SMR cost concerns challenge industry optimism

Concerns over the potential cost of small modular reactors (SMRs) and the electricity they produce continue to cast a shadow over growing optimism for new nuclear.

The Argentine Modular Elements Power Plant (CAREM) small modular reactor project (Source: Handout via Reuters)

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Proponents say that the recent faltering history of large nuclear projects missing schedules and running over budget are just teething problems for a new industry in the midst of a difficult economic climate.

However, critics claim it as proof that nuclear is not economically viable at all, and it will take too long faced with pressing climate issues.

There is little doubt that new nuclear will, at least initially, be more expensive to develop, build, and run than many are hoping. 

New Generation IV reactors, such as SMRs, are likely to produce hidden costs inherent in the development of first-of-a-kind technology, while high commodity and building material prices, stubbornly high inflation, and interest rates at levels not seen for decades are adding to mounting expenses for the new developers.

NuScale’s cancelled deal to supply its SMRs to a consortium of electricity cooperatives due to rising power price estimates prompted The Breakthrough Institute’s Director for Nuclear Energy Innovation Adam Stein to write that advanced nuclear energy was in trouble.

Speaking during an event at the American Nuclear Society (ANS) 2024 Annual Conference in June, Stein said nothing had changed to fix the fundamental challenges nuclear faces since he wrote that in November, but there was a greater sense of urgency.   

“Commodity prices have come down slightly, though interest rates are largely still the same and those are risks, or uncertainties, that are outside of the developer's control,” Stein said during an event at the American Nuclear Society (ANS) 2024 Annual Conference.

“Until those can be considered a project risk, instead of unknown uncertainties, they are not going to be controlled at all and can drastically swing the price of any single project.”

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Enthusiastic hype

These criticisms clash with growing enthusiasm (critics say ‘hype’) surrounding the new technology.

Twenty two countries and 120 companies at the COP28 conference in November vowed to triple global nuclear capacity by 2050, and developers are making sweeping promises about the capabilities and affordability of their latest creations, many of which will not be commercially available in North America or Europe until the early 2030s.   

SMRs, defined as reactors that generate 300 MW or less, cost too much, and deployment is too far out for them to be a useful tool to transition from fossil fuels in the coming 10-15 years, according to a recent study by the Institute for Energy Economics and Financial Analysis (IEEFA).

“SMRs are not going to be helpful in the transition. They're not going to be here quick enough. They're not going to be economic enough. And we really don't have time to wait,” says co-author of the study Dennis Wamsted.

Existing SMRs in China (Shidao Bay), Russia (floating SMR such as the Akademik Lomonosov), and in Argentina (the still under-construction CAREM) have all cost significantly more than originally planned, the IEEFA says in the study ‘Small Modular Reactors: Still too expensive, too slow, and too risky.’

Construction work on the cutting-edge CAREM project has been stalled since May due to cost-cutting measures by Argentina's President Javier Milei, the head of National Atomic Energy Commission (CNEA) told Reuters.  

The billions of dollars the U.S. and Canadian governments are pouring into nuclear power through subsidies, tax credits, and federally funded research, would be better spent on extra renewables, Wamsted says.

Some 260,000 MW of renewable energy generation, mostly solar, is expected to be added to the U.S. grid just through to 2028, the study says citing the American Clean Power Association, way before any new nuclear is expected to be plugged in.

“Federal funds to nuclear is, in our opinion, a waste of time and money,” says Wamsted.

Overnight Capital Cost range for large reactors and SMRs. (Costs in 2022 USD)

(Click to expand) 

Note: Q = Quartile

Source: Gateway for Accelerated Innovation in Nuclear (GAIN), Idaho National Laboratory (INL) 'Meta-Analysis of Advanced Nuclear Reactor Cost Estimations'

High uncertainty

Breakthrough Institute’s Stein agrees the high degree of uncertainty around the new technology feeds pricing worries, though notes that these problems do not exclude nuclear power and investment was not zero-sum game where a dollar spent on nuclear was a dollar less for renewables. 

“The (IEEFA) report makes some good points that are evergreen. Investors should always complete rigorous due diligence. Public utility commissions should consider ratepayers. Nuclear developers need to deliver the product to market to be viable,” Stein says.

"The industry does need a reality check at times. It can only get to real solutions if you identify and address the real issues."

However, inflated project costs and the failure of the NuScale contract were largely due to factors seen across the energy sector, such as high commodity prices and interest rates, and nuclear's struggles were not unique to the industry, he said.  

A separate report released in June, ‘Meta-Analysis of Advanced Nuclear Reactor Cost Estimations’, which Stein co-authored alongside researchers from Idaho National Laboratory, Argonne National Laboratory, and Massachusetts Institute of Technology (MIT), looks closely at the potential cost of SMRs and sees a wide potential cost variation depending on use and location.

Full-grid decarbonization

Nuclear also needs to be seen as a complimentary technology to renewable and other low-emission generation sources, according to Professor in Nuclear Engineering at MIT and Member of the U.S. National Academy of Engineering, Jacopo Buongiorno.

Electricity from a SMR to an isolated oil sands site or a power-hungry data center may demand a premium cost over rock-bottom grid prices, small nuclear reactors will play an important role in decarbonizing hard-to-abate sectors, Buongiorno says.

“Studies have shown that when you’re going for deep decarbonization – so not 20%-30%, but 80%-90% grid decarbonization – then the value of renewables goes down and the value of nuclear goes up dramatically,” Buongiorno says.

A grid relying on only renewables, due to wind and solar’s relative low capacity and intermittent issues, would have to over-build capacity to reach high levels of decarbonization.

Nuclear power’s smaller footprint per megawatt and high capacity factor, means it can fill the gaps created by renewable generation making it an important piece of the energy transition puzzle.

“It's not either nuclear or renewables, it's both, and they play different roles on the grid. If it takes 10 years to deploy nuclear, whether large nuclear plants or SMRS, it’s worth the wait,” says Buongiorno.

By Paul Day