Pint-size nuclear plants get a boost from Obama administration

Small-scale nuclear plants can be strung together and might save utilities on capital costs. But critics question the efficiency and operating costs of small-scale nuclear plants.

The Obama administration wants to seed the United States with pint-size nuclear reactors, and this week it backed a new developer to do it.

The US Department of Energy (DOE) said it would provide $217 million in matching funds over five years to NuScale, which builds small, ready-made reactors that can be strung together.

But NuScale only gets the federal funds if it can match them with money from private investors, who so far have been leery of the technology. In April, Babcock & Wilcox said it would scale back its DOE-backed plans to build modular reactors for the Tennessee Valley Authority because it failed to secure venture capital. Will NuScale do any better?

NuScale says its advantage is that 12 of its modular reactors can be combined to form a 540 megawatt unit. When one of the modules goes down, it could easily be maintained while the rest of the reactors continue to operate, so that whole facilities are not knocked off the grid. Each individual module could be refueled in relatively short order.

The cost of a 540 megawatt unit would be between $2.2 billion and $2.5 billion. That’s marginally less expensive per unit of output than a traditional nuclear plant. And at that price, utilities would not be taking the kind of financial risks they might otherwise have to if they built a $15 billion to $20 billion central nuclear facility. 

As a first step, Oregon-based NuScale is opening an engineering and project management office in Charlotte, N.C., where it will hire 70 employees.

“This expansion ... is critical to completing NuScale’s design and submitting our design certification application to the Nuclear Regulatory Commission," writes Mike McGough, chief commercial officer of NuScale, in an e-mail. The company hopes to submit its design certification in the latter half of 2016. And it plans to have its first plant operating commercially by 2023. [Editor's note: This paragraph and the preceding one were changed to correctly portray the nature of NuScale's Charlotte operation and its commercial ambitions for 2023.]

That's a long and arduous process – just as it is for a larger nuclear plant. Typically, investors don’t want to tie up their money for that long. The Department of Energy’s involvement is aimed at trying to create some legal and financial certainties so they can invest with more confidence.

While NuScale says that its units are more affordable than larger centrally located nuclear facilities and that they can replace retiring coal plants, its critics say that the technology lacks efficiencies and cannot compete against combined-cycled natural gas facilities.

“I wish them luck but the economics don’t make sense,” says Mike Keller, president of Kansas-based Hybrid Power Technologies, in an interview regarding both NuScale and Babcock & Wilcox. He adds that the smaller units are inefficient, which means that they produce more nuclear waste than their larger nuclear cousins while they would generate power at three times the current cost of a combined cycle natural gas plant.

“Having a big chunk of money [from the government] does not equal commercial success,” adds Mr. Keller. “The US government should do more due diligence.”

The Energy Department, however, is looking at the big picture – the need to have a diversified portfolio of energy options that extends beyond today's era of cheap natural gas. To that end, Uncle Sam helps all sorts of energy technologies, from tax credits for wind and solar power to direct financing for clean-coal technologies and loan guarantees to big nuclear plants.

Small modular reactors have a place in America's energy portfolio, especially because they are considerably less financially risky than larger centrally-generated nuclear power plants. The US government is a believer. Time will tell if the fledgling technology wins commercial acceptance, too.