The disaster at Fukushima has little to do with any coming demise of America's nuclear renaissance. The problem is the price tag for these multi-gigawatt monsters; the delivered costs exceed the stockholder equities of most utilities.
Designers cling to the idea that bigger is better and cheaper. This thinking is catapulting new reactor designs from the hundreds of megawatts in size to the thousands of megawatts. While the operations of these monsters will be safe, efficient and economic, few utilities can afford to buy one. Thus, the demise of the current renaissance is almost assured -- at least for the private sector. But an alternative is in development, which will resuscitate the renaissance. Once again, the U.S. will be one of the world's technological leaders in nuclear power.
Of course, a couple of new gigawatt-sized reactors will be coming on line. The Tennessee Valley Authority (TVA) will complete two of their legacy units, Southern Company (SO) will likely build two AP1000 nuclear plants at their Vogtle site, and SCANA (SCG) might complete construction of two more AP1000s at their V. C. Summer site. However, the only reason these units are proceeding is because the shareholders of these utilities secured government guarantees to protect their equity, and in some cases, their debt. These are not entirely private sector plays.
Southern secured a federal loan guarantee to protect its debt and secured the full backing of the state of Georgia to protect its equity. SCANA acquired backing from the state of South Carolina's for its equity and may seek federal loan guarantees. TVA, a federally owned public utility, has the U.S. government's backing for its debt and equity.
Most other utilities do not have this type of access to government guarantees. Any unhedged debt or equity for nuclear construction will cost utilities a fortune, if those funds could be found. So, companies like Dominion Resources (D), Constellation Energy Group (CEG), Duke Energy (DUK), Progress Energy (PGN), NextEra Energy (NEE), NRG Energy (NRG) and others quietly shelved their new nuclear projects and are waiting for a better solution.
But, they shouldn't have to wait long. Right now, companies are designing a truly revolutionary reactor called the small module reactor (SMR). The idea is to scale down monster-sized plants into bite-sized units so almost any utility can afford to buy one or two. While they may not be as economically efficient as their larger cousins, SMRs will produce safe, economic and reliable power to serve the grid's base load.
SMRs are not just scaled-down versions of larger designs. According to the University of Chicago's Energy Policy Institute at Chicago (EPIC), SMRs are substantially safer than their larger cousins. In its Nov. 11, 2011 report, "Small Modular Reactors - Key to Future Nuclear Power," EPIC concludes the current designs for light water SMRs have at least three safety advantages over large operating reactors. Specifically, SMR designs (1) greatly enhance the ability to withstand earthquakes; (2) eliminate the need for emergency electrical generators; and (3) drastically reduce the potential of uncovering spent fuel pools. Also, since they are physically smaller, the risk to the public is smaller.
How is this possible? The answer has been staring us in the face since the days of Admiral Rickover. Think nuclear-power submarines. America's attack and ballistic missile submarines use SMRs. Military SMRs can withstand the shock and awe of violent combat, and they are designed to be safe in very tight quarters. While commercial versions use different fuel configurations, their designs are similar to naval reactors.
When investors and utilities consider SMRs, they should change how they think about nuclear power. SMRs are not constructed; they are manufactured. For SMR developers and owners, construction costs and schedules shrink to months instead of years.
Utility sites can host several SMRs since each module can be connected to others to form one aggregate source of power. Modules can be sequentially purchased, and banks of SMRs can produce power equal to large-scale coal plants. The difference is that SMRs are carbon-free and produce no greenhouse gases.
Finally, while it may need some improvement, the regulatory framework is already in place to accommodate SMRs. EPIC's analysis offers multiple routes to secure NRC certifications, licenses and permits.
It will be some time before companies such as Babcock & Wilcox (BWC), Toshiba's Westinghouse Electric, NuScale (Oregon State University) and others manufacturers can commercialize and deliver SMRs. But, make no mistake; SMRs will revolutionize the power markets.