The new energy world is full of ambition about future developments, not least nuclear. At some point hard questions have to be asked and answered. Dan Yurman is asking questions about next generation Small Modular Reactors (SMRs). For example, why take on the unknown material and regulatory risk of SMRs over the known risks of proven LWRs? Which governments and/or investors will back the $500m needed to get an SMR into production? Where are the multiple customers that bring essential economies of scale? There are plenty more. For competitive reasons, some firms will keep the answers to themselves, but investors and others, including suppliers, eventually will want to know what SMR developers are thinking. Let’s remember that sceptical questions are not meant to slow progress but speed it up with facts and an unbiased view of market realities.
The race for investor commitments of cash and eventual market share among developers of small modular reactors (SMRs) globally is on. Developers in the U.S., Canada, U.K., South Korea, Russia, and China, and in other nations are pursuing their technology visions for a variety of designs concepts including light water (LWR), molten salt, HTGR, and other GEN IV types.
Success is not certain for any of them given the huge costs and long time frames needed to bring these reactors to market and to sell enough of them to produce an acceptable return for the investors.
The IAEA ARIS Database lists two dozen efforts globally to develop commercially successful SMR efforts followed by another dozen or so demonstration units of which a few might also join that crowd.
Next Generation is underway
Conventional wisdom within the global industry says that LWR type designs have the fastest path to commercial success because the technology has a tried and true technical legacy which offers a quicker response from regulatory agencies and more cost competitive pricing and reliability in terms of quality from suppliers of components. For suppliers, first of a kind issues relate to fabrication, but not to design principles.
That said in the U.S. several major nuclear utilities have put up cash money to partner with developers of advanced reactors. Southern Nuclear is working with TerraPower on a molten chloride salt design and with X-Energy on TRISO fuel for it. NuScale has in UAMPS its first customer for its LWR design to be built at a site in Idaho with ground breaking expected in the early 2020s.
In Canada New Brunswick Power has inked development agreements with two distinctly different types of reactor suppliers – the ARC100, which is based on the sodium cooled Integral Fast reactor developed and operated at Argonne West and Moltex, which is a Molten Salt Reactor that has a unique capability in its design to do load following by storing some of the hot salt to coordinate timing of its use with wind and sale electrical generation sources.
Where will investors place their bets and why?
The challenge for an investor who wants to place substantial bets on one or more of these efforts is that it seems to be a daunting task, especially at this early stage for some projects, to figure out which ones will go the distance and which ones will fold.
The failure of Transatomic to produce a design with the necessary power and efficiency needed to come to market is an object lesson for anyone with stars in their eyes about the brave new world of nuclear energy entrepreneurship.
What are the prospects for global SMR sales? The host nation of your development effort, no matter how large or small, is at best a springboard for entry into the global effort to decarbonise the electrical generation industry.
Bigger isn’t always better when it comes to host countries for SMR efforts
Several nations, including the U.S. and the U.K., say they are interested in SMRs, but both nations have put up peanuts in terms of the cash needed to jump start the industry. The U.K. government went so far a few years ago to announce a “competition” for SMRs, and then it sat on its hands and did nothing thereafter while the Prime Minister and Parliament dithered over Brexit.
The U.S. government has one major cost sharing agreement with an SMR developer for design and licensing costs. It has handed out lots of awards of small amounts of money ($millions) for slices of technology development, but hasn’t committed to creating an industry ($billions).
Meanwhile, two other U.S. LWR developers dropped out of the race lacking both potential customers and the cash to continue their efforts
Being a big nation has not translated into being a big player in terms of growing the global SMR industry. By comparison, Canada’s competition effort through its national laboratory has yielded at least a dozen new efforts and two of the developers recently achieved new levels of maturity in terms of development and regulatory review.
A country with one tenth the population of the U.S. is punching above its weight in terms of producing winning rounds of progress with SMRs..
Are small countries better bets for SMRs?
Many SMR firms have inked memorandums of understandings for LWR and advanced reactors with countries across the globe. How will these firms present their technological differentiation cost competitive numbers to customers who at best are risk adverse to all but the most well understood reactor technologies which already are embedded in operating plants? How will these firms present an SMR as an alternative business case to a 1000 MW mainstream LWR?
What’s the best path for raising the $500M or more needed to take an SMR design from drawing board to production and what country is the best place to do it? How will these firms leverage global prospects for raising money and what kinds of investors will have the patience to wait a decade for their payoffs?
Is it worth talking to small countries for which a large reactor, e.g. 1000 MW, is a “bet the state-owned utility” proposition?
The sticking point once they get past the price difference between big and small units is the apparent unwillingness of many governments to offer regulated rate structures, and a floor on the rate of return to attract investors to specific new builds assuming the reactor technology itself is mature enough to break ground?
Examples of small nations with big interests in SMRs
- Bulgaria went so far recently to offer virtually nothing to developers other than a qualified site and some long lead time equipment from a previous failed new build as incentives. While it appears to be stuck on large reactors, an SMR effort might be a more plausible path for the country.
- The Czech Republic may have to buy out its minority investors in CEZ, the state owned electric utility, before it can commit to a new nuclear projects. These investors have threatened to sue over the risks of building new full size reactors at the country’s two power stations. The government could make a plausible case for lower risk SMRs at the same time it buys out the thorn in its side.
- Poland has kicked its start date for a new nuclear energy project into the future more than once due to an inability to commit to a financial package to pay for one.
- Jordan has entertained proposals from three or four SMR developers but faces similar issues of raising the necessary funds and getting public approval for a nuclear reactor energy project.
- Romania, which is well on its way to adding two new 700 MW CANDU type units to its fleet, is nevertheless talking to at least one SMR developer.
- Ukraine is committing to building an SMR component factory for exports and also, possibly, to build them for its own use once its fleet of Russian VVERs reach the end of their service lives.
- South Africa, which ditched an ill-fated plan the buy eight 1200 MW units from Russia, is rethinking its plans for electrical power from nuclear energy, and smaller, more affordable, units are clearly one of the things it has in mind.
The key question is in terms of global target markets: which ones offer the best opportunities for a favourable investment climate in new nuclear energy projects and are predisposed to SMRs due to the daunting costs of their bigger brothers?
What about the regulatory hurdles?
Are nuclear regulators going to continue to treat SMRs the same way they’ve dealt with large LWRs? How will agencies steeped in light water expertise move up the learning curve to address safety issues for molten salt, high temperature gas, and other advanced designs? In the U.S. and Canada, respectively, their nuclear regulatory agencies are moving ahead to adapt to the times, but globally lots of smaller nations may have to rely on safety reviews from other countries.
Will some countries decide the cost of being able to certify the safety of an SMR, especially an advanced design, just isn’t worth the trouble and cost? Will this perception be a barrier to entry into markets which are most likely to see the affordability of SMRs as a plus?
How and where will the supply chain and production savings appear?
How many units does an SMR need in terms of ink in its order book to make a substantial development in supply chain and production capabilities. No suppliers will be able to pass along volume discounts to SMR developers if there aren’t enough units to bring up a new production facility of fabrication process.
One SMR developer is building a factory in the U.S. to manufacture components with an eye towards making them not only for its own LWR SMR, but also to be a global centre for production for other firms. Can an OEM industry achieve success and when?
Are alternative uses of SMRs something that customers will want?
Almost every developer of SMRs, both LWR and advanced types, touts alternative uses of the power of the reactor for efforts like hydrogen production, water desalinisation, process heat, etc. It would be interesting to see how developers quantify these market opportunities relative to the needs of their customers for electrical power. What’s the best mix of offerings of electrical generation and use of their reactor for their other outputs?
Fuel In and Fuel Out questions
Fuel fabrication capabilities for LWR and advanced reactors are developing. For LWRs, existing fuel suppliers can adapt to meet near-term demand. However, advanced reactors that need low enriched high assay fuel (greater than 5% but less than 20% U235) are looking at a development landscape that even with U.S. Department of Energy (DOE) money is at a minimum three to five years away from production. The same can be said for TRISO fuel. Will the fuel supply be ready when the designs are ready to come to market?
Spent fuel management for LWRs faces the same challenge as for existing nuclear utilities. The lack of deep geologic disposal and reprocessing facilities means the spent fuel will be stored at the reactor. For advanced reactors, such as molten salt and HTGRs, less has been said about disposition of the spent fuel. Some developers take the “bathtub” approach which is that the entire small reactor module is disposed of? Exactly where is that going to occur and how will it be done?
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There are lots of other questions that could be asked? What are your questions? Please post yours in the comments section?
Dan Yurman is the author of Neutron Bytes and writes on nuclear matters.
This article is published with permission.