Discover more from Planet Earth & Beyond
Nuclear Power Just Took A Huge Step Backwards
The future of nuclear might not be so bright after all.
Nuclear power is utterly remarkable. Despite popular opinion, it is one of the safest and lowest carbon forms of energy. It is also one of the few on-demand forms of low-carbon energy. As such, it will be a crucial technology as we transition to net-zero. However, the nuclear industry faces a massive problem: it costs too much. New nuclear power plants cost tens of billions of dollars and take well over a decade to build, and once built, the energy they produce is some of the most expensive on the market. This has led many governments and energy providers to distance themselves from this planet-saving technology. But a new type of reactor called an SMR promises to solve all of these issues and kick-start a nuclear renaissance, saving the nuclear industry. However, a pioneering SMR project has just been cancelled because costs are ballooning out of control. So, the question has to be asked: is the future of nuclear energy doomed? Possibly not.
Let’s start at the beginning: what is an SMR? SMR stands for Small Modular Reactor. Typical nuclear power plants have several enormous custom-built reactors. These are incredibly complex and must be carefully and accurately assembled on-site. This skyrockets the construction cost and deployment time. SMRs solve this by using reactors small enough to be fully assembled off-site in a controlled factory and then shipped to the location. These reactors produce less power, so you need more of them, generally over 10, to make a power plant. However, the overall cost of these reactors per MW of power should be far cheaper than regular reactors, as the factory can use economies of scale to lower prices. Deployment should also be far quicker, as reactors can be built ahead of time, and their small nature and controlled production facility make construction far quicker. There is even a flexibility advantage, as an SMR plant can add or remove reactors quickly to better meet demand. Ordinary reactors take decades and billions of dollars to expand their output.
** Quick interruption, if you want more from me, or interact with me, go follow me on Bluesky**
Several companies are pioneering SMR technology. But, the company spearheading the SMR movement is NuScale. Their Power Module SMR is the first and only one to receive design approval from the US Nuclear Regulatory Commission (NRC), enabling them to operate it within the US.
Half of the reason for this head start is that their reactor uses a pressurised water-cooled design, which is a similar technology to regular commercial reactors, just at a small scale. All the safety legislation around this design is already sorted out, whereas other SMRs which use more revolutionary reactor designs, like helium-cooled or molten-salt designs, have to prove their safety, and the NRC has to figure out new standards for the technology. It also means that NuScale uses the same type of nuclear fuel as current reactors, whereas these other designs require high enrichment or unique types of fuel, which simply aren’t available or are heavily regulated.
Each Power Module can produce 77 MW of power and stands 20m tall and 2.7m wide and deep. NuScale’s SMR pants are called VOYGR, and you can get them with 4, 6 and 12 Power Modules, providing up to 924 MW of power. That is enough to power a decent-sized city.
Now, NuScale initially stated that a VOYGR plant with six reactors (VOYGR 6) would only cost $5.3 billion, and the energy cost would be only $58 per MWh or around half of what current nuclear energy costs.
But these numbers are just theory until NuScale actually produces, delivers and runs a VOYGR plant. This is where the Department of Energy (DoE) and the Utah Associated Municipal Power Systems come in. Together, they are the first “customers” of NuScale, and together, the three started the Carbon Free Power Project, which aimed to build a VOYGR 6 SMR plant in Idaho that would be fully operational by 2030.
The Carbon Free Power Project has been active for a few years now, honing the SMR reactors’ design, production, and delivery. In fact, this process is one of the main reasons NuScale got NRC approval, as that was part of this initial set-up process.
But, a few days ago, the news broke that the project had been cancelled. Why? Well, NuScale’s costs had surged! Construction costs have leapt 75% to $9.3 billion. This was thanks to the increased price of essential raw materials such as copper and steel and the dramatically higher interest rates in this post-COVID-19 world, making financing such a project excruciatingly expensive. This interest issue is particularly problematic for nuclear facilities, as the vast majority of their costs are front loaded into construction, which needs financing through debt. Fossil fuel power plants are the opposite, being cheap to build but expensive to fuel, meaning they are less affected by high-interest rates.
These increased construction and finance costs have pushed up the overall cost of energy from a VOYGR plant. It is now 52% more expensive at $89 per MWh. This price would actually be much higher if the energy wasn’t going to be subsidised by the DoE to the tune of $4 billion. Without that subsidy, the cost is more like $119 per MWh.
Inflation is also making this cost more expensive. These figures all use 2022 dollars, but the project will only start selling energy by 2030 at the earliest, and US inflation is set to soar in the interim. This inflation means that by 2030, the actual cost of energy from this plant after subsidies will be $102 per MWh. That is close to double what NuScale initially promised.
At face value, these rising costs seem unpalatable. But are they really that high? Lazard’s report on the estimated levelized cost of energy of unsubsidised nuclear power is $97–$136/MWh. So, even in the current worst-case scenario, this project’s energy cost will be on par with other nuclear plants. But, the construction costs are the killer. Current regular nuclear reactor projects are projecting construction costs of up to $8.2 million per MW of power. This is considered insanely high and has been pushed up by higher interest rates and raw material costs in the same way NuScale has been affected. By contrast, the VOYGR 6 in Idaho is projected to cost $20 million per MW!
This high construction cost should be expected, though. What makes SMRs cheap is the ability to manufacture reactors in a controlled factory en masse. As this is NuScale’s first proper plant, such economies of scale don’t yet exist, and it is expensive to get these large-scale reactor factories set up and operational. But, once set up, construction costs should start to plummet.
So, it is interesting that construction costs weren’t the reason for the Free Carbon Power Project’s cancellation. Instead, it was wholesale energy customers not buying its energy.
The DoE and the Utah Associated Municipal Power Systems stated that for the project to continue, they needed to reach 80% of their energy purchase commitments from wholesale energy providers. This didn’t happen. Why? Well, as well as these rising costs, the project still needs to undergo additional design, licensing by the US Nuclear Regulatory Commission, construction and pre-operational testing, which could raise prices even further. What’s more, interest rates, material costs, and inflation could easily get worse than we project them to be, making final delivery costs far too expensive by 2030. It seems wholesale energy providers don’t want to take the risk and agree to buy energy from the Carbon Free Power Project, leaving the project dead in the water, and therefore it was cancelled.
This is deeply disappointing, as SMR technology has a cost hump we need to crest. As I said, the first few SMR plants will be more expensive than we predicted, partly because the economy and materials market have changed but also because it costs a tonne to get the reactor factory set up and running smoothly, regulations passed, and personnel trained. Once these costs are paid off, the overall cost of NuScale’s SMRs should be far cheaper. They just need someone willing to spend the money to get them off the ground.
Luckily, NuScale still has other opportunities for this. They still have a partnership with US steel mill operator Nucor, who are looking to make ultra-low emissions nuclear steel mills around NuScale’s technology. As this project doesn’t rely on getting wholesale energy providers to commit to energy purchases (as Nucor will be the plant’s operator and energy purchaser), it won’t face the same problems as the Carbon Free Power Project. Moreover, steel mills require the 24/7 high-energy demand that other low-carbon forms of energy can’t yet deliver, making nuclear their only viable option to reduce their emissions. These factors mean that Nucor could be a far more solid development route for NuScale.
We have seen this story play out time and time again. New technology is expensive, and its initial rollout is fraught with hurdles, but once it is widely used, its cost plummets and becomes a critical part of our way of life. You can see this with telephones, the internet, cell phones, laptops, smartphones, EVs, renewable energy and now SMRs. Yes, this project’s cancellation is a significant setback for NuScale and the SMR industry, but it doesn’t mean this technology will go away, only that it will take longer to come to fruition. Let’s not forget that the attraction to SMRs isn’t just their theoretical lower cost but also their speed of deployment and flexibility. So even if NuScale can only lower costs to match regular nuclear plants, they are still the better choice. Nuclear power and SMRs are still set to be a vital part of our shift to net-zero, so don’t write off NuScale just yet.
Thanks for reading! Content like this doesn’t happen without your support. So, if you want to see more like this, don’t forget to Subscribe and follow us on Google News and Flipboard and follow me on Bluesky, or hit the share button below.