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Small Modular Reactors for Nuclear Power: Hope or Mirage?

Image of SMR proposed in Korea.

Supporters of nuclear power hope that small nuclear reactors, unlike large  plants, will be able to compete economically with other sources of electricity. But according to M.V. Ramana, a Professor at the University of British Columbia, this is likely to be a vain hope. In fact, according to Ramana, in the absence of a mass market, they may be even more expensive than large plants.

In October 2017, just after Puerto Rico was battered by Hurricane Maria, US Secretary of Energy Rick Perry asked the audience at a conference on clean energy
in Washington, D.C.: “Wouldn’t it make abundant good sense if we had small modular reactors that literally you could put in the back of a C-17, transport to an area like Puerto Rico, push it out the back end, crank it up and plug it in? … It could serve hundreds of thousands”.

As exemplified by Secretary Perry’s remarks, small modular reactors (SMRs) have been suggested as a way to supply electricity for communities that inhabit islands or in other remote locations.

In the past decade, wind and solar energy have become significantly cheaper than nuclear power

More generally, many nuclear advocates have suggested that SMRs can deal with all the problems confronting nuclear power, including unfavorable economics, risk of severe accidents, disposing of radioactive waste and the linkage with weapons proliferation. Of these, the key problem responsible for the present status of nuclear energy has been its inability to compete economically with other sources of electricity. As a result, the share of global electricity generated by nuclear power has dropped from 17.5% in 1996 to 10.5% in 2016 and is expected to continue falling.

Still expensive

The inability of nuclear power to compete economically results from two related problems. The first problem is that building a nuclear reactor requires high levels of capital, well beyond the financial capacity of a typical electricity utility, or a small country. This is less difficult for state- owned entities in large countries like China and India, but it does limit how much nuclear power even they can install.

The second problem is that, largely because of high construction costs, nuclear energy is expensive. Electricity from fossil fuels, such as coal and natural gas, has been cheaper historically ‒ especially when costs of natural gas have been low, and no price is imposed on carbon. But, in the past decade, wind and solar energy, which do not emit carbon dioxide either, have become significantly cheaper than nuclear power. As a result, installed renewables have grown tremendously, in drastic contrast to nuclear energy.

How are SMRs supposed to change this picture? As
the name suggests, SMRs produce smaller amounts of electricity compared to currently common nuclear power reactors. A smaller reactor is expected to cost less to
build. This allows, in principle, smaller private utilities and countries with smaller GDPs to invest in nuclear power. While this may help deal with the first problem, it actually worsens the second problem because small reactors lose out on economies of scale. Larger reactors are cheaper
on a per megawatt basis because their material and work requirements do not scale linearly with generation capacity.

“The problem I have with SMRs is not the technology, it’s not the deployment ‒ it’s that there’s no customers”

SMR proponents argue that they can make up for the lost economies of scale by savings through mass manufacture in factories and resultant learning. But, to achieve such savings, these reactors have to be manufactured by the thousands, even under very optimistic assumptions about rates of learning. Rates of learning in nuclear power plant manufacturing have been extremely low; indeed, in both the United States and France, the two countries with the highest number of nuclear plants, costs rose with construction experience.

Ahead of the market

For high learning rates to be achieved, there must 
be a standardized reactor built in large quantities. Currently dozens of SMR designs are at various stages of development; it is very unlikely that one, or even a few designs, will be chosen by different countries and private entities, discarding the vast majority of designs that are currently being invested in. All of these unlikely occurrences must materialize if small reactors are to become competitive with large nuclear power plants, which are themselves not competitive.

There is a further hurdle to be overcome before these large numbers of SMRs can be built. For a company to invest
in a factory to manufacture reactors, it would have to be confident that there is a market for them. This has not been the case and hence no company has invested large sums of its own money to commercialize SMRs.

An example is the Westinghouse Electric Company, which worked on two SMR designs, and tried to get funding from the US Department of Energy (DOE). When it failed in that effort, Westinghouse stopped working on SMRs and decided to focus its efforts on marketing the AP1000 reactor and the decommissioning business. Explaining this decision, Danny Roderick, then president and CEO of Westinghouse, announced: “The problem I have with SMRs is not the technology, it’s not the deployment ‒ it’s that there’s no customers. … The worst thing to do is get ahead of the market”.

Delayed commercialization

Given this state of affairs, it should not be surprising that
 no SMR has been commercialized. Timelines have been routinely set back. In 2001, for example, a DOE report on prevalent SMR designs concluded that “the most technically mature small modular reactor (SMR) designs and concepts have the potential to be economical and could be made available for deployment before the end of the decade provided that certain technical and licensing issues are addressed”. Nothing of that sort happened; there is no SMR design available for deployment in the United States so far.

There are simply not enough remote communities, with adequate purchasing capacity, to be able to make it financially viable to manufacture SMRs by the thousands

Similar delays have been experienced in other countries too. In Russia, the first SMR that is expected to be deployed is the KLT-40S, which is based on the design of reactors used in the small fleet of nuclear-powered icebreakers that Russia has operated for decades. This programme, too, has been delayed by more than a decade and the estimated costs have ballooned.

South Korea even licensed an SMR for construction in
2012 but no utility has been interested in constructing one, most likely because of the realization that the reactor is too expensive on a per-unit generating-capacity basis. Even the World Nuclear Association stated: “KAERI planned to build a 90 MWe demonstration plant to operate from 2017, but this is not practical or economic in South Korea” (my emphasis).

Likewise, China is building one twin-reactor high- temperature demonstration SMR and some SMR feasibility studies are underway, but plans for 18 additional SMRs have been “dropped” according to the World Nuclear Association, in part because the estimated cost of generating electricity is significantly higher than the generation cost at standard-sized light-water reactors.

No real market demand

On the demand side, many developing countries claim to be interested in SMRs but few seem to be willing to invest in the construction of one. Although many agreements and memoranda of understanding have been signed, there are still no plans for actual construction. Good examples are the cases of Jordan, Ghana and Indonesia, all of which have been touted as promising markets for SMRs, but none of which are buying one.

Neither nuclear reactor companies, 
nor any governments that back nuclear power, are willing to spend the hundreds of millions, if not a few billions, of dollars to set up SMRs just so that these small and remote communities will have nuclear electricity

Another potential market that is often proffered as a reason for developing SMRs is small and remote communities. There again, the problem is one of numbers. There are simply not enough remote communities, with adequate purchasing capacity, to be able to make it financially viable to manufacture SMRs by the thousands so as to make them competitive with large reactors, let alone other sources of power. Neither nuclear reactor companies, 
nor any governments that back nuclear power, are willing to spend the hundreds of millions, if not a few billions, of dollars to set up SMRs just so that these small and remote communities will have nuclear electricity.

Meanwhile, other sources of electricity supply, in particular combinations of renewables and storage technologies such as batteries, are fast becoming cheaper. It is likely that they will become cheap enough to produce reliable and affordable electricity, even for these remote and small communities ‒ never mind larger, grid- connected areas ‒ well before SMRs are deployable, let alone economically competitive.

Editor’s note:

Prof. M. V. Ramana is Simons Chair in Disarmament, Global and Human Security at the Liu Institute for Global Issues, as part of the School of Public Policy and Global Affairs at the University of British Columbia, Vancouver.  This article was first published in National University of Singapore Energy Studies Institute Bulletin, Vol.10, Issue 6, Dec. 2017, and is republished here with permission.

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