The US nuclear industry's hopes for a brighter, more profitable future, represented by the development of small modular reactors - the Easy Bake Ovens of nuclear energy - have suddenly dimmed. Unlike Hollywood's "If you build it they will come" fantasy-based business model, few if any SMR customers have even shown up.
So both Westinghouse and Babcock Wilcox, after already pumping $100's of millions into new designs, have had second thoughts about their chances of success in a new and untested market. After all, when the industry touted SMR's as a game-changer, the benefits of mass production - shorter factory build times, reduced shipping costs, and quicker installation - required a steady stream of orders to pan out.
In February, Danny Roderick, CEO of Westinghouse, announced that his firm was calling off R&D for their SMR, which is designed to produce 225 MWe, the high-end of the new market.
His decision came after two setbacks. In November 2012, competitor Babcock & Wilcox, along with minority partner Bechtel, won the first DOE R&D subsidy round for its proposed 180-megawatt reactor, mPower. Working with the Tennessee Valley Authority, Babcock and Wilcox has received $101 million from the energy department so far. Then last December, NuScale Power, its 45-mw reactor design backed by Fluor and Rolls-Royce, won the second round, grabbing $226 million.
Considering alternatives
At the time, the DOE stated that it would not fund construction, and none of the small reactor makers have announced construction funding commitments from private backers. After being shut out twice, Westinghouse's partner Ameren Missouri decided it was "stepping back and considering [its] alternatives." Another factor contributing to Ameren's step back, the state's Governor had sold the public on SMR's by promising jobs as Westinghouse built a new twenty-first century industry. No customers, no deal, no twenty-first century jobs. Roderick explained that the lack of customers was a serious problem. "The worst thing to do is get ahead of the market." Roderick added that Westinghouse needed to make 30 to 50 small modular reactors to get a return on their investment. This, of course, is a number that would reflect heavy demand for the new reactor. So in the end, with no federal funding and no market, there was no way forward. Ironically, Westinghouse will concentrate on its $1 billion a year decommissioning business - which is already as profitable as its AP000 reactor business. With the aging
global nuclear fleet, this promises to be a growth industry far into the future.
Slowing SMR development
Babcock and Wilcox may have won DOE funding, but it has already spent about $400 million of its own money on its 180-megawatt reactor. This has caused a major rethinking. CEO Jim Ferland said the company will propose a new strategy for mPower in mid-April, which could even include cutting the project's budget down to a very low level to slow the SMR's development. Agreeing with Roderick, Ferland said that the market for small reactors is further out than anticipated when the program started in 2009. The world has changed radically since then; utilities are putting off building new plants because demand for electricity remains weak, and may even flatten out in the future; and there is also the relentless competition from low-cost natural gas. (Don't forget much cheaper renewables, and lingering post Fukushima jitters.) Ferland estimated (optimistically) the market for SMR's has been pushed back three to five years. What he may be thinking is that rapidly expanding third-world economies (probably the only realistic market, if they're still even pursing power grid extensions) need time to grow into a $1 billion dollar reactor. Initially Babcock and Wilcox's plan A was to find other minority partners like Bechtel. But "investors that want to take even minority positions are hard to find." So now the company is seeking plan B, a majority owner, sweetening the deal by agreeing to sell the mPower intellectual property along with the majority share. But that strategy hasn't worked either, leaving severe budget cuts as the only workable alternative so far.Is there a future for small modular reactors?
Images: SMR, Babcock&Wilcox; SMR, Westinghouse
Comments
Mr. Harrington,
Given the IPCC’s report and the consistent debate over the best solution to promote sustainable solutions to our current situation this is a very interesting and timely piece. As a civil engineering student this topic fascinates me and as an advocate for nuclear power, I hope to see more media coverage on emergent technology in the field. I first want to emphasize the importance of atomic energy as a bridge and potential permanent low emission remedy to the impending crisis. What worries me most is in the booming shale oil and natural gas production creating all time low prices and causing a great deal of stagnation in progressive movement toward sustainability. Continued use of fossil fuels as the primary source for base load electricity is shortsighted and although the hydrocarbon industry will increase profit margins with such low prices, a study published in the Proceedings of the National Academy of Science, conducted by Purdue and Cornell universities is “scrutinizing methane emissions associated with natural gas development […] as methane is 34 times more potent than carbon dioxide.” I implore such companies not to shy away from pursuit of alternatives to oil and natural gas and seriously consider investment in more environmentally responsible sources. Another latent drawback to prolonged greenhouse gas emissions comes in the very real threat of geoengineering and chemtrails, or the releasing of toxic aerosols into the upper atmosphere to reflect sunlight to slow warming. Although in the past these techniques were considered outlandish, many scientists have voiced support claiming the techniques are safe. Riley Duren, Chief systems engineer at NASA’s Jet Propulsion Labs warns, “geoengineering is inevitable […] and the technology could be used to blackmail the planet. Other consequences of chemtrails include droughts, famine, acid rain and other potential unforeseen effects that could be devastating cheap retro jordans.
Moving more specifically toward the feasibility of nukes, in the article you refer to SMRs as a “game-changer, possessing the benefits of mass production – shorter factory build times, reduced shipping costs, and quicker installation.” Despite the lack of confirmed orders and private investment, all the aforementioned advantages still hold true for these new designs. I acknowledge the responsibility of executives of Westinghouse and Babcock & Wilcox to their shareholders to make the best decisions financially, however it is my belief SMRs will indeed be the future of atomic energy and the those prepared for it will stand to gain the most. The public remains insecure on civil nuclear power, understandably with the recent devastation at the Fukushima plant in Japan. However, since safety is the number one priority when designing fission reactors, why not go with SMRs. Robert Rosner, a physicist at the University of Chicago's Energy Policy Institute said, “the units are safer because they're protected underground against both internal accidents and external attacks.” As Jim Ferland estimates the SMR market is three to five years away from maturing, I question why his company would slow down on development when the process of creating detailed designs and gaining regulatory approval takes such a long time. It is clearly a risk but upon examining The U.S. Department of Commerce estimates which project the international marketplace for civil nuclear technology at $500 to $740 billion over the next ten years, with the potential to generate more than $100 billion in U.S. exports and thousands of new jobs” why not be ready to capitalize?
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