Funding a Fantasy

Funding a Fantasy

When the Department of Energy (DOE) unveiled new initiatives to support small modular reactors (SMR) in March 2012, they envisioned a burgeoning new age for nuclear power. Lawmakers ponied up the cash and DOE chose two companies to move forward in the midst of outsized optimism about the nascent nuclear technology. Only two years later, the nuclear industry has had second thoughts and taxpayers have been left funding a fantasy.    

The House and Senate have taken a small step towards fixing the situation this year, but they’re also responsible for enabling DOE’s daydream in years past. After a $39 million request in the President’s fiscal year (FY) 2011 budget went unanswered, DOE was able to get its SMR program off the ground with $95 million from Congress in FY2012. To support the technology’s commercialization, DOE poured $28 million into advanced SMR research and development and created an SMR Licensing Technical Support initiative to help companies get their designs approved by the Nuclear Regulatory Commission. At the same time, the department signed agreements to let three companies use its Savannah River Site to develop SMR prototypes.

The dream was that by 2022 or so, these mini-nukes that produce less than  300 megawatts of electric energy (MWe) would begin rolling off assembly lines for delivery by train or truck to eager utilities across the country (and abroad, according to some DOE reps). Full commercial production was expected by 2040. Coming soon to a utility near you: hot tub-sized nuclear reactors!

Not surprisingly, the far-fetched scheme has had trouble taking off. The SMR concept promises a number of benefits including lower capital costs, reduced operating expenses, and passive safety features, but the economics of SMRs have always been iffy at best. Cost estimates vary widely –because there’s not a single SMR on the market today – but most analyses show that while an SMR will be cheaper to fabricate, it will produce more expensive electricity on a MWe per hour basis.

The SMR industry’s response has been to adopt the price-club sales model: they’ll be cheaper if you buy a twin-pack! And yet, DOE has cited studies concluding that even when employing SMRs in four, or even six packs, they’ll still struggle to compete, and the Nuclear Energy Agency agrees. Low natural gas prices aren’t helping.

Forest Service Moves Forward with Money-Losing Timber Sale in Alaska

Of course, it hasn’t taken long for nuclear industry heavyweights to figure out that SMR’s don’t make good business sense.  For its Licensing Technical Support program, DOE picked mPower, backed by Babcock & Wilcox (B&W), and NuScale, backed by Fluor Corporation, to receive up to $452 million in government support. But the subsidy has failed to make the bet worthwhile for the two backers.  Shortly after receiving the awards, both companies started looking to sell off equity in their SMR subsidiaries. B&W began its search in November, but after failing to find anyone willing to invest even a little, the company decided to cut back its spending on mPower in April. Fluor has been quieter about its search, but its CEO has reiterated that they’re looking to sell down their share in NuScale in a number of calls to investors. They managed to find at least a little support from Enercon in March, but Fluor might still be looking to divest some of its NuScale holdings. If they’ve really got the next big thing, major corporations don’t usually offer to let others in on the action.

Call it sour grapes, but after not receiving a DOE award, the Westinghouse Electric Company’s CEO also announced that they’d be pulling back from SMRs, citing a lack of customers.

On Wednesday, the House Appropriations Committee passed a bill that cut back spending for DOE’s Licensing Technical Support Program, rightly concluding that taxpayers shouldn’t invest more in mPower if its owner is backing away. The Senate version of the bill passed by the Energy and Water subcommittee on Tuesday contains similar language. The measure will save taxpayers around $43 million, but legislators can’t get back what DOE has already given mPower (approximately $101 million through March, but potentially more since then). If Congress really wanted to protect the taxpayer they’d cut the remaining $54.5 million for NuScale in FY 2015, rescind whatever DOE hasn’t spent, and scale back DOE’s Reactor Concepts RD&D budget that also supports SMR technology.

We have to look toward the future, but getting caught up in irrational exuberance is a costly endeavor.

Go to Top