Over the last several years evidence has been mounting that a large expansion of nuclear energy capacity is indispensable for keeping global warning within 1.5°C limits. Multiple studies have confirmed that, contrary to the claims by “all-renewables” zealots, no single group of technologies can enable a timely and cost-efficient energy transition, and a diversified energy mix of low-carbon sources, including both intermittent renewables and nuclear, is needed to achieve net-zero by 2050. The most recent estimates suggest that the global nuclear energy installed capacity needs to increase 2.5-3 times from the current 370 GW to between 916 GWe and 1,160 GW by 2050.
To offset the retirement of the aging existing fleet, new global capacity additions over the next 25 years need to reach between 800-1,000 GWe, averaging about 30-40 GWe annually. This task is challenging, considering that the average new global capacity additions over the past decade stood at approximately 6.5 GWe per year, almost six times less than the target. While the majority of expected growth will likely come from conventional, GW-sized reactors connected to centralised grids in BRICS and other large emerging economies, between 10% and one-third of the additions are expected to come from small modular reactors (SMRs).
In December 2023, the New Nuclear Watch Institute (NNWI), a London-based think tank, published a report: ‘Scaling Success: Navigating the Future of Small Modular Reactors in Competitive Global Low Carbon Energy Markets’ which emphasises the pivotal role of SMRs in achieving global net-zero targets and underscores the urgency for accelerated deployment of SMRs across the globe.
Despite growing interest and burgeoning number of start-ups and initiatives, the actual sector's progress in the past decades has been slower than expected. Russia's Akademik Lomonosov, the world’s first operational SMR-based facility launched in 2019 and stationed in Chukotka, remains the lone commercially-operational project to date. The recent cancellation of NuScale's pilot project in Utah in November 2023 further highlights the challenges SMR vendors face.
According to the NNWI analysis, the very attributes making SMRs appealing – their compact size, modular construction, and flexibility – are also associated with their potential strategic vulnerabilities. While SMRs offer the promise of quicker, more economical builds and suitability for diverse grid configurations, these advantages come with higher relative costs per unit of output capacity. At the same time, market demand uncertainties, along with supply chain challenges, regulatory and political risks, complicate the scaling of modular production, a key factor in driving down costs.
SMR projects are entering a very competitive market. Internally, the competition arises among different SMR designs, while externally, especially in the on-grid application segment, they face competition from other low-carbon energy sources like large reactors, utility-scale energy storage, which is advancing rapidly towards full commercialisation, advanced geothermal technologies in some parts of the world, and carbon capture and storage systems. In this context, according to the NNWI analysis, capabilities enabling a rapid scaling for SMR designs to leverage modularisation benefits and reduce costs becomes crucial. As a result, the market is expected to be dominated by first movers.
Many of the SMR vendors tout significant and even potentially disruptive reduction of overnight construction cost offered by a move from the conventional pressurised water (PWR) technology, where up to half of the capital expenses is spent on safety features, to advanced, next generation technologies boasting “inherent safety”. However, according to the NNWI, the real costs of new technologies are likely to significantly exceed ex-ante estimates. Advanced SMRs, employing technologies like molten salt and high-temperature gas reactors, might face significant delays due to complex licensing and challenges in supply chain and fuel provision. Though some prototype units still may, as planned, become operational between 2030 and 2035, widespread deployment and mass production are not anticipated until around 2040.
The NNWI analysis shows that factors beyond technology, such as access to low-cost capital, subsidised demand, shorter supply chain lead times, and more efficient licensing processes are vital, sometimes even more so than technological advancements in safety and performance. It highlights that learning curves, scalability, and reduced capital costs often lead to greater reductions in electricity costs than those achieved through technological innovation.
According to the report, in its base-case scenario the total capacity of the global SMR fleet by 2050 will be around 150-170 GWe (up to about 300 GWe in the high case). Geographically, this distribution is expected to include approximately one-third in the United States and Canada, about one-quarter in China, and another quarter across the emerging markets of Africa, Asia, and Latin America.
The report evaluates the top 25 SMR projects, chosen based on a mix of external business factors and internal technological capabilities. These 25 designs or design series, according to the NNWI, have the highest chances to be successfully deployed and capture significant market shares by mid-century. It suggests that if current trends continue, over half of the global SMR capacity by 2050 could be represented by just 6 to 8 leading designs that are the first to enter the market.
The Russian RITM reactor series, benefiting from state backing and an early move into the stage of series manufacturing, is expected to capture the largest share of the global SMR fleet, representing 17-18% of its total capacity. Despite geopolitical challenges, Rosatom is likely to extend its market dominance from the large reactors’ exports segment to that of SMRs, especially in emerging markets. The Chinese Linglong One, NuScale's VOYGR, GE Hitachi’s BWRX-300, as well as advanced reactors like the XE-100 are projected to secure significant global market shares in the coming decades. Relative latecomers, which are expected to capitalise on substantial private and public backing, like the molten salt reactor Natrium developing by Bill Gates’ TerraPower, the French NUWARD, and Rolls-Royce’s UK-SMR, as well as the group of potential disrupters, such as OKLO’s Aurora, SSR-Wasteburner, and Terrestrial Energy’s IMSR are also expected to survive the competition and win in some significant market niches.
The NNWI estimates that developing 150-160 GWe of SMR capacity globally by 2050 will require an investment of around US$800-900bn, based on 2023 prices. State support and subsidies are vital in the sector's early stages before the leading designs reach the stage of full commercialisation. The sector is estimated to need about US$150bn in governmental aid and subsidies for its successful rollout over the next two decades. Although it may seem a lot, this amount is just a fraction of the amount currently spent on fossil fuel subsidies, with over US$1 trillion spent globally in 2022 alone, including coal subsidies via capacity mechanisms.
Despite the challenges, SMRs remain the most economically viable, and often the only practical, option for replacing coal in decentralised grids, district heating, and industrial applications. If pursuing net-zero is a genuine goal, prioritising the replacement of coal and diesel generation with SMRs is essential. The world requires an initiative akin to the Marshall Plan to assist the most carbon-intensive regions in transitioning from aging coal-fired plants to SMRs.
