Should Utilities Consider Small Modular Nuclear Reactors?

by Bob Shively, Enerdynamics President and Lead Instructor

President Obama has announced that the EPA will move forward with developing greenhouse gas regulation for existing power plants, with a goal of implementing nuclear symbol  on keyboardregulations by mid-2014.  Natural gas prices have risen 42% in the last year.  And Bill Gates says our future needs nuclear power[1]. With multiple U.S. manufacturers[2] in the process of developing small modular reactor (SMR) technologies and with U.S. government support in sharing the costs of such development, has the time come for utilities to consider including SMR in their future generation planning?

MidAmerican Energy Company, the Iowa utility owned by Warren Buffet’s Berkshire Hathaway, recently studied this question at the direction of the Iowa State Utilities Board.  The conclusion? Maybe in the future, but not yet.[3] We’ll discuss how they got to this conclusion, but first, what is SMR for?

SMR is generally defined as a nuclear unit with capacities of 300 MW or less.  This is in contrast to the current commercial nuclear units which are typically 1000 MW or more.  SMR is intended to be constructed mostly in manufacturing with limited on-site work required.  According to the MidAmerican report, SMRs have advantages over existing nuclear designs used for power generation including improved safety, smaller required investment, and the ability to incrementally match load growth due to the smaller feasible minimum size of an SMR.

The MidAmerican study compared the economics of an SMR versus natural gas combined-cycle power plants. This choice was based on two assumptions:

  • new coal power plants will not be possible to build under air emissions regulation until such time as carbon capture and sequestration technology is available
  • although renewables will continue to grow significantly there will still be need for non-renewable baseload power

The study concluded that under certain scenarios, included scenarios the consultant running the study (NERA Economic Consulting) believed to be most likely, the cost of power over a period from the year 2020 to 2080 would be lower for SMR than for natural gas.

Key inputs that drive the conclusion include:

  • future domestic natural gas supply and resulting gas prices
  • the level of future economic growth and how that results in electric demand growth
  • carbon pricing policy
  • the ultimate capital costs of SMR engineering

Results are very sensitive to gas costs and SMR capital costs since the cost of gas generation is largely driven by fuel costs (75-82% of the revenue requirement for gas-fired power) and SMR is driven by capital costs (73% of the revenue requirement for SMR).  Herein lies the difficulty: No one knows the future of gas prices and, since no SMR has ever been built, no one knows the true capital cost of building one.

Since much of the costs for SMR is upfront, and since current gas prices are low, the study concluded it simply makes sense to wait awhile and take advantage of low gas costs.  This shows the difficulty for any new highly capital-intensive technology in today’s energy world.  It’s a lot easier to just wait than to take the plunge and go first despite some appealing features of SMR.

One way of looking at SMR is that it is a hedge against future gas-price and carbon-price volatility.  The key questions are: When will the hedge be developed enough to be viable? How much should a utility pay for the hedge? And when should the hedge be put in place?

Unfortunately not enough is known yet to answer those questions with the certainty required for a utility to move forward.  This then leaves it up to the U.S. government to foster development until more questions can be answered.


[1] See our earlier blog, Why Bill Gates Still Believes in Nuclear Power, available at:

[2] These include Generation mPower (Babcock and Wilcox),  NuScale Power, SMR (Holtec Inernational) Westinghouse Electric Company

[3] For a summary of the study and links to the complete analysis see:

About Enerdynamics

Enerdynamics was formed in 1995 to meet the growing demand for timely, dynamic and effective business training in the gas and electric industries. Our comprehensive education programs are focused on teaching you and your employees the business of energy. And because we have a firm grasp of what's happening in our industry on both a national and international scale, we can help you make sense of a world that often makes no sense at all.
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1 Response to Should Utilities Consider Small Modular Nuclear Reactors?

  1. Yes, and in particular, Molten Salt Reactors, which are a radically different kind of Nuclear Fission reactor that uses liquid fuel instead of solid fuel pellets. This allows the fuel to circulate and achieve complete burn up, has inherent safety features (can’t melt down, and won’t explode as it’s not under pressure), and produces vastly less waste. MSRs can also burn Thorium. MSRs have the potential to generate energy cheaper than coal, there’s a good book on Amazon about it:

    Also Thorium Remix 2011 on Youtube is really worth watching:

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