheaper on a per kW basis, but intermittency means that the expensive hydrogen generation plant might be idle for too long periods.
NuScale’s reactor could produce 50 metric tons of hydrogen per day, or the consumption of 38,000 cars with fuel cells.
Nuscale’s Business model
Even when small and modular, nuclear power plant projects are a major investment, with years of expenditure before starting to generate income from the energy generated, this makes their financing a task almost as crucial as the engineering and science itself.
NuScale has entered into a partnership with the private investment platform ENTRA-1 and the private asset management firm Habboush Group to answer this problem. Both investment firms specialize in energy and infrastructure financing and operation.
This offers flexible options to companies looking to implement SMR technology: They can either just purchase the energy produced, operate the plant, or own and operate the plant, depending on their preferences.
For example, an electric utility company with experience in nuclear power will likely want to directly own and operate the plant. However, a chemical plant will likely prefer to just sign a long-term purchase agreement for the produced high-temperature steam.
Ongoing Projects
As the technological and regulatory hurdles are being pushed into the rear mirror, NuScale is now actively growing its order book. This so far includes projects on three continents, for example:
North America
- Standard Power in Ohio and Pennsylvania, for nearly “two gigawatts of clean, reliable energy”.
- The Prodigy Marine Power Station in Quebec has deployed 1-12 reactors for the production of clean fuels such as hydrogen and ammonia on a commercial scale.
Europe
- RoPower Nuclear: A project in Romania with Nuclearelectrica (the national nuclear power plant operator) to deploy 6 VOYGR reactors for 462 MWe of carbon-free electricity generation.
- KGHM Polska Miedź in Poland, to deploy VOYGR reactors as a coal repurposing solution for existing power plants, with deployment as early as 2029.
- Getka & UNIMOT in Poland, also to replace coal power plants.
- Energoatom in Ukraine, with the aim to deploy VOYGRs as soon as the war ends to rebuild the country’s energy grid.
Asia
- Indonesia Power, looking at a proposed 462-megawatt facility in partnership with Fluor Corporation, and Japan’s JGC Corporation.
- GS Energy in South Korea, for a 6 VOYGR reactors order that could start in 2028 and be completed by 2030 to supply the new hydrogen industrial complex in Uljin.
NuScale’s Financials
As the company starts to generate money from agreements like with RoPower in Romania, it is starting to have some revenues after almost 2 decades of “startup mode”.
Still, the company is experiencing around $50M net loss every quarter, reflective of the company’s operating expenses. This means that until it has started to fully sell and/or operate VOYGR reactors, the company will need more cash infusion to stay afloat.
Luckily, the stock price has recently gone up, which will help it raise more cash without diluting too much of its preexisting shareholders.
Potential investors should also be aware of the existence of 31.4M shares in the form of options and warrants, on top of the 252.2M shares outstanding (as of December 2024).
Source: NuScale
Conclusion
In a tightly regulated and very technically complex field, it can pay off tremendously to be a first mover. Not only does this give an advantage in reaching the market first, but it can even help a company shape the future of the regulatory environment and the potential customer’s expectations.
NuScale has been a trailblazer in SMR technology and is still leading the industry. Other nuclear technologies like thorium, molten salts, fast reactors, or floating power plants, could all be integrated into SMR. However, this adds another level of complexity which might prove an issue, both in engineering and with the regulators.
Instead, Nuscale focused on proven light water technology, simply changing its scale. This should help it move faster, and become the most known SMR stock in the market.
So potentially, after a stock market boom in segments like EVs and AI, the next step could be a boom in the energy generation able to power these sectors with carbon-neutral power.
Investors will need to remember however that energy generation is a very capital-intensive industry, and that nuclear power is moving slower than other tech sectors, meaning that patience and a high tolerance to volatility will be needed.
