Welcome to our Friday mailbag edition!
Every week, we receive great questions from your fellow readers. And every Friday, I answer as many as I can.
This week, the conversation continues around one of my top predictions for 2024: the nuclear energy revival and the uranium fuel that will power it.
In particular, we’ve gotten a lot of questions about SMRs (or small modular reactors), like this one from reader Ian S.…
Thanks for your research and answers to interesting questions. I read a few months ago that the cost of SMRs had ballooned thus making them uneconomic. Is this correct?
Your page seems to indicate that a lot of work is being done in this space, thus debunking the uneconomic cost of these units. What is the situation as you understand it?
– Ian S.
Hi Ian, thanks for that excellent question.
First, for readers who don’t know, SMRs are a smarter solution to today’s bulky nuclear power plants.
SMRs need less cash up front. And their small size makes them great for places where big reactors just won’t fit.
Now, you’re right. The cost of constructing SMRs has risen over the past few years. And that has led to concerns about their economic viability.
However, the cost of large traditional nuclear plants has risen too.
Georgia Power is due to spend more than $30 billion on their Vogtle Units 3 and 4 nuclear plants. That project blasted through many budget increases along the way.
In contrast, SMR nuclear projects can cost as low as $3,000 per kilowatt (kW) to build. A 300-megawatt (MW) project could cost $900 million.
That compares favorably to conventional, massive nuclear plants, such as Vogtle in Georgia or Sizewell C in the U.K. Those cost about $30 billion, or $9,000 per kW.
But I do want to address the reasons behind prevailing fears about recent rising costs. Then, I’ll talk about why that’s a good thing for innovative SMR technology.
First, there’s the cost of modern factory construction. SMRs are designed to be in modular systems. Once a factory is built to construct one SMR, more SMR’s can be built easily and cheaply. But building that factory incurs an upfront cost.
Last year, NuScale announced it had overrun its initial construction budget by 53%. The cost jumped from $5.3 billion to $9.3 billion. That leap caught the nuclear industry (and me and my team) off guard. And it seems more due to bad planning than expenses.
Second, SMRs require cutting-edge technologies, advanced materials, and quality control systems. A Cato Institute study found that SMR cost reduction requires a high rate of manufacturing. They calculated that to be 5–10 reactors per year.
Big, diversified companies like Westinghouse can leverage existing systems and materials to drive down construction costs. They can deploy existing transportation methods to move them.
That’s why I believe these larger companies have an edge over smaller ones.
Finally, materials and labor costs have risen. That’s due to post-Covid supply chain shocks and inflationary pressures. But that’s not specific to SMRs.
All that said, once the initial prototype and factory are set up, SMRs can be mass-produced more cost-effectively and quickly than traditional nuclear reactors.
They are also more adept at distributing energy from multiple spots than large nuclear power plants.
Their smaller scale allows them to be transported to regions with limited access to traditional power sources.
Future technological advancements added to existing factory builds will lower SMR costs.
I’ve written about the benefits of new SMR technologies and which firms are involved, here.
Plus, as I’ve also written, there is a growing D.C. policy focus on nuclear energy technology and resource strategy.
The overall U.S. Departments of Defense and Energy nuclear budget totals $756 billion over the next decade. That’s an average of about $75 billon per year. It’s 19% larger than that projected a year ago.
And based on my sources in D.C., I see this figure growing as the U.S. secures its desire to be the top dog in the nuclear energy space.
And specifically, there’s an allocation of $1.6 billion to modular reactor technology and development. I expect that to grow, too. Because you can’t grow nuclear energy power without advancing technology.
That’s why I’m bullish on the future of nuclear energy, SMRs, and micro-modular reactor technologies.
And that’s all for this week’s mailbag. Thanks to everyone who wrote in!
If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition.
I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice.
And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at [email protected].
In the meantime, happy investing… and have a fantastic weekend!
Regards,
Nomi Prins
Editor, Inside Wall Street with Nomi Prins