A Big Step for Small Modular Reactors

This past Wednesday, the Tennessee Valley Authority (TVA) and Babcock & Wilcox mPower, Inc. (B&W mPower), a subsidiary of the The Babcock & Wilcox Company, announced an agreement to begin design and permitting work for a small modular reactor (SMR) at a site in Oak Ridge, Tennessee. B&W mPower is a company formed between B&W Nuclear Energy and Bechtel Power Corporation. TVA and B&W have set a timeline of having the first of two reactors operational by 2022 at the site once planned for the Clinch River Breeder Reactor.

Proponents of small modular reactors highlight several factors making them more feasible than traditionally sized reactors. First, smaller reactors have a much lower upfront capital requirement. They also provide flexibility, since capacity can be added in 180 MW units at a later date as needed. Also, SMR reactors are built to ramp up and down more easily than older nuclear power plants. This could be a significant advantage as utilities add more and more variable energy resources.  Another potential advantage is that since this kind of reactor can be built in a factory, and shipped ready-to-assemble, manufacturers will be able to achieve economies of scale that will significantly drive down costs over time.

Perhaps most important, SMR reactors are supposed to be substantially safer than more traditional reactors. The reactors are designed to be “passively safe,” meaning that in an emergency the reactor can be cooled without pumps or valves that could fail during a power outage or due to human error. B&W also claims the reactors would require significantly less staff to operate, and could be defended by a smaller security force.

This project highlights the importance of government support in making nuclear projects feasible. A big catalyst for this project was cost-sharing award won by B&W in November of 2012. The Department of Energy investment will help B&W obtain Nuclear Regulatory Commission licensing with the goal of becoming commercially operational by 2022. The specific amounts and timing of funds will be confirmed once TVA and B&W have finalized their statement of work.

Even though SMR reactors are much smaller than traditional reactors, they still require massive amounts of upfront capital. The risk remains too high for a utility or other power generator to try and construct a reactor on its own. The Department of Energy hopes to reduce the financial risks of investing in modular reactor projects, and has explicitly stated its support of the technology going forward.

“The Obama Administration continues to believe that low-carbon nuclear energy has an important role to play in America’s energy future,” said Secretary of Energy Stephen Chu. “Restarting the nation’s nuclear industry and advancing small modular reactor technologies will help create new jobs and export opportunities for American workers and businesses, and ensure we continue to take an all-of-the-above approach to American energy production.”

This serves as another reminder of the inextricable link between government and the energy industry, and how policy makers will always have a role in picking “winners and losers.” It is certainly debatable how effective government has been at subsidizing, incenting, and funding the “right” kinds of energy projects, but I think a more productive conversation is about assuring that organizations like the DOE have qualified individuals capable of effectively allocating a fixed amount of capital. Government will always have trouble allocating capital as effectively as the market, but a combination of capable people and sensible procedures will assure the gap becomes as small as possible.

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