Why Britain’s mini-nukes dream is hanging by a thread

Scuppered American power deal throws the UK’s promise of a green transition into doubt

It was meant to provide cheap, clean power to towns in the Midwest of the US.

But a scuppered nuclear power deal has thrown the promise of green power in the region into doubt, and could have repercussions in Britain.

NuScale Power said earlier this month that its maiden deal to build six of its mini-nukes in Utah was dead, after several towns that were backing the project pulled out over soaring costs.

NuScale is a frontrunner in the development of so-called Small Modular Reactors (SMRs), factory-built nuclear power plants that are smaller and cheaper than the huge facilities currently used in the industry.

SMRs have been seized upon by governments around the world as a way to help get to net zero.

In Britain, the Government wants a quarter of all electricity to come from nuclear power by 2050, and has launched a competition to find developers who can build SMRs by the mid-2030s. Last month, it unveiled a shortlist of six contenders, including NuScale.

However, the Portland, Oregon-based company’s struggles raise the spectre that SMRs may be beset to the same cost overruns that have long haunted the industry, casting doubt over whether mini-nukes can actually deliver on their promise.

Cheap gas and falling solar prices, together with rising development costs, have suddenly made SMRs less attractive Credit: Rolls-Royce

NuScale is the only SMR developer with a design approved by a regulator. 

The Utah Associated Municipal Power Systems (UAMPS), which provides power to local areas across the Midwest, first signed a deal with NuScale in 2015.

The ambition of the project changed over time, with UAMPS eventually settling on plans to buy six NuScale reactors that could deliver 77 megawatts (MW) of electricity each, collectively enough to power almost 1.4 million homes.

However, members of UAMPS, small towns and local areas, were uneasy with the long timeline and high costs of the project.

When the Utah city of Logan pulled out in 2020, its finance chief Richard Anderson told the Salt Lake City paper Deseret News: “We don’t have the experience to be swimming in these waters. I didn’t feel good about it.”

The death knell for NuScale came in January when new estimates showed a 53pc increase in costs. The price of steel and other raw materials had leapt, sending the price of power from the plant from $58 per MW hour to $89. 

The sharp increase came despite a promise of $4bn (£3.2bn) in US taxpayer support under President Biden’s Inflation Reduction Act.

Several member towns pulled out over soaring costs, leaving the project dead in the water.

Tony Roulstone, a lecturer in nuclear energy at the University of Cambridge and a former Rolls-Royce engineer, said the deal coming unstuck was “bad for the broader market”.

“They’re the one with a ticket from a safety authority,” he said of NuScale. “They’re the one with a project, which has been supported by the US government.”

SMRs offered the promise of bringing the cost discipline of mass production to nuclear engineering. They were touted as a way to pull the industry away from unwieldy megaprojects that were subject to cost overruns and delays.

Forecasts suggested the price of a mini-nuke could start at $100m, rather than the tens of billions that traditional nuclear power stations cost.

A country might buy a dozen to mimic a full size power station, or industry could buy their own to meet the power needs of a large factory or processing plant.

However, the rising costs in Utah evoke worrying parallels to the industry of old. Hinkley Point C in Somerset was estimated to cost about £26bn in 2015, for example, but could now end up costing £33bn, according to the latest estimate.

While the scale of costs is different, the unpredictability is a worry.

Hinkley Point C was estimated to cost about £26bn in 2015, but could now end up costing £33bn Credit: Finnbarr Webster/Getty Images

Cheap gas and falling solar prices, together with rising development costs, have suddenly made SMRs less attractive.

Roulstone says: “The current low gas price, and with renewables and subsidies that go with renewables – it’s a very hostile time for nuclear in the US.”

The market is also quite crowded. France’s EDF, US-Japanese alliance GE-Hitachi, Rolls-Royce and US companies Holtec, NuScale and Westinghouse are all competing for part of the SMR market in the UK through the Government’s competition.

With costs rising and interest waning, the industry has complained the Government is moving too slowly.

Rolls-Royce chief executive Tufan Erginbilgic has repeatedly called for speed in moving forward with a project in the UK.

The winner needs “tangible commitments in terms of projects, multiple projects,” he said. Rolls will complete its design assessment with UK regulators at the end of next year putting it ahead of the competition in Britain, he added.

SMRs are one of the key businesses Erginbilgic is betting Rolls’s future on, even as he slims down the group with plans to sell off assets worth £1.5bn.

To save the UK SMR dream, speed and decisiveness is needed, says Roulstone.

“There needs to be some urgency that is just absent.”

The Government has six contenders and it “has to make a choice”, he says.

“Any number larger than two is the wrong answer. To be honest, for SMR, one type would be perfectly ok for the UK.”

To succeed in delivering the economies of scale promised by factory production, SMRs must be developed en masse.

“You can’t do this if you’ve got an order for one,” says Roulstone. “You can do it if you’ve got an order for 10.”

Rolls-Royce chief executive, Tufan Erginbilgic, has repeatedly called for speed in moving forward with a project in the UK Credit: F. Carter Smith/Bloomberg

Recent slowness has coincided with a high turnover of government decision makers. Since 2019, seven ministers have headed the Department for Energy Security and Net Zero and its predecessor, the Department for Business, Energy and Industrial Strategy.

Experts say British advances have been held back for years by lingering fears about the destructive potential of nuclear disasters and a historic overreliance on other sources of energy, such as North Sea gas.

Now, there is a realisation that an alternative is needed.

“In Western Europe, people realise that we’re going to have lots of renewables, solar, lots of wind,” says Roulstone. “But we do need something which is zero carbon and provides electricity all the time.”

Nuclear is the obvious answer.

While NuScale’s issues in Utah are a setback for the company, industry watchers do not believe it is necessarily a blow to its ambitions in Britain.

NuScale’s power was deemed too expensive for Utah customers but Michael Crabb, an executive at Last Energy, an American SMR contender, says: “I think in the UK, you guys would love $89 per MWh baseload power.”

John Hopkins, NuScale’s boss, says that his company still has $200m in the bank Credit: Manuel Balce Ceneta/AP

Power prices vary widely in the US and are seasonal. But the US Energy Information Administration said in March it expected prices this year to average $51.36 per MWh. That compares to today’s price of about £84 ($105) per MWh in the UK.

NuScale’s power may also be cheaper than Hinkley Point C. It promised £92.50 per MWh in 2012 prices but the cost rises with inflation, putting it above £120 today.

Last Energy is aiming to build smaller, 20MW reactors in the UK, Poland and Romania for about $100m apiece.

It is not part of the UK government’s design competition and instead aims to raise private funding. It wants to get a reactor working by 2025, which is “admittedly an aggressive target,” Crabb says.

Meanwhile, John Hopkins, the NuScale boss said last week that his company is still in a good position to pursue other opportunities.

“I know from a financial perspective we have $200m in the bank,” he told a conference in Washington.

It has other projects in Romania and South Korea to develop and will be hoping Britain joins the list. 

A Government spokesman said: “Our aim is to make our Small Modular Reactor design competition the fastest of its kind in the world.

“When delivered, these Small Modular Reactors will deliver cheaper, cleaner and more secure energy for families and businesses, rapidly expanding nuclear power towards our target of 24GW by 2050.”