Risks of rising costs, likely delays, and increasing competition cast doubt on long- running development effort
By David Schlissel and Dennis Wamsted
In a new analysis, the Institute for Energy Economics and Financial Analysis looked at NuScale’s proposed Small Modular Reactor, concluding that its costs will be far higher than NuScale predicts and that the reactor is fundamentally not needed. What follows are the Executive Summary and Conclusions sections of the report. The full report can be read and downloaded here.
Too late, too expensive, too risky and too uncertain. That, in a nutshell, describes NuScale’s planned small modular reactor (SMR) project, which has been in development since 2000 and will not begin commercial operations before 2029, if ever.
As originally sketched out, the SMR was designed to include 12 independent power modules, using common control, cooling and other equipment in a bid to lower costs. But that sketch clearly was only done in pencil, as it has changed repeatedly during the development process, with uncertain implications for the units’ cost, performance and reliability.
For example, the NuScale power modules were initially based on a design capable of generating 35 megawatts (MW), which grew first to 40MW and then to 45MW. When the company submitted its design application to the Nuclear Regulatory Commission in 2016, the modules’ size was listed at 50MW.
Subsequent revisions have pushed the output to 60MW, before settling at the current 77MW. Similarly, the 12-unit grouping has recently been amended, with the company now saying it will develop a 6-module plant with 462MW of power. NuScale projects that the first module, once forecast for 2016, will come online in 2029 with all six modules online by 2030.
While these basic parameters have changed, the company has insisted its costs are firm, and that the project will be economic.
Based on the track record so far and past trends in nuclear power development, this is highly unlikely. The power from the project will almost certainly cost more than NuScale estimates, making its already tenuous economic claims even less credible.
Worse, at least for NuScale, the electricity system is changing rapidly. Significant amounts of new wind, solar and energy storage have been added to the grid in the past decade, and massive amounts of additional renewable capacity and storage will come online by 2030. This new capacity is going to put significant downward pressure on prices, undercutting the need for expensive round-the-clock power. In addition, new techniques for operating these renewable and storage resources, coupled with energy efficiency, load management and broad efforts to better integrate the western grid, seriously undermine NuScale’s claims that its untested reactor technology will be needed for reliability reasons.
This first-of-a-kind reactor poses serious financial risks for members of the Utah Associated Municipal Power System (UAMPS), currently the lead buyer, and other municipalities and utilities that sign up for a share of the project’s power.
NuScale is marketing the project with unlikely predictions regarding its final power costs, the amount of time it will take to construct and its performance after entering commercial services:
- There is significant likelihood that the project will take far longer to build than currently estimated;
- There is significant likelihood that its final cost of power will be much higher than the current $58 per megawatt-hour claim;
- There is significant likelihood that the reactor will not operate with a 95% capacity factor when it enters commercial service.
As currently structured, those project risks will be borne by the buying entities (participants), not NuScale or Fluor, its lead investor. In other words, potential participants need to understand that they would be responsible for footing the bill for construction delays and cost overruns, as well as being bound by the terms of an expensive, decades-long power purchase contract.
These compelling risks, coupled with the availability of cheaper and readily available renewable and storage resources, further weaken the rationale for the NuScale SMR.
There are serious problems with the proposed NuScale SMR project.
The first set of problems revolve around the company’s optimistic assumptions regarding its untested, first-of-a-kind reactor. NuScale claims it will be able to accomplish a performance trifecta that has never been accomplished:
- Completing construction at the new facility in 36 months or less;
- Keeping construction costs in check and thereby meeting a target power
price of less than $60/MWh; and
- Operating the plant with a 95% capacity factor from day one.
As this report has demonstrated, these are unduly optimistic assumptions. Costs and construction times for all recent nuclear projects have vastly exceeded original estimates and there is no reason to assume the NuScale project will be any different. For example, costs at Vogtle, the project most like NuScale in terms of modular development, now are 140% higher than the original forecast and construction is years late with significant uncertainty about a final completion date.
The second set of problems with the NuScale proposal are contractual. As the power sale agreement is currently structured, anyone who signs on to buy power from NuScale’s SMR will have to pay the actual costs and expenses of the project, not just the $58 per MWh estimated target price now being promoted by NuScale and UAMPS. And participants would have to continue to do so for decades, even if the price of the electricity from the SMR is much more expensive than NuScale and UAMPS now claim or even if participants don’t receive any power from the project for a significant part of its forecast operating life. These are risks that far outweigh any potential project benefits.
The third set of problems with the NuScale project are ones of comparison. The NuScale SMR will not be online until 2029 at the earliest. In the interim, thousands of megawatts of new wind, solar and battery storage are going to be added to the electric grid, reducing carbon dioxide emissions immediately and undercutting the need for the reactor project. Additional experience integrating variable generation resources and a broad utility effort to better integrate the Western grid will also serve to eliminate the need for the NuScale reactor.
In sum, there are cheaper zero-carbon energy options available now. NuScale’s SMR is not needed.
The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. www.ieefa.org. Director of Resource Planning Analysis David Schlissel is a long-time consultant, expert witness, and attorney on engineering and economic issues related to energy. He has testified in more than 100 court proceedings or cases before regulatory bodies. Analyst/Editor Dennis Wamsted has covered energy and environmental policy and technology issues for 30 years. He is the former editor of The Energy Daily, a Washington, D.C.-based newsletter.
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Headline image is artist’s rendering of a NuScale plant by Oregon State University/Creative Commons (image courtesy NuScale Power)