Nuclear energy is an important potential option to deploy in a decarbonized global energy system, and we never like to see news like that of the recent cancellation of NuScale’s Carbon Free Power Project (CFPP). This November 8th cancellation represents a major, though temporary, setback for the fledgling small modular reactor (SMR) company. It does not, however, necessarily represent the prospects of the broader SMR and advanced reactor market in the United States or globally. This was a demonstration project that grappled with commercial viability from the start. Rather than a condemnation of a vital clean energy sector, the project’s cancellation offers an opportunity to glean insights from the hurdles faced by the global nuclear sector and to chart a more sustainable path forward.
The challenges of a first-of-a-kind project
First-of-a-kind (FOAK) projects pose inherent risks and expenses regardless of technology, but in the case of the CFPP, the FOAK risks extended well beyond the technology itself. Launched in 2015, well before NuScale submitted its application for standard design certification with the Nuclear Regulatory Commission (NRC), the project’s timing reflected NuScale’s need for a customer to instill investor confidence and allow the company to advance toward licensing and commercialization. However, utilities, while expressing interest in NuScale technology, hesitated to commit to the first SMR in the United States that had not even initiated the regulatory process.
Selecting Utah Associated Municipal Power Systems (UAMPS) as its first customer further exacerbated NuScale’s challenges. UAMPS, a collective of municipals close to an available site at Idaho National Labs, lacked experience with nuclear technology, couldn’t undertake cost risks on behalf of its customers, and operated in a market with cheap natural gas and growing wind deployment. The project, consequently, was not positioned for commercial success from its inception, with the subscription numbers failing to reach levels needed to support the originally envisioned 12-pack of reactors for NuScale’s VOYAGR design.
As a result, NuScale reduced the project size to a 6-pack to offset the cost and tried to offset the rising marginal cost by uprating from 50 MWe to 77 MWe per reactor. That offset, however, was insufficient for this particular design.
The design intricacies of the VOYAGR, while innovative, still require significant on-site civil works. Notably, the construction of a large pool, in which the reactors were submerged, incurred a large, fixed cost regardless of the number of modules. This lack of modularity rendered the design more expensive and less adaptable than other SMR alternatives, contributing to its commercial challenges. The VOYAGR design is also a relatively large and complex nuclear power plant capable of generating up to 924 MWe with 77 MWe modules. Other SMR developers are pursuing more modular and smaller designs that may be better positioned for competitive power markets.
Advancing the SMR industry
Despite these challenges and the project’s inability to proceed as initially structured, the CFPP initiative played a crucial role in advancing NuScale’s technology and yielded victories with implications for the entire advanced reactor and SMR industry. Although it was costly and time-consuming, over the course of achieving the first ever design certification for an SMR, NuScale also secured limitations on Emergency Planning Zones (EPZ) and reductions in control room staffing and security requirements. NuScale ultimately bore the cost of these achievements for the entire industry.
The licensing process also resulted in many lessons learned for both developers and the NRC, such as design readiness, the need for risk-informed decision-making, Advisory Committee on Reactor Safeguards (ACRS) reform, and others. Finally, it allowed NuScale to secure projects that are better positioned for success, such as those with Nuclearelectrica in Romania (an experienced nuclear utility well positioned to develop SMRs in a market that needs Western nuclear technology to ensure energy security and decarbonization) and Standard Power, a data center developer whose financial model requires 24/7 carbon-free large-scale power.
Given this background, the termination of CFPP ought to serve as a signal for governments, industry stakeholders, and the broader nuclear sector to reconsider the FOAK deployment strategy for SMRs. The traditional approach of licensing a design and then proceeding with construction is too slow and expensive for today’s dynamic market.
CFPP’s prospects could have been different, for example, if governments made available reactor sites where companies could deploy — through a significantly streamlined process — prototype/demonstration reactors for testing and operation oriented to regulatory licensing, with either government offtake or insurance provided to a project developer and owner that would cover costs beyond a certain threshold.1 This way they could have avoided trying to force a demonstration reactor into a commercial model. Of course, this doesn’t mean giving a blank check to a reactor vendor; vendors must be incentivized with target-based payments (e.g., upon achievement of full design completion or reaching successful regulatory milestones).
To transform the trajectory of FOAK SMR deployment, several more changes are imperative. These include treating FOAK projects as demonstrations rather than full commercial endeavors, which entails setting realistic expectations, especially for very early-stage projects like CFPP.
More than 50 SMRs exist in the world today. It is simply unrealistic to believe that all will succeed, or that every project undertaken by a developer (especially before shovels are in the ground) will move forward. Failures are to be expected in a free-market society and have been notable in the climate tech sector.2 This doesn’t mean that the United States will abandon ambitious solar, offshore wind or EV rollout plans. It simply means that the market will adjust, and amongst some losses, winners will emerge.
The same is to be expected in advanced nuclear. Beyond setting expectations, the right incentives and support are needed for FOAK demonstrations (e.g., cost overrun insurance, etc.), as well as recognizing that investor-owned utilities may not be ideal customers for FOAK nuclear technology. Industries — such as data centers, artificial intelligence, and heavy industries — and public utilities with strategic goals and strong demand for zero-carbon reliable energy may be better suited to undertake such technology and deployment risks.3
Governments should also focus on incentivizing large order books4 and fostering partnerships across industries to support the scale-up of the nuclear market, drawing inspiration from successful models like the U.S. Department of Energy’s Regional Clean Hydrogen Hubs program for the hydrogen market. Reshaping nuclear business cases, emphasizing design completion, promoting more modular and less complex SMR designs, and streamlining the nuclear regulatory process are essential steps toward a more successful and sustainable future for advanced nuclear technologies.
While all these steps are necessary to improve nuclear energy’s chances for success, a final note must also be made with regard to cost comparisons between technologies. While the projected “levelized cost of energy” (LCOE) from VOYAGR escalated over time to $89/MWH, it is now widely understood that LCOE is not the proper evaluation of an electricity unit because it does not consider its value to the system. That value, importantly, needs to consider technology characteristics beyond levelized cost, such as dispatchability on 24/7/365 basis, and its impact on the total system (e.g. avoided transmission, reserve contribution, etc.). Studies of power system decarbonization continue to overwhelmingly support the finding that clean dispatchable resources like nuclear lower the total cost of decarbonization. This is not to suggest that FOAK price points like those of VOYAGR are desirable, but that even those large costs need to be put in perspective considering grid value.
With all of this context, while NuScale may be viewed as a new victim of a challenging energy landscape, the lessons learned from the CFPP termination underscore the broader challenges within the traditional nuclear ecosystem. It thus prompts a critical reflection on how novel designs can thrive within this framework. The CFPP experience, rather than highlighting a flaw in the SMR concept, presents an opportunity to reshape strategies, redefine partnerships, and reinvigorate the trajectory of advanced nuclear technologies in a changing energy landscape.
1 This model is similar to recommendations 5 and 6 here.
2 This includes newsworthy failures like Solyndra, and, more recently, many solar developers declaring bankruptcy, to cancellation of a $200M offshore wind blade factory by Siemens Gamesa, to the recent bankruptcy of EV technology manufacturer Proterra.
3 This is not a dismissal of the investor-owned utility model for SMRs. As demonstrated by NEI’s survey, U.S. utilities want to deploy 300 SMRs. They are not, however, well positioned to be first movers.
4 Pathways to Commercial Liftoff: Advanced Nuclear, Section 3.a: Committed orderbook, page 26: https://liftoff.energy.gov/wp-content/uploads/2023/05/20230320-Liftoff-Advanced-Nuclear-vPUB-0329-Update.pdf