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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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Small Modular Reactors Are Gaining Ground

  • The limited choice in nuclear power plant reactors is rapidly coming to a close.
  • New SMRs and existing Gen III reactors basically come in three sizes
  • NuScale and GE Hitachi’s BWRX 300 seem to be among the first wave of SMRs that are likely to receive licenses for commercial operation.
Nuclear reactor core

In terms of technology, the first fifty years of the commercial nuclear power industry in the US was similar to early ice cream choices when there was only chocolate and vanilla. In nuclear power terms that means boiling water and pressurized water reactors (PWRs). Because of their better efficiency and flexibility, producing electricity and steam, PWR technology dominates the market for gigawatt scale reactors. Worldwide of the 470 or so operating reactors about 300 are PWRs. But this limited choice in nuclear power plant technologies is rapidly coming to a close. The Organization for Economic Cooperation and Development’s Nuclear Energy Agency lists no fewer than 21 promising new small modular reactor (SMR) designs ranging in size from 5 to 300 MWs. New SMRs and existing Gen III reactors basically come in three sizes: 1) jumbo: gigawatt scale plants over 1,000 MWs, 2) medium: 200-300 MW units currently favored by utilities, and 3) mini: reactors in the 5-50 MW output range, some of which like the eVinci from Westinghouse, that are tiny enough to be self contained and mobile. 

For decades, electric power wholesale generators have believed that bigger is always cheaper. And in a commodity business like electricity, cheaper is crucial. But recent US and French difficulties building large 1200+mW Gen III pwrs on time and within budget has pushed the nuclear power industry in a different direction. (As an aside we should point out that no one is clamoring for smaller modular coal or gas plants apart from gas peaking plants which from a technology perspective are well established.) The push for small reactors is a response to the problem of runaway construction costs and delays experienced by bigger projects with extensive on site construction activity. Whether these problems reflect weakness in design, execution, or regulation has become almost irrelevant. Building a Gen III reactors like Plant Vogtle in Georgia or the European Pressurized Water Reactor ( EPR) at Flamanville in France has become financially excruciating. The small (nuclear) is beautiful movement claims to be the answer with miniaturized and modularized construction. The reactor and all key components are factory built and assembled from these pre-built parts which are trucked to the site. The goal here is to transform an 8-10 year effort into a far more manageable construction period of 1-2 years. The appeal of SMRs is that they offer a way to streamline nuclear construction by moving as much work as possible to a factory setting for rapid on site assembly.

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The downside of downsizing reactors, reversing a long term trend, is that the electricity they produce costs more on a per kwh basis. They have most of the same components as larger nuclear plants, reactors, turbines, etc. but simply smaller. How much more expensive is difficult to estimate since there are no commercially approved designs although several are close. We think this is the biggest issue for SMRs. Producing an essential commodity product like electricity at a relatively high cost inevitably renders producers vulnerable to lower priced competitors. But the flexibility of small reactors (some designed to be mobile for military use) means they can selectively target a broader variety of customers like district heating systems or industrial users like steel mills. Right now it’s early days for this industry and discussions of cost are premature since many parts of the supply chain do not yet exist. Among the most promising SMR technologies recently listed by the OECD’s Nuclear Energy Agency, more than a few noted that no fabrication facilities existed for their preferred form of fuel, although these were expected within the next two to three years. In other words this is an industry in a fledgling state with a lot of technological competition.

There are five basic criticisms of nuclear power as a technology for energy production: 

  1.  Excessive initial capital costs (it costs too much to build). 
  2.  Lengthy construction periods. 
  3.  High operation and maintenance (O&M) expenses over the life of the unit. 
  4.  Safety concerns with respect to reactor-specific accidents (like Three Mile Island or Chernobyl) as well as nuclear proliferation. 
  5.  Need for long-term safe storage of radioactive waste. (As an aside we should point out that fossil fuels also produce toxic waste that must be abated at various points in the fuel production-to-power generation cycle.) 

But SMRs would remedy one major problem: the lengthy construction periods with the attendant cost escalations . Building plants on time would also increase the likelihood of being within budget, not a small thing in this context.

While the modularized aspect of SMRs is designed to hasten construction, there are developments in nuclear fuel technology that would make reactors meltdown-proof. Even though accidents involving reactor cores are rare, the uranium encased in the fuel rods of an exposed core, uncooled, retains its high heat and can melt down in what used to be called a China Syndrome event. TRISO fuel, tristructural isotropic particles, which will be used in a number of future SMRs, is incapable of melting down. Each small uranium pellet is encased in three layers of a carbon-ceramic material and each outer layer has an enormous ability to withstand heat and remain intact. The US Energy Department’s Office of Nuclear Energy called TRISO fuel pellets the “most robust nuclear fuel on earth” in a 2019 publication. This would eliminate another of the five basic arguments against nuclear energy (reactor core meltdowns). This fuel technology used to be called “pebble bed” when the fuel pellets were the size of billiard balls versus the relatively tiny, poppy seed-sized “kernels” discussed here which can be assembled in conventional fuel rods. 

Lastly we are even seeing efforts to reduce relatively high nuclear O&M expenses by greatly extending the period between refueling outages. Instead of 18 or 24-month cycles for conventional plants today, we are seeing seven or eight year intervals between refueling cycles.

We have been describing new nuclear reactor technologies mainly in terms of size: small, medium, and large. But we can also think of these new technologies as being phased-in in several waves. NuScale and GE Hitachi’s BWRX 300 seem to be among the first wave of SMRs that are likely to receive licenses for commercial operation. But there is also likely to be a subsequent wave or waves of new reactor technologies like HTGRs (high temperature gas cooled reactors) and those employing molten salt as a moderator. All we can say definitively at this point is that the decade of the 2030s could see an unprecedented amount of technological development and competition in the SMR space with an industry committed to building plants faster, smaller, and safer. 

By Leonard Hyman and William Tilles for Oilprice.com

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