Competition heats up for SMR Manufacturing

The UK seeks to become the world’s center for export of factory built small modular nuclear reactors, but first customers have the place orders for them. The US needs to catch up if it wants to be competitive.

order bookHow many orders for new SMRs does a nuclear reactor vendor need to go the financial markets to get funding to build a factory to make lots of them?

The answer, according to David Orr, head of nuclear business development for Rolls-Royce in the UK, which has been making small reactors for the UK’s Royal Navy submarine fleet for decades, is a minimum of about four dozen units and six dozen would be better.

This estimate means that turning out the first 50 or so SMRs for any firm in the business is going to be a high wire act. Costs will come down per unit from the first-of-a-kind to the 10th unit and so on.

Former US Energy Secretary Steven Chu thinks the 10th unit of the same design is the tipping point where real cost savings start to appear. It will be getting to having orders for five times that number that will convince investors to open their checkbooks to fund a factory.

Both SMR vendors and their potential customers know it won’t be until the reactors can be turned out like so many washing machines that the price per kW of SMRs will significantly drop below the equivalent of their 1000 MW big brothers. This chicken and egg conundrum hasn’t dampened interest in pursuit of the market.

In the UK there is growing interest in getting to the factory solution of manufacturing SMRs. A government funded report on SMRs from the National Nuclear Laboratory published in December 2014 reported the global market for SMRs by 2035 would be 65-85 GWe. That’s a lot of SMRs when you consider their power range is 50-300 MW. The lab report goes on to estimate this market would be worth in the range of $225-400 billion.

The idea in the UK is that it could establish itself as a global center of manufacturing SMRs for export even supporting multiple vendors and their supply chains, all of which would add thousands of high paying jobs to the economy.

That idea isn’t lost on other nations. At the COP21 climate conference, US Energy Secretary Ernest Moniz tried to pump up interest in SMRs by touting the technological and economic benefits of SMRs, and, in particular, those of NuScale, which has a cost sharing funding arrangement with DOE for design and licensing costs. His key message is that SMRs will be affordable to a great many more utilities than the 1000 MW variety of nuclear reactors.

NuScale says that it plans to submit an application for safety design review to the NRC in late 2016. Moniz thinks that their first SMR will break ground in the US sometime in the early 2020s.

The value of SMR manufacturing isn’t lost on various states in the US.  Advocates for NuScale have pushed for the firm’s utility customer UAMPS to locate their first SMR at a site in eastern Idaho. That hasn’t stopped the legislature in Washington from looking at what that state can do to capture manufacturing market share.

Then there is the surprising development in Wisconsin where the state legislature seems poised to undo a long standing policy banning the construction of new nuclear power plants. Enthusiasm for the measure is so high that it unanimously passed out of committee on the House side.

And NuScale is facing a challenge in terms of locating in Idaho which may be what is stimulating Wisconsin’s interest. The question is whether the prospects of spent fuel from its eventual configuration of two six packs of 50 MW SMRs in Idaho will trigger another round of anti-nuclear fervor by the state’s political establishment.

Recently, two former Idaho governors, Cecil Andrus, a democrat, and Phil Batt, a republican, successfully killed a plan by DOE to bring samples of high burn-up commercial spent nuclear fuel to the Idaho National Laboratory for R&D testing.

Their case rested on an assertion that no new spent nuclear fuel, of any kind, should be brought into the state until the federal government develops a national solution for all of the spent fuel at all of the country’s nuclear reactors. For Andrus and Batt paranoia runs deep. They see any new spent fuel coming to Idaho as being a camel’s nose under the tent to bring all of it to the state.

It doesn’t take much to connect the dots between challenges to siting an SMR in Idaho and Wisconsin’s sudden interest in lifting its ban on new nuclear power plants. The solons in Wisconsin may have their eyes not only on the SMRs, but also on the manufacturing facilities needed to build them. Wisconsin’s moves could be the first of several efforts by states to get an SMR vendor to choose them for a manufacturing location.

While US states are waking up to the possibilities of high value, high tech nuclear reactor manufacturing, what’s going on in the UK is not lost on US vendors. Both NuScale and Westinghouse have opened offices in the UK for the purpose of exploring setting up their manufacturing centers there.

Not all US vendors of SMRs share this enthusiasm for the market. On November 19th Babcock & Wilcox signed off on the suspension of the NRC’s design certification of the firm’s 180 MW mPower SMR. The firm cited in its decision the inability to secure the financing to pursue it. It also said it had lacked the customers and the potential to grow its order book needed to change the mind of its investors..

B&W has reduced its internal spending on the mPower reactor from $80M a year to just $15M. It told the NRC it would continue its nuclear design work, but gave the regulatory agency no clues as to when or even whether it would restart the design review process.

Just two week prior to B&W decision to step away from the table, the NRC announced it would propose variable fees for SMRs. The fees would be based on power ratings. [Federal Register: full text]

The nuclear industry. which reimburses the NRC for all regulatory work its does on the nation’s full size reactors, is on board. In a statement on its website, the Nuclear Energy Institute (NEI) said it supports the proposal.

“Annual fees for future SMR licenses based on the total thermal rating of a facility would establish a fair and equitable fee structure and meet relevant regulatory requirements,” NEI Senior Project Manager for New Plant Licensing Marcus Nichol said.

“[Small modular reactors] incorporate enhanced design and safety features that are expected to result in lower generic regulatory costs associated with regulating this class of reactors,” NEI Senior Vice President and Chief Nuclear Officer Anthony Pietrangelo said in a letter to the NRC.

“In addition, because SMRs are significantly smaller than large light water reactors and may include multiple modules at a single facility, SMRs would face a disproportionately high annual fee if assessed on a per-reactor basis at the uniform rate for large reactors.”

“The proposed SMR fee-structure rule provides the clarity needed for potential owners and operators of SMRs to make more informed near-term business decisions,” Nichol said.

It is expected that the change in fees, if adopted by the agency, could make it more likely that other SMR vendors may seek design certification from the NRC rather than going overseas. If that turns out to be the case, it could open new opportunities for these vendors to build their reactors here.

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