Think small: Why America should bet on small modular reactors

Nuclear power is having a moment, playing a central role in Department of Energy Secretary Chris Wright’s plans and getting plenty of attention (and some support) from Big Data firms. There is good reason for this: nuclear offers clean, safe and highly reliable energy. So why are we not building dozens of reactors today? In part, the regulatory process is slow and unpredictable — both at the Nuclear Regulatory Commission and through local reviews under the National Environmental Policy Act, and nuclear development takes a long time and poses high investment risk.

But mostly, nuclear power is expensive, slow to build, and recent large reactor plants (like Vogtle in Georgia) have suffered from disastrous delays and cost overruns. Large-scale reactors in France, the UK and Finland have experienced similar problems, and the United States has plenty of other more compelling sources of energy. There is therefore little likelihood that large reactors will become fully competitive in the U.S., as large reactors are fundamentally not a strategic industry here: They create no upstream tiers of suppliers, will generate few jobs themselves and have little potential to create downstream users for whom nuclear power is critical — that energy could be replaced by many other sources if necessary (unlike chips for example, a key input into many other industries).

Small modular reactors could be different. SMRs are powered at 1 MW to 300 MW, instead of around 1,000 MW like traditional reactors. They are “modular,” meaning they can be stacked in different configurations depending on need, and they can be built either partially or entirely in factories, where economies of scale can potentially reduce costs by 10% to 15% each time production doubles. SMRs could become an important industry, and could have both upstream and downstream impacts. China and Russia are working hard to dominate this potentially significant industry. Hence the interest from data centers and others.

SMR investors face four core risks: technological risks — new designs may not pan out, or competing energy sources could suddenly become better or cheaper (as solar and gas have done); market risks — on the demand side, we don’t know whether the projected boom in energy demand is going to last, or even occur at all, or whether nuclear’s advantages will really matter; on the supply side, we don’t know if fuel will be readily available or whether plants can be built on time and on budget; regulatory risks — the pathway to approval for new nuclear designs is currently unpredictable, even though the NRC is working to improve it. International coordination, meanwhile, remains in its infancy; and political risks — nuclear needs bipartisan support because builds take so long, and development depends heavily on government backing. Sudden shifts in strategy would be disastrous.

Since nuclear takes such a long time to develop and deploy, these risks are magnified. TerraPower (a nuclear startup) was founded with funding from Bill Gates in 2006, and it still hasn’t delivered its first commercial reactor and won’t operate at scale until the mid-2030s. It takes companies a long time to move their technologies across the four basic stages of technological development and deployment:

1. Basic and applied research, where early-stage funding is key, as investors will avoid projects that are many years away from the market. Expertise — in the form of support from national labs — and, where possible, shared facilities will also be needed, along with sustained funding.
2. Development (also known as the "valley of death"), the stage after research funding runs out but before deployment funding becomes available. This phase remains a critical bottleneck in the nuclear innovation chain.
3. Initial deployment, which is currently supported by the Office of Clean Energy Demonstrations. While OCED has suffered from misguided congressional mandates to support technologies not yet market-ready (e.g., clean hydrogen), it can still play a critical role. The office needs reform — not elimination.
4. Scaleup, which has historically been left to the market, although achieving scale is both essential and difficult. Funding from the Loan Programs Office, focused on scaleup, costs the government little or nothing. It too requires reform, not elimination, and other mechanisms to de-risk deployment will be needed as well.

Governments across the globe (including the U.S.) have helped fund and develop SMRs across the whole development cycle. This range of support is important: basic and applied research help through National Labs matters just as much as commercial demonstration funding or loans for scaleup from the LPO. Taken as a whole, the varied supports it has already provided is substantial, but now we need to forge them into a coherent, consistent, bipartisan strategy that addresses all of the four fundamental stages of industry development and supports SMRs to the point where they reach price/performance parity with fossil fuels.

Today, no federal government capacity exists to implement and then enforce either strategic choices about which nuclear pathways to follow, or more specifically a strategy for SMRs. Different DOE components (and other agencies) operate in their own silos, but effective long-term development of SMRs requires a more coordinated approach. That must include strategic direction from the Office of the Secretary of DOE aligned with clearly defined White House support, and covering many agencies including DOE, NRC, the Federal Energy Regulatory Commission, the Department of Defense, the Environmental Protection Agency, Commerce and State. Accelerated reform at NRC and FERC needs to be part of that strategy.

This is a moment of opportunity for nuclear energy. The sudden demand for clean and reliable energy from data centers in particular could help SMRs become a strategic industry of the future, and a key step toward affordable, clean and abundant energy. But that will require effective support across the entire development cycle — and a sustained commitment based on bipartisan, long-term political backing.