Today, the energy industry supplies America’s 28 trillion kWh/yr power demand with fossil fuels, nuclear power, renewables, and hydroelectric power1. The immense portion of demand fulfilled by fossil fuel is under direct attack due to its CO2 emissions and contribution to climate change, leading the power industry to look for clean solutions. Renewables are growing, but are unable to provide base-load power (i.e. the sun is not always shining, the wind is not always blowing) and currently rely heavily on government subsidies to make the economics work2. Nuclear power presents waste and security concerns, but can sustain base-load power and is a complete carbon emission-free solution3.
However, nuclear energy’s days of positive contributions to clean energy are numbered if current trends are not reversed. 83 of America’s 100 nuclear reactors are 30+ years old and thus nearing the end of their 40-year license period4. These reactors require significant investment to upgrade and qualify for a new license, leading utilities to often take reactors offline rather than invest heavily in 1960s-era technology. Until last month, no new US nuclear capacity has come online since 1996 due to enormous up-front capital costs and lengthy construction schedules5. Thus, instead of increasing zero carbon energy production, the nuclear industry’s contribution is holding steady at best.
NuScale’s business model
NuScale Power has identified the need for nuclear to continue contributing to clean energy and is creating a business model that makes investing in new nuclear power capacity an attractive option for utility companies. Thus, rather than create challenges, climate change’s pressure on the energy industry has created opportunity for NuScale.
NuScale’s business model is based on solving the 5 challenges commonly associated with nuclear power:
|Use existing technology and R&D in new ways to minimize challenges of first-time use
Streamline construction, operations, and maintenance
|Develop modular reactors with ~1/3 the capacity of existing systems
Module design enables low levels of generation in remote locations and scaling in high demand locations
|Build the plant for current needs, then invest to add capacity (modules) as demand grows
Decrease and make construction costs predictable through off-site fabrication and assembly
|Design auto-shut down and passive cooling systems that remove operator action, power, or additional water
Install below grade in a reactor building designed to withstand aircraft impact and environmental events
|Reduce target size with a smaller, lower profile building
Minimize Uranium enrichment requirement (average 3.8% vs. 90% for weapons-grade6)
By addressing the critical nuclear power challenges, NuScale has built a business model that is not only immune to climate change but poised to benefit from the growing demand for clean energy.
Economically, NuScale is currently backed by Fluor Corporation, several corporate partners providing testing and manufacturing support, and a Department of Energy fund-matching grant8. Revenue will begin shortly as the first NuScale reactor enters construction for a 2024 launch9. Ongoing conversations in the UK present additional future opportunities for NuScale9.
Further developing the business
NuScale’s first product installation in Idaho should be its primary focus in the coming years. However, NuScale should not lose sight of developing its operating model in this time. NuScale is the company closest to filing a modular reactor design certification application with the NRC and all eyes are on its success. As the demand for clean energy is and will continue to grow quickly, NuScale’s success will be attractive to many utility companies looking for clean energy solutions. To capture the market demand, NuScale will need to be in a position to quickly scale its sales, design, and construction operations after the Idaho facility goes online.
NuScale also faces significant headwinds is public perception. The recent core meltdown at Fukushima has led many countries to shut down or halt construction and investment in new plants. Culturally, images of ghost towns and stories of families unable to return to their homes generated stigma against nuclear power for the damage it can cause. NuScale is a utility partner rather than a public-facing entity so it does not need to go so far as to launch a pro-nuclear PR campaign, but it does need to be aware of the social stigma working against it and be extra cautious to not have accidents that further opposition to nuclear power.
On a more positive note, if NuScale is able to truly solve the challenges facing nuclear power and create a way to mass produce clean energy, it will become a 21st century icon. We will see how the story plays out…
1 “Electric Power Annual,” US Energy Information Administration, February 16, 2016, http://www.eia.gov/electricity/annual/, accessed October 2016.
2 “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013,” US Energy Information Administration website, March 12, 2015, https://www.eia.gov/analysis/requests/subsidy/, accessed November 2016.
3 “Nuclear Power in the USA,” World Nuclear Association website, October 26, 2016, http://www.world-nuclear.org/ information-library/country-profiles/countries-t-z/usa-nuclear-power.aspx, accessed October 2016.
4 “Nuclear Reactors,” US Nuclear Regulatory Commission, 2016, http://www.nrc.gov/docs/ML1624/ ML16245A046.pdf, accessed October 2016.
5 Chris Mooney, “It’s the first new US nuclear reactor in decades. And climate change has made that a very big deal,” Washington Post, June 17, 2016, https://www.washingtonpost.com/news/energy-environment/wp/2016/06/17/the-u-s-is-powering-up-its-first-new-nuclear-reactor-in-decades/?utm_term=.c90cbbf16e35, accessed November 2016.
6 Ivanka Barzashka, “Converting a civilian enrichment plant into a nuclear weapons material facility,” Bulletin of the Atomic Scientists, http://thebulletin.org/converting-civilian-enrichment-plant-nuclear-weapons-material-facility, accessed November 2016.
7 “Benefits of NuScale’s Technology,” NuScale Power website, http://www.nuscalepower.com/smr-benefits, accessed October 2016.
8 “Partnering: A History of Nuclear Excellence and Innovation,” NuScale Power website, http://www.nuscalepower.com/about-us/investors-and-partners, accessed October 2016.
9 “Preferred Site Identified for first NuScale SMR Plant,” Modern Power Systems website, October 31, 2016, http://www.modernpowersystems.com/features/featurepreferred-site-identified-for-first-nuscale-smr-plant-5653358/#.WBoRi9WSjL0.email, accessed November 2016.