2023-11-12 16:21:45
It was a turning point in the history of nuclear power when, on August 28, 2020, the US nuclear regulator certified NuScale’s design of special small nuclear power plants as safe. NuScale’s design called for small reactors made of identical elements to be manufactured in factories. The company set out to prove to the world that small pressurized water reactors were cheaper and better than large power plants.
Now the company gave up its first project because of skyrocketing costs. Subsidies worth up to $1.4 billion from the US Department of Energy could not save the “Carbon Free Power” project.
The plan called for six small reactors to be built in Idaho on a U.S. Department of Energy research site with a total capacity of 462 megawatts, starting in 2029 and supplying electricity to utilities. Proponents of the new design for nuclear reactors had argued that they would be lighter, faster and cheaper to build because, at least in the idea, their modules should be produced in factories rather than in complex individual production on site.
Too few customers
This calculation didn’t work out. NuScale justified the abandonment of the prestigious project by saying that it had found too few buyers for the electricity to be produced. Power plant projects in the United States are financed by developers engaging utility companies that accept fixed purchase contracts with fixed price clauses lasting many years.
The contracts guarantee the cash flow to banks or other financial investors to service the loans. The fact that too few customers were found is probably closely related to the price development.
A number of utilities had secured offtake contracts, even though the prices calculated as necessary for a megawatt hour rose steadily from $55 at the start of planning to $89 at the beginning of this year. However, investors demanded that the company succeed in increasing its purchase commitments to 370 megawatts, or roughly 80 percent of potential capacity, by January 2024 or abandon the project.
Important element in the president’s climate policy
The short sellers at Iceberg Research had already drawn attention to this critical ultimatum on October 19th. Since then, the value of NuScale shares has fallen from $5.88 to $1.86 and to an enterprise value of $450 million. As a result, the company lost roughly two thirds of its market value. The announcement to abandon the prestigious project came in the middle of this week.
NuScale’s fate now apparently depends on a major contract with the company Standard Power, which wants to supply the crypto industry with electricity. “What could possibly go wrong,” Iceberg Research noted sarcastically in its analysis. The investors expressed serious doubts about the reliability of the business partners, who had no previous experience in operating nuclear power plants and some of whom had legal problems. Further projects in other states and countries such as Romania, Poland and Bulgaria have not yet progressed very far.
The failure in Idaho has serious consequences because the small reactors are an important element in the American president’s climate policy. They receive special support through the Inflation Reduction Act.
Marcus Theurer Published/Updated: Recommendations: 44 Uwe Marx Published/Updated: , Recommendations: 60 Ralph Bollmann, Berlin Published/Updated: Recommendations: 40
The importance of small reactors can be seen in the state of Illinois. There, Governor Jay Pritzker vetoed a law that lifted a 40-year-old moratorium on the construction of nuclear power plants. His reasoning: The law was not specific enough and should have targeted small reactors instead of also approving large power plants. There are also legislative efforts in California to limit the comeback of nuclear power to small reactors only. At least three other companies in the USA are currently working on small reactors, including Bill Gates’ company Terrapower, which is advancing a project in Wyoming.
Nuclear power expert and head of strategy consultancy Radiant, Mark Nelson, believes that the fact that NuScale came up with a novel design increased the already great complexity of the construction. He fears that the failure will play a role in the media, but not in the real world, where the comeback of nuclear power is progressing, as shown by examples in China and Eastern Europe.
Nuclear power plants are paradoxical because they require huge initial investment costs, but are highly profitable once they are in operation. The problem can only be reduced if you gain experience through frequent construction and create economies of scale, says Nelson.
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