Small reactors, big hang-ups
SMALL Modular Reactor (SMR) technology, a relatively new application of an old idea that is thought to present a practical opportunity for the Philippines to join the world’s nuclear club, is increasingly looking like the energy sector version of Bitcoin: an intriguing concept that appears as though it must have some use, but on closer examination is not actually all that innovative or economical, and is probably more trouble than it’s worth.
The most recent news about SMRs highlights the persistent uncertainty about whether there is any real value to the technology or not.
On January 20, the US Nuclear Regulatory Commission (NRC) issued what is called its “final rule” on the SMR design of developer NuScale, which is constructing a prototype of its VOYGR plant design in rural Idaho. The decision was hailed by the company, the Department of Energy (which has invested more than $600 million of US taxpayer money in NuScale’s work since 2014), and the media as a breakthrough heralding the dawn of a new age of abundant, cheap, clean energy.
Since I’m writing about it here, you can probably already guess that it is not.
First of all, there was nothing surprising about the recent NRC decision, as the agency had already certified NuScale’s 50-megawatt (MW) SMR design for commercial use in July of last year, completing a review process that began in 2018. The published final rule, which will take effect on February 21, allows utilities to reference NuScale’s SMR design when applying for a combined license to build and operate a reactor; in other words, NuScale may now sell its design to other builder-operators, rather than being limited to developing new SMR plants itself.
Second, despite being a “final rule,” the latest NRC decision still leaves NuScale a step short of being able to manufacture and sell the VOYGR product it is actually marketing, which is a modular plant design consisting of either four, six, or twelve 77MW SMR units. The current NRC certification applies to NuScale’s 50-MW prototype; it will have to go through another application and review process in order to be uprated to the 77-MW version.
There is no reason to believe that won’t happen, but it will likely take at least a few years, and may be held up until the plant being constructed in Idaho demonstrates a few months’ worth of safe and reliable operation. The first unit of the Idaho plant is expected to be operational by 2029, but as with all nuclear projects that timeline must be taken with a grain of salt, as the project has already run into significant cost overruns.
In another development in the SMR sector, Ares Acquisition Corp., a special-purpose acquisition company that is in the process of merging with SMR developer and NuScale competitor X
Energy Reactor Co. in order to allow the latter to go public, offered a rather discouraging outlook for potential investors in an S-4 filing with the US Securities & Exchange Commission on January 25.
An S-4 is a preliminary proxy statement and spells out details of the proposed new business (which is to be renamed X-Energy) and market risks, so to some degree the cautions it gives are a matter of routine. However, the discussion in the Ares filing goes well beyond the usual boilerplate warnings for the sake of transparency.
As for the anticipated output of the business, Ares said it expects X-Energy will yield about $2 billion in revenue from 2023 through 2027 under the US Department of Energy’s Advanced Reactor Demonstration Program, or ARDP. About $1.2 billion of that would be in the form of direct funding from the federal government, while the rest is “assumed to come from X-Energy’s utility or other designated partner in the ARDP program,” Ares said. However, “terms of the cost-sharing agreement are being negotiated and may change,” it added.
The disclosure statement said that the company expects the first commercial delivery of its 80-MW SMR design in 2029, “but the start of construction depends on finalizing the design, producing fuel and receiving permits from the NRC,” and that, “Failure to complete any one of these tasks in a timely manner could result in us being unable to begin production in the anticipated time frame.”
The most sobering warnings contained in the S-4 filing pertain to the anticipated market for the SMR technology, up to and including a caution that there may not actually be a market. The market for SMRs, and in particular for advanced-technology SMRs such as X-Energy’s Xe-100 design, which uses the potent but currently unavailable high-assay low-enriched uranium (Haleu) fuel, has not actually been established, Ares said, nor has advanced SMR technology been proven at scale.
Ares explained that its estimates for the “total addressable market and expectations of certain unit economics for SMRs” are based on internal and third-party estimates, which combined potential contracted revenue, the number of potential customers based on those who have expressed interest in X-Energy’s design, and assumed prices and production costs.
“However, our assumptions and the data underlying our estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time,” it said.
Ares also warned that it may not