Nuclear power is getting a fresh look as a carbon-free power source, but its history of excessively high costs remains a hurdle to new conventional projects in the U.S.
The Utah Associated Municipal Power Systems, comprised of 50 municipally owned power systems across six Western states, hopes to change those economics with a first-of-its-kind small modular reactor technology that supporters say is the future of nuclear industry.
The SMR project, to be housed at the Department of Energy's Idaho National Laboratory, enjoys federal support that includes a $1.355 billion DOE award in 2020. But it will require significant uptake from UAMPS members, some of which have already backed out of the deal, as well as other utilities who will need to agree to buy the power.
If the project advances, UAMPS is set to come to market with 40-year bonds to finance construction, set tentatively to begin in 2026 if UAMPS meets its target of submitting its combined operating license application to the U.S. Nuclear Regulatory Commission in early 2024.
Under the current schedule, the first module will be operational by 2029 with the remaining five coming online in 2030.
The price tag totals $5.3 billion, a number that's likely to climb when UAMPS releases updated budget estimates by the end of the year.
"This is the first in the country and the first SMR in the world that's approved by the NRC, which is an immense step forward," said LaVarr Webb, UAMPS' spokesperson. "There's a lot riding on the project and the nuclear industry is watching it very closely."
Skeptics say the project relies on overly optimistic estimates and that the financing structure puts participating municipalities on the hook for all costs tied to the risky project.
"Communities are signing a blank check," said David Schlissel, director of resource planning analysis at the Institute for Energy Economics and Financial Analysis, who summed up the project as "too late, too expensive, too risky and too uncertain."
The U.S. has 93 operating commercial nuclear reactors at 55 nuclear power plants with an average plant age of almost 40 years.
Cost overruns and delays have long dogged the few new projects undertaken over the decades. In what remains one of the largest municipal bond defaults to date, the Washington Public Power Supply System in the early 1980s
The country's only active construction of a new nuclear plant is at Georgia's Vogtle Units 3 and 4, where the
Public utility Santee Cooper issued more than $4 billion of municipal bonds for the failed project that it continues to repay.
The Georgia and South Carolina experiences have cooled investors and power operators to tackling new conventional nuclear projects, even as the sector enjoys fresh attention as a carbon-free energy source.
Small modular reactors, which are defined as less than 300 megawatts of electricity, about one-third of a traditional nuclear power reactor, promise to reduce capital costs by building modules offsite in factories and shipping them to the plant site. The technology, which the Navy has long used to power nuclear submarines, requires less refueling, is scalable to the needs of various power markets and can be used to complement other energy sources like wind and solar. SMRs also feature so-called passive safety systems designed to shut down without human action in case of an emergency.
There are dozens of SMR projects with different technologies in development around the world, with Russia reportedly launching the only operational one so far.
In the U.S., Microsoft founder Bill Gates and Berkshire Hathaway have
The recently enacted Inflation Reduction Act and Infrastructure Investment and Jobs Act
UAMPS formed the Carbon Free Power Project LLC to oversee its nuclear project and is partnering with Oregon-based NuScale Power, LLC, which has been developing the SMR technology since 2007.
The project is on track to be the first operable SMR in the country. The NRC in 2020 approved NuScale's application for the SMR, and in August, the NRC
But the project will need significantly more buy-in from UAMPS members and outside utilities in order to move forward.
Originally sized at 12 modules, UAMPS in 2020 reduced the number of units to six in part because several members dropped out of the project and because NuScale said the modules could generate 25% more power than previously expected. The reduced size will mean a slightly higher "levelized cost of energy over the plant's 60-year design life," acknowledged Diane Hughes, NuScale's vice president of communications. "It is important to note that project costs do not decrease proportionally with the decrease in megawatt-hours generated," Hughes said.
Of the roughly 36 members that originally expressed interest,
Webb said there are currently 27 members involved, which he said is relatively high for a UAMPS project. The agency operates around 16 power projects, all of which members choose whether or not to participate in.
"Because of the risks, UAMPS' board of directors, which is made up of the utilities, wanted to make sure the utilities weren't locked in, so there are offramps at the point of milestones in the project," Webb said, adding that the contract allows UAMPS itself to withdraw, with NuScale covering the agency's out-of-pocket expenses.
Members' interest may be tested again this fall when UAMPS is expected to release an updated cost estimate, which will trigger another offramp.
Critics say the project could be a drag on participating municipalities' larger financial profile.
"The financing is being done on the backs of municipally owned power companies, which can affect ratepayers and taxpayers, because if things go south, because it's a city-owned utility, they may do fund transfers," said Rusty Cannon, the director of the watchdog group the Utah Taxpayers Association.
"As municipalities get to these different offramps, we urge them to take them," Cannon said. "If this is going to work, it should be financed with private speculative money."
Schlissel from the Institute for Energy Economics and Financial Analysis, who
NuScale became a public company in August in a so-called SPAC deal with a blank-check company called Spring Valley Acquisition Corp., with Fluor maintaining
"Companies like NuScale are selling reactors before you know how they're going to work and how much they're going to cost," Schlissel said.
The contracting structure requires public participants to "sign a blank check," he said. "And their estimated target price is misleading," he added, saying present estimates of $58/per megawatt-hour will likely climb higher by the time the project comes online at the end of the decade.
Members' participation, however, may be less important than outside utilities' willingness to buy the power.
With six modules generating 77 megawatts each, the project generates 462 megawatts, and UAMPS' members will likely only buy about one-third of the power, Webb said.
"Two-thirds of the project still needs to be subscribed to," Webb said, adding that the agency will need to meet a "critical mass" of participation before submitting its combined operating license to the NRC in 2024, or coming to market with bonds that will likely be backed by the power purchase agreements.
The agency is having "lots of good discussions" with outside utilities, he said.
"There was a big boost in interest when NuScale received its certification and that shows the project really is viable and serious," he said. "Utilities want to be certain about what they're getting into," he added. "With first-of-its-kind projects there is always some risk."
