Seven Reasons To Be Skeptical About SMRs (With Four Charts)

Small modular reactors are promising. But commercializing them will be difficult and require staggering amounts of money. Only a few SMR companies will survive.

Cherenkov radiation emitted from the core of the Advanced Test Reactor at Idaho National Laboratory in 2009.

Nvidia is on a tear. Its stock is up nearly 200% this year. The maker of semiconductors for AI is now worth some $3.3 trillion, making it one of the world’s most valuable companies.

That’s an impressive run. But the meme stock of the moment is NuScale Power. NuScale’s stock is up 844% this year, and a writer for the Motley Fool recently called it “unstoppable.”

The expected power demand for AI and the long-awaited boom in nuclear energy have NuScale and a slew of other SMR companies riding high. In March, Wood Mackenzie estimated the pipeline of SMR projects was worth more than $176 billion and that SMRs could account for as much as 30% of the global nuclear fleet by 2050. Earlier this month, Radiant Industries, which is developing a 1-megawatt reactor, raised $100 million in new funding. Meanwhile, several SMR companies, including TerraPower, Kairos, Natura Resources, and Oklo (whose stock has more than doubled this year), have all begun construction at their sites around the country.

That’s the good news. The less-than-good news is that, aside from NuScale, none of those companies have obtained approval for their reactor designs from the Nuclear Regulatory Commission. Furthermore, none of those SMR companies are profitable. NuScale lost $168 million during the first three quarters of this year. Oklo lost $63 million. (NuScale and Oklo have been targeted by short sellers. See here and here.)

Consider the case of Ultra Safe Nuclear Corporation (USNC). Last year, it was riding high. The company signed a joint venture agreement with Framatome, the French company that designs and produces components for nuclear power plants. The venture aimed to produce specialized (TRISO) fuel for USNC’s proposed 15-MW reactor. In announcing the deal, the CEO of Framatome, a subsidiary of Électricité de France, said it would help support the “rapid expansion of fourth-generation nuclear power.” On October 29, after burning through $200 million over the past three years, USNC filed for Chapter 11 bankruptcy in Delaware. Several other SMR companies are running low on cash. As one industry veteran told me, those companies “don’t have the wallets to make it happen.”

In short, the SMR sector looks frothy. There are simply too many companies and too many reactor designs competing in a brutal marketplace.

I first wrote about SMRs in 2008. In that article, which included a look at NuScale, I explained that small reactors may have applications “in remote areas where electricity is prohibitively expensive. They may also be used for temporary power production, or at locations like military bases that need highly reliable electric power.” And I said that several SMRs could be combined “to provide power for small cities that don’t need (or can’t afford) a much larger reactor.”

Those are the same claims we are hearing today. And yet, 16 years later, the US still hasn’t built a single SMR. Yes, we may be on the cusp of a nuclear comeback here in the US and around the world. I hope it happens. I’m adamantly pro-nuclear and have been for more than 15 years. But my first book, Pipe Dreams, published in 2002, was on Enron. Success in business depends on a company’s ability to produce cash. Why did Enron fail? It ran out of real money. And it’s cash — not necessarily the best technology — that will decide who will win the years-long, or rather, decades-long, contest to deploy SMRs in the US and around the world. In its bankruptcy filing, USNC said it failed because of “severe liquidity issues.” The liquidity required to get from the prototype and test stage (where nearly all of the SMR companies are now) to commercial deployment at scale, will likely be measured in billions of dollars

Energy realism requires sober analysis of all energy sources, not just the ones getting favorable headlines and stock valuations. One point before I continue: I don’t have a financial interest — either long or short — in any nuclear companies. Further, I’m not making any financial recommendations. As fellow Substacker Quoth The Raven says in his disclaimer, “I am an idiot and often get things wrong and lose money.”

With that out of the way, here are seven reasons to be skeptical about SMRs and a few ideas about what the incoming Trump administration and Congress should do to boost the US nuclear sector.