The End of DOE's Flagship SMR — A Cautionary Tale

By Stephanie Cooke, Energy Intelligence Group
Published on 2024

T. Schneider/Shutterstock

The collapse of the US Department of Energy’s (DOE) flagship small modular reactor (SMR) project should serve as a cautionary tale to SMR developers everywhere. When the agency first announced funding for NuScale Power’s SMR project in 2013, then Energy Secretary Ernest Moniz said it represented “a new generation of safe, reliable, low-carbon nuclear energy technology” that would “provide a strong opportunity for America to lead this emerging global industry.” Yet despite years of trying, NuScale failed to deliver. DOE has so far spent some $3 billion on SMRs, according to a department spokesperson, and this is not its first failed SMR project — a Babcock & Wilcox "mPower" design that received the agency’s first SMR funding in 2012 and was regarded as the industry leader in SMRs collapsed in 2017. The question now is whether or when DOE and its multitude of congressional supporters will finally wise up and end the nuclear bonanza?

NuScale and its primary customer, Utah Associated Municipal Power Systems (UAMPS), a nonprofit electricity wholesaler with 50 utility members across seven Western states, couldn’t generate enough interest among the utilities to keep the project going. Under power purchase agreements, individual utility subscribers were obligated to help pay project development costs, which continued to rise, based on their level of offtake. Off-ramps were provided at specific dates with the caveat that any subscriber choosing to take one would have to bear the brunt of its costs to date. Eight subscribers chose to do that in 2020, with a very large offtaker following suit in 2021.

In mid-2021, the target price of power from the proposed 462-megawatt plant, consisting of six 77 MW reactor modules, stood at $58 per megawatt hour; it then rose to $89/MWh, a 53% increase. The project, planned for a DOE site in Idaho, survived despite a sea of local opposition, including from the Utah Taxpayers Association, but it never recovered from the mass exit. The remaining subscribers faced an off-ramp early next year; by deciding to unanimously exit they could avoid bearing costs to date, and instead receive compensation. That’s what they decided to do.

Downward Spiral

The collapse announced on Nov. 8 followed a scathing financial report on NuScale’s prospects by a European short-seller, Iceberg Research, on Oct. 19. That report sent NuScale’s share price into a tailspin, and may have accelerated the decision by the remaining subscribers to leave, which led to another downward spiral. But there were “many reports, articles and opinion pieces published regionally and nationally that raised well-researched questions and doubts about the project’s necessity and financial viability and led potential new subscribers and investors to hesitate,” points out Scott Williams, who spearheaded environmental group Heal Utah’s opposition to the project.

However, the Iceberg report cast a pall over the small community of niche investors in new nuclear. X-energy, one of DOE’s two lead “advanced” reactor developers, cited “challenging market conditions” following the Iceberg report for its decision to pull out of an attempted public offering. The company had planned to follow NuScale’s example and merge with a “blank check” special purpose acquisition company (SPAC) to gain access to stock market investors. The SPAC process has the advantage of allowing a small relatively unknown company to widen its investor base without the regulatory scrutiny involved in a conventional initial public offering.

When Fluor signed the merger deal for the NuScale SPAC in December 2021, the company’s executive chairman, Alan Boeckmann, predicted it would “bolster and accelerate the path to commercialization and deployment of NuScale Power’s unique small modular nuclear reactor technology.” But Fluor itself was under pressure from the market to sell down its majority holding in NuScale — which stands at roughly 55% — something it has been notably unsuccessful in doing. “This is the next step in Fluor’s plan, first outlined 10 years ago, to work closely with NuScale Power, Congress and the Department of Energy to commercialize this unique carbon-free energy technology,” Boeckmann noted.

Decarbonization Goals

10 years is a long time for investors; and it doesn’t sit well in the context of climate change, which requires solutions now. Since 2011, Congress has appropriated some $6.6 billion for SMRs, out of which DOE has “obligated” some $3 billion, including $583 million for NuScale — more than for any other SMR project. (The other two lead developers, TerraPower and X-energy, have received DOE obligations of $318 million and $242 million, respectively, so far). Yet not one megawatt of commercial carbon-free energy has resulted from this spending.

Meanwhile developers have been allowed to chase a rainbow of reactor designs, using different types of coolants and fuels, that date back to the mid-20th century. And as one long-time expert put it, "It's hard to believe that these more exotic designs will be any cheaper" than the conventional light-water design NuScale was pursuing. A DOE report in March effectively admitted that only large reactors (1 gigawatt or more) deployed en masse have a chance at making an impact on decarbonization, and that “waiting until the mid-2030s to deploy at scale could lead to missing decarbonization targets and/or significant supply chain overbuild.”

The report also noted that “the nuclear industry today is at a commercial stalemate between potential customers and investments in the nuclear industrial base needed for deployment — putting decarbonization goals at risk.”

SMR Craze Continues

Decarbonization goals aren't being served by wasteful spending on nuclear projects that don't or won't deliver the carbon-free power that's needed. Yet the SMR craze continues both in the US and elsewhere. “I see a clear window of opportunity opening up,” EU Commissioner for Energy Kadri Simson told a European SMR “partnership event” in Bratislava on Nov. 6, two days before NuScale’s announcement. “I am confident that the EU can have a leadership role in achieving technological maturity for SMRs,” Simson added. “The first SMRs must be connected to the European electricity grid within a decade at the latest. This must be our goal.” The day after NuScale’s announcement, on Nov. 9, officials from the US State Department, also in Bratislava, and Slovakia’s Ministry of Economy launched the “Phoenix Project” aimed at replacing aging coal plans with SMRs.

So, what next for DOE’s SMR effort? Should it find another US developer to lead the way and hope for ‘third time lucky’? Or redefine its program in order to justify more foolish spending? Some guess the Canadians might steal the lead on SMRs, a prospect that is loaded with irony, since the project everyone is watching involves a Babcock & Wilcox spinoff called BWX Technologies and a design inspired by a conventional boiling water reactor design that was never built.

More importantly, will Congress wake up and hear the music? The UAMPS subscribers to the NuScale project trusted in NuScale to deliver, and at a reasonable cost, until they no longer did, and wisely chose the off-ramp. Congress should follow suit and stop funding a dead-end enterprise.

Stephanie Cooke is the former editor of Nuclear Intelligence Weekly and author of In Mortal Hands: A Cautionary History of the Nuclear Age. The views expressed in this article are those of the author.