NuScale Small Modular Reactor Costs Hit Hard by Inflation
The cost of building the nation’s first small modular reactor (SMR) is rapidly escalating due to the impact of as yet uncontrolled inflation in key commodity areas. According to a set of talking points prepared on January 3, 2023, by the Carbon Free Power Project (CFPP) there are new details about these costs.
The new cost numbers come in tandem with the completion of NuScale’s Standard Plant Design (SPD) which cover things like facility construction as well as procurement and manufacturing of long-lead time major engineered equipment. Some of these systems and components will come from offshore suppliers.
The bottom line is that CFPP said the cost of the project “has been influenced by external factors such as inflationary pressures and increases in the price of steel, electrical equipment and other construction commodities not seen for more than 40 years.”
According to the new cost estimate, the producer price index for commodities such as carbon steel piping and fabricated steel plates has increased by over 50% since 2020. It noted that inflationary pressures are increasing the costs for all power generation and infrastructure projects.
Will They Stay or Will They Go?
UAMPS through its members has an option to withdraw from the project and be reimbursed for most out-of-pocket expenses if the price of energy per megawatt-hour exceeds a certain threshold. The new cost estimates result in an updated estimated target price of $89MWH. The report says this new price “reflects the changing financial landscape for the development of energy projects nationwide.” It might have also said worldwide as inflationary cost increases are likely in the UK, France, and other industrialized nations.
The original target price in 2020 was $58MWH. The increase is 53% of the original target price. While the report is done, it has not yet been formally adopted by CFPP as part of its governance processes.
Looming in the not too distant future is a decision to be made by the various utilities that make up UAMPS. It is to stay or leave the project due to rising costs and the risk of possible further price increases. The deadline for their decision is February 17, 2023.
The overall project is composed of six of NuScale’s 77MW power modules to generate 462MW of electricity. The utility members of UAMPS “subscribe” for the amounts of the electricity they want to buy that will be produced by the six SMRs. If too many of them pull out, the project will not be built or at least not under current financial conditions. UAMPS will have the option to terminate the project and be reimbursed if the total of all member utility subscriptions do not reach 370MW (of 462 MW available) by the end of 2023.
LaVarr Webb, a UAMPS spokesperson, wrote in an email on January 24th to this blog that the information downloaded from a CFPP public facing web page “is legitimate and correct.”
He added, “as noted in the document, member participants have until February 17th to determine their status in the project. We fully expect the project to proceed. Our members need carbon-free, dispatchable energy, which this project will provide.”
A spokesperson for NuScale declined to comment on the CFPP budget and cost report referring all inquiries to UAMPS.
Why and How Did Costs Increase?
The costs were primarily influenced by external impacts, not by the project’s development. Price increases have occurred due to inflationary pressures on the energy supply chain that have not been seen for more than 40 years. If you think the price of groceries is out of control, take a look at construction costs. According to the new budget / cost estimates in the past two years have skyrocketed:
- Producer Price Index for Fabricated Steel Plate increased 54%
- Producer Price Index for Carbon Steel Piping increased 106%
- Producer Price Index for Electrical Equipment increased 25%
- Producer Price Index for Fabricated Structural Steel increased 70%
- Producer Price Index for Copper Wire and Cable increased 32%
- Producer Price Index for All Commodities increased 45%
- In addition, the referenced interest rate used for the project’s cost modeling has increased approximately 200 basis points since July 2020.
What are the Total Costs of the Project?
- Total cost of acquisition and construction, including financing: $9.3 billion
- Total value of DOE Cost Share Award and other financial resources: $4.2 billion
- Net cost of acquisition and construction for UAMPS: $5.1 billion
Note that from a competitive perspective, over in the UK Rolls-Royce has been describing its 470 MW PWR as having a price of $2.2 billion per reactor for the first half dozen of a projected fleet of 16 units with factory production and supply chain efficiencies reducing the price per unit to $1.8 billion. Rolls-Royce has not yet released updated data on its cost estimate for the 16 reactors despite the fact that inflation in the UK is running at 9.2% annually according to the Office of National Statistics.
CFPP Compared to Other Resources?
Because of high commodity prices, and much higher interest rates, CFPP says the energy landscape today is much different than it was just two years ago.
“UAMPS has analyzed all forms of non-carbon, dispatchable (always available) energy generation to replace retiring coal generation and to back up additional renewable generation. The analysis concluded that the CFPP remains competitive with other generation resources and has the advantage of a smaller footprint and a much longer life cycle (40 to 60 years).”
“Efforts are underway to strengthen the CFPP business case and reduce risks for participating members through updates in the Development Cost Reimbursement Agreement (DCRA), including protection and cost reimbursement in the event that subscription levels do not meet agreed thresholds within a year.”
Where Does the CFPP Team Stand on the New Numbers?
According to the January 3rd briefing, CFPP says “the NuScale SMR remains cost-competitive and needed as a carbon-free, dispatchable resource, part of a diversified resource portfolio. The higher costs reflect the changing financial landscape for the development of energy projects nationwide. The CFPP has matured to face, understand and address these challenges that other technologies and generation options must also still face.”
According to CFPP’s timeline, the first unit at the plant is due to begin commercial operation in December 2029. It said the project remains on schedule.
~ Background ~
How the Project is Organized and Managed
How is the Project Structured?
CFPP is the limited liability corporation (LLC) chartered by UAMPS, which is NuScale’s customer to manage all aspects of project development including
- interfaces with NuScale Power,
- Fluor on Engineering, Procurement and Construction and Combined Operating License (COL) application approval,
- resolution of remaining technical issues with support from owner’s engineers,
- development and implementation of an operating strategy,
- compliance with Department of Energy funding requirements, and
- conformance with cost model thresholds to assure project viability among the numerous power offtake subscribers.
The CFPP, which is to be built at the US Department of Energy’s Idaho National Laboratory at a site about 50 miles west of Idaho Falls, ID. It will use six of NuScale’s 77 MW power modules to generate 462 MW of electricity. The plant will be air-cooled due to limited and precious water resources in the region. The Snake River Aquifer will not be tapped to cool the reactor.
CFPP LLC is owned by Utah Associated Municipal Power Systems (UAMPS), a political subdivision of the state of Utah which provides energy services to 48 members from Utah, California, Idaho, Nevada, New Mexico, and Wyoming, which are mostly municipalities, and which choose which UAMPS projects they participate in, based on their unique needs for electricity.
The CFPP LLC awarded Fluor a contract in January 2021 to provide estimating, development, design and engineering services for its Carbon Free Power Project. The project scope includes the development of cost estimates and initial project planning work for the licensing, manufacturing and construction of the SMR plant.
DOE Funding: Current Status and Future Prospects
In October 2020, the U.S. Department of Energy (DOE) approved a multi-year cost share award to a new special purpose entity named Carbon Free Power Project, LLC, an entity wholly owned by Utah Associated Municipal Power Systems (UAMPS), that could provide up to $1.4 billion to help demonstrate and deploy a NuScale power plant located at Idaho National Laboratory.
The agreement serves as a funding vehicle and is subject to future appropriations by Congress. If the current Congress, which on the House side, is embroiled in a game of chicken with the Biden Administration over the Debt Ceiling, fails to fund the project, it will throw a new monkey wrench into the budget works.
Regulatory Status Report
NuScale’s power module is the only SMR design to date to receive approval from the NRC, which issued a Final Safety Evaluation Report for the 50 MW design in September 2020. Earlier this month the NRC issued a final certification of the 50MW design. The decision takes effect on 02/21/23.
Also, in 2020 the company announced an increase in capacity of the design to 77MW from the previously envisaged 60 MW. It will support the six-module VOYGR-6 plant configuration that it plans to supply to UAMPS.
Fluor is working on behalf of CFPP LLC in preparation of the combined operating license application (COLA) with the submittal of the 77 MW design to the NRC expected in early 2024.
What is the Standard Plant Design (SPD)?
The SPD provides customers with a generic VOYGR[tm] power plant design that will serve as a starting point for deploying site-specific designs. The SPD encompasses 12,000 deliverables to support client-licensing and deployment activities including:
- Full material takeoffs
- Equipment lists
- Data sheets
- Architectural and construction drawings and specifications
- Detailed system design specifications and calculations
- Electrical single-lines and load lists
- Mechanical piping and instrumentation diagrams
Along with these deliverables, a comprehensive 3D model of the power plant was produced, providing an asset for potential customers to evaluate NuScale’s technology. All of these data points are inputs to the new cost estimates.
In a press statement John Hopkins, NuScale President and Chief Executive Officer said, “Having the SPD, developed at our expense, along with a manufacture-ready NuScale Power Module, and the NRC’s recent approval of our Emergency Planning Zone boundary methodology, clearly differentiates NuScale from the competition.”
Hopkins and his team at NuScale are likely to be doing all that they can to sharpen their pencils to deal with the inflationary pressures affecting the cost of building the first of a kind SMR. The company’s future, including its evolving export opportunities in Romania and elsewhere, also depend on these numbers.
NuScale is Not Alone in Dealing with the Inflation Monster
It matters that other SMR developers of light water and advanced designs are probably facing similar inflationary pressures both in the US and in global markets. DOE’s two reactors that are part of the advanced reactor demonstration project are very also feeling the heat of inflationary fires.
If nuclear energy is to prevail as a means of decarbonizing electricity generation, industrial applications,, desalination, and making hydrogen, inflation is the number one project risk that has to be brought under control.
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All facts and no fluff…great article Dan.