Small modular reactors could help meet surging U.S. electricity demand, but regulatory and financial barriers still stand in the way of deployment.

An increasingly automated and electrified domestic manufacturing industry and the growth of artificial intelligence computation will require substantial increases in national electricity generation capacity over the next five years and beyond. While the United States has a relative abundance of renewable energy generation in some places, that requires massive storage facilities to meet density and reliability requirements in applications such as data centers. At the same time, the U.S. grid, a behemoth infrastructure of 600,000 miles and over forty to fifty years old in most parts, has limited additional capacity for long-distance transmission. New, additive electricity generation solutions are urgently required if the United States is to maintain and increase its economic competitiveness. What those will be, and how they can be achieved both economically and with maximum national security, constitutes a critical national challenge. One long-awaited candidate is the small modular reactor (SMR). The key question: Can we make it a timely reality?

The State of U.S. Nuclear Energy

As of today, only large-scale nuclear facilities exist. There are ninety-four operating reactors across the country, making the United States the world’s largest producer of nuclear electricity, generating about 30 percent of the world’s total nuclear energy. Although most U.S. reactors were constructed between 1970 and 1990, with periodic upgrades, nuclear energy has consistently accounted for 20 percent of total electricity generated in the United States since 1990. Since then, societal concerns, blossoming regulatory adjustments, market uncertainties, construction delays, and a gradual weakening of supply chains have adversely affected new large-scale reactor development. Partly in consequence, over the last ten years, nuclear energy developers have been working on designs for SMRs, microreactors, and certain advanced reactors to address those issues.

SMRs are designed for 50 to 300 megawatts (MW) of power generation and are cooled using inert gas, liquid sodium, or molten salt, which, unlike water, do not evaporate easily. SMRs and advanced reactors also use passive control systems based on natural heat dissipation or gravity, thus reducing reliance on active or manual control systems. They have smaller cores and more than one ancillary safety system to prevent leaks, or, in the case one occurs, to contain it more effectively. Their smaller operating scale makes them ideal to co-locate near industrial and urban centers. 

The Promise of Small Modular Reactors

Small modular reactors provide an answer for many of the electrification challenges we face. Unlike solar or wind, they are energy dense and dispatchable, and as such, they do not require large energy storage investments with the additional costs and complexities involved. Given an exceedingly small land footprint, they can be established virtually anywhere in any geography without extensive reliance on the national transmission system. That distribution makes for a more resilient infrastructure. For critical applications, they are suitable for behind-the-fence and/or behind-the-meter installations. They can provide distributed energy or process heat where needed and can be scaled up to gigawatt-scale production, if needed. The key question is: Can they overcome regulatory, financial, and market challenges to meet national electrification challenges in the next five years?

Obstacles to Deployment

That question has been asked consistently for many years, with launch dates being consistently pushed back. The key aspects of SMRs discussed above—land use, size, cooling systems, passive control systems, smaller cores, and potential grid independence—differentiate them from large legacy reactors. Combined with an economic, societal, and national security imperative to rapidly increase domestic energy production, these factors suggest the need for simplified and accelerated SMR development. That has not happened for three main reasons: Regulatory, market, and financial issues related to a first-of-a-kind (FOAK) reactor.

While the technology and physics behind SMRs are not new, the concept of factory-built, widely deployable smaller reactors—and their designs—is. The regulatory environment has not adapted to moving SMRs to widespread commercialization. The Nuclear Regulatory Commission (NRC) has an established framework of regulations for issuing new reactor licenses. Most were originally established for large-scale plants and have not been tailored to SMRs. An oft-cited challenge in designing and deploying a new standardized reactor is the requirement to meet the broadly defined risk parameters that those entail. A related issue is the balkanized structure of regulatory oversight, with authority distributed among the NRC, Department of Energy, and Department of Defense. Other issues related to FOAK SMRs are the financial viability challenges related to establishing a broader market for new technology, especially one with extremely high upfront capital requirements.

The well-known case of NuScale is illustrative. The company has the first (and so far, only) SMR design to receive regulatory approval. That approval, from initiation in 2008 to final approval in 2023, took fifteen years. Its pilot plant, under an agreement with the Utah Associated Power Systems (UAMPS) in 2015, was touted to start operations in 2023 at an expected construction cost of about $3 billion, receiving a $600 million Department of Energy subsidy. By 2023, still under study and not in construction, the estimated costs had ballooned by more than three times to $9 billion, at which point UAMPS pulled the plug. Those costs represent a per-unit cost of electricity several times that of solar and wind generation, even after higher costs associated with firming battery storage.

For a private investor, even with $600 million in government support, such a project does not make economic sense. To realize the potential for SMRs to provide commercially competitive, additive, dense, dispatchable, distributed electricity generation, the industry will have to prove that SMRs can compete at scale with alternative unsubsidized energy systems. Given the huge upfront capital investments required, neither institutional private capital nor public utilities are likely to be willing to accept the risks of an FOAK system. The answer, if the federal government finds the will, would be an Apollo-style program to build and operate FOAK small modular reactors for energy-intensive facilities as proof of concept. It would provide a pathway to subsequent commercial development. AI and robotics are here. Will SMRs be one of the answers?

Robert W. Sweeney is the Managing Partner of Accelex Resources, an energy and minerals venture investor, and a former bank CEO with a thirty-five-year career in international finance. He holds a certificate in Clean Energy Systems from MIT, a Master’s in International Affairs from Columbia University, and is a Master’s of International Policy candidate at Texas A&M University.

Rashmi Singh has been Chief Lending Officer of a San Francisco-based commercial bank, with a certificate in Clean Energy Systems from MIT and a Master’s in Energy Law from Texas A&M University.

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