Taking stock of the SMR promise

Above: OPG is to construct a first-of-a-kind GE Hitachi BWRX-300 SMR at its Darlington nuclear site (Photo credit: Ontario Power Generation (OPG))

The latest in the long series of nuclear technology promises, that of the Small Modular Reactors (SMRs), keeps gaining potency, as illustrated by the evolution of the discourses between the 2022 and 2023 Reuters SMR and Advanced Reactor conferences. The nuclear community has been highly successful in creating a sense of urgency, in the face of climate and energy security crises, thereby lending the promise considerable legitimacy. By contrast, the road is long before the SMR promise reaches sufficient credibility – a second key success factor for any techno-scientific promise – by persuading investors and other stakeholders of the industry’s ability to deliver.

The promise is facing an increasingly risky phase, as shown by the recent cancellation of the NuScale project in Idaho. The greater the expectations, the deeper is the disappointment if the hopeful discourses fail to gradually translate into policy instruments, funding schemes – and ultimately, R&D, prototype and commercial projects. Yet, the credibility and the very success of the SMR promise may matter less for a growing number of industry players and nuclear advocates who see SMRs less as an end and more as a means of getting back to the “real business” of building large reactors.

Is the SMR promise legitimate?

The urgency of tackling the climate change and energy security challenges has lent the SMRs the legitimacy, and hence the political support, that is vital for any techno-scientific promise. If 2022’s Atlanta conference was replete with frustration and nostalgic references to the foregone times of political leadership under the Atoms for Peace programme, last year’s motto seemed to be that the nuclear community has now won the political battle – and that “there’s no path to net zero without nuclear”. Fred Dermarkar, the President and CEO of Canada’s nuclear science and technology laboratory AECL, opened his speech with great enthusiasm: “It’s a heart-stopping historic moment!... For how long have we been asking for leadership?...Well, we have it now!” The prominent role of nuclear in the recent joint statement by PM Trudeau and President Biden on energy-sector collaboration served as a sign of political leadership. Alongside the frequent references to IEA and IPPC reports, in 2023 the speakers evoked the recent Ontario grid operator’s report, which suggests that to reach its net-zero emission target by 2050, the province could need up to 17,800 MW of new nuclear capacity, both SMRs and large reactors. Reaching the climate targets without stable nuclear baseload might be possible but extremely costly, the Atlanta speakers reasoned. Perhaps unsurprisingly, the downsides of stable and rather inflexible baseload in the decentralised and renewables-dominated grids of tomorrow were not explored.

Earning credibility

Legitimacy alone is not enough, however, if the promise-makers fail to convince key stakeholders of the ability of the technology to effectively tackle the problem. The concern of the industry’s ability to deliver was even more acute in 2023 than the year before. Where to find the requisite resources and abilities to complete the SMR designs, persuade investors, rebuild supply chains, pass through the regulatory maze, and then eventually construct new reactors at the pace needed to satisfy the demand, and – according to a pledge by a group of over 20 countries at COP 28 – triple the global nuclear capacity by 2050?

Historical experience of the radical downscaling of electricity growth forecasts in the mid-1970s calls for caution. Yet, if demand does indeed shootsthrough the roof, how is the SMR industry to compete with its rivals, for the needed resources, for both highly skilled and unskilled workforce?

The industry question of “can we deliver?” had by 2023 surpassed the concerns for cumbersome safety regulation as an obstacle to SMR deployment. Gone were the previous year’s complaints about “too much democracy” in safety regulation, instead the regulators and government speakers now openly challenged the industry. Ramzi Jammal, Chief Regulatory Operations Officer at the Canadian Nuclear Safety Commission (CNSC), pointed out that international regulatory harmonisation was well underway, including plans to set up an International Technical Support Organization (ITSO) to assist regulators in embarking countries. Jammal had a scathing message to the industry: “You are behind us, let me tell you bluntly... Get your act together, standardise the codes and move on in that direction. Otherwise, you are going to get something you are not going to like!”. Bjo¨rn Peters, the co-founder of Dual Fluid, developing a lead-cooled SMR, echoed Jammal: once the industry comes up with a truly good design, “licensing will follow, politics will follow”, but the real challenge is to “convince... in each utility the top 20 people or so to buy a few” reactors.

The US Department of Energy’s (DOE) Julie Kozeracki made an almost desperate plea for action: “At LPO (DOE’s Loan Programs Office), I have 300 billion dollars in loans that almost nobody wants, for nuclear deployment.” With a pinch of sarcasm, Kozeracki noted that “the nuclear industry really loves press releases, they love MoUs, they love letters of intent. But I can’t finance a supply chain or build a workforce on a press release. I need signed contracts!”

Convincing investors

The SMR promise is still far from proving its credibility in the eyes of investors. Symptomatic was that Westinghouse, with its AP300, had replaced NuScale as the 2023 conference’s opening showcase. NuScale’s recent troubles – the steady decline of its share price since August 2022, the cancellation in November 2023 of its planned first-of-a-kind project in Idaho, for the lack of subscribers – illustrate the fragility of the promise of new, even light-water, reactor designs. The absence of Rolls-Royce, another posterchild from the 2022 conference, points in the same direction.

But why should investors believe that this time all will be different, that the industry has learned its lessons and that SMR projects will not run vastly over time and over budget, like the recent AP1000s in the US and EPRs in Europe? By educating the finance community, answered Kalev Kallemets, director of the Estonian SMR start-up Fermi Energia. “The public has moved on, but the financing has not... in nuclear, we are living in the post-traumas. It’s important to bring that very conservative field of finance also to the 21st century.” However, the recipe based on the “deficit model” – that citizens must be educated, and thus liberated from their “irrational fears” – has not worked with the general public and is unlike to work with the finance community. A more serious initiative is the plan to establish an International Bank for Nuclear Investment (IBNI), presented in Atlanta by its chairman Daniel Dean as a “long-term partner and pro-industry, pro-market and pro-investor supporter and enabler of SMR/Gen IV stakeholders”. Crucially, IBNI would establish “a globally recognised and harmonised” set of standards and criteria for SMR technologies, thereby seeking to help scale-up and commodify SMR delivery across the world.

Consultants and pro-nuclear climate activists Kirsty Gogan and Eric Ingersoll, from Terra Praxis, painted even bolder visions of scaling up via “productisation”. Their vision of a move away from cumbersome, risky, and difficult-to-finance one-off projects towards modular factory production is elemental to the SMR promise. Turning the vision into practice may be difficult. Even SMR advocates have shown scepticism towards the idea of modularity as factory production. Many prominent nuclear-sector cheerleaders on social media are equally critical.

Exploiting the window of opportunity

Being able to deliver is fundamental, yet the Atlanta 2023 speakers stressed that doing it fast is vital. “We must build reactors now!”, said Fred Dermarkar from the AECL, “to show that we can deliver”, not least to enable the nuclear industry to stay in the game. The creation of IBNI may help, but even there, timelines are becoming stretched, with plans to have the Bank operational by 2026. Views diverge on what the current “window of opportunity” for SMRs in fact consists of. For some, it is the growing public acceptance, spurred by climate change and energy security concerns, and the fading of the memories of the Fukushima disaster. For others, the opportunity lies in the unprecedented yet ever so fragile political demand and leadership. Many nuclear critics argue that the development of battery technologies, grid management and demand-side solutions will soon close the “window” and render SMRs uncompetitive with renewables. In contrast, and echoing the general sentiment in Atlanta, Julie Kozeracki argued that nuclear does not even need to compete with renewables but instead with “other clean, firm options” such as “solar with really long-duration storage, or natural gas with carbon capture, geothermal, or hydropower”.

Instead of safety regulation, the lengthy siting procedures and impact assessments were at the 2023 conference highlighted as a major obstacle to fast delivery of SMRs. Great hopes were placed on repurposing former coal or decommissioned nuclear sites, which could help cut down the planning, assessment and site preparation time down to 4-5 years from the current 8-9 years. However, Scott Hunnewell, Vice President of the New Nuclear Program at the TVA, reminded delegates of the difficulties of repurposing, including the highly distinct requirements and conditions for coal and nuclear sites. Public acceptance cannot be taken for granted either, even in communities with populations desperate for new economic activity and familiar with risky industries.

The question haunting the 2022 conference was that of leadership: who is to move first and commit to an SMR project? A year later, Canada, with supply chains in shape – largely thanks to the recent and ongoing refurbishments – had consolidated its role as a potential leader of yet another promised nuclear renaissance in the West. “The world is looking to Canada!,” exclaimed Brian Fehrenbach, Director of Business Development at the Organisation Canadian Nuclear Industries (OCNI). More accurate might be to say that all eyes are on Ontario, where OPG is to construct a first-of-a-kind GE Hitachi BWRX-300 SMR at its Darlington nuclear site, with the expected completion date of 2028. The announced timetable has not slipped, yet. Empirical evidence on costs and feasibility, based on this project, were to precede any commitment to a wider SMR programme, yet in July 2023, the Ontario provincial government jumped the gun, by confirming OPG’s plan to build three additional BWRX-300s on the same site. SaskPower is eagerly waiting for cost experience from the OPG, to decide in 2029 whether to follow suit and launch the construction of four BWRX-300s.

Most of the leading SMR designs may be foreign, especially American, but the Canadian government’s commitment to nuclear is arguably stronger than ever.

The policy frameworks and collaborative networks (SMR Roadmap, Action Plan, strategic plan, and feasibility study) are there, laying the basis for the three “streams” of SMR development – light-water SMRs for grid electricity, advanced designs mainly for industrial heat and power, and micro-SMRs for off-grid uses in remote communities.

But have the Canadians learned from past policy failures? Has the country left behind its policy tradition that political scientists Michael Howlett and Andrea Migone have characterised as one of “overpromising and underdelivering”? Are the supportive discourse, creation of networks, and relatively modest financial support simply just another way of “kicking the can down the road” rather than a determined strategy? Sceptics predict a similar fate for SMRs as that which befell the nearly mythical Arrow aircraft carrier, supposed to consolidate Canadian technological leadership in the 1950s. The then Prime Minister Diefenbaker abruptly stopped the vast technology programme in 1959, arguing that rapid changes in geopolitics and technology had made Arrow obsolete. According to rumours, pressure from Americans unwilling to face competition from their northern neighbour was a vital contributing factor. The SMR promise will end like the Arrow did, critics argue: the Americans will, in the end, snatch the markets and put the Canadians back to their place.

SMRs: A stepping stone back to megaprojects?

For many in the nuclear community, the SMR promise appears increasingly as an instrument, a stepping stone on the way back to constructing large reactors, rather than an end in and of itself. Last year in Atlanta an entire session, chaired by OCNI’s Fehrenbach, explored the relationships between SMRs and large nuclear reactors. While the legitimacy of the SMR promise has thus far largely relied on the notion that nuclear megaprojects are just too risky, costly, and slow, SMRs are now often portrayed as a useful, if not indispensable, bridge towards large reactor projects. As presumably safer, cheaper, and multifunctional, SMRs could help to overcome the public opposition and scepticism that has handicapped large nuclear projects, so the arguement goes. Moreover, the SMR promise helps to keep nuclear in the headlines, attract talent, and retain the skills and competences needed for the construction of large reactors – a line of reasoning particularly valid in Canada, with its home-grown CANDU knowhow and well-established nuclear institutions. Finally, enthusiasm for SMRs is partly motivated by defence interests, as highlighted by policymakers and nuclear-sector insiders.

Beyond the value of the SMRs as a “stepping stone”, the rather vague overall SMR promise serves various constituencies, regardless of the actual success of any specific design. By declaring their support and providing funding for R&D into SMRs, politicians can show they are acting upon the climate and energy security challenges; the R&D community benefits from new challenges and funding opportunities; and investors can make a quick buck by speculating on the stocks of SMR companies. Vendor start-ups may be among the few for whom the success of their chosen SMR design is decisive. The instrumental value of SMRs might help explain the contradiction between the rather pessimistic evaluations of the potential economic viability of SMRs on the one hand, and the growing enthusiasm towards these technologies in the policy world on the other. What counts may not be the viability of the technology itself but instead the value that the promise itself can provide, in various ways, to the diverse involved communities.

Author: Markku Lehtonen, Pompeu Fabra University, Barcelona