Why Small Nuclear Reactors Could Make Sense, but May Not Get Built

Before the nuclear accident in Japan, significant private-sector interest existed for the development of small modular nuclear reactors. It remains to be seen if that interest will continue.

Small and medium reactors are an interesting technology. At roughly 100-300 MW each, they are a very different sort of creature from the 1,000-1,400 MW units that are the standard for the commercial power industry today. Several companies are pursuing small modular reactors, that in fact are not so different in size from the reactors powering submarines and some nuclear powered ice-breakers.

It is on the commercial front, however, where many investors are particularly excited about small modular reactors (SMRs). This is because SMRs lend themselves to standardization in manufacturing, so that if contracts for reactors come in, leaning-by-doing should rapidly take place. The value in this standardized production and replication is that cost declines would be expected to rapidly take place. In many mass-produced technologies, the cost declines are dramatic: about a 20% decline for each doubling of production (Duke and Kammen, 1999). This means that if the cost per megawatt of, say, a 200 MW small reactor is comparable to large reactors then just to build a "standard" 1,000 MW nuclear power plant, five more units worth of experience and cost declines should result while the traditional reactor industry produced just one unit.

At a time when significant federal subsidies exist for nuclear power plant construction, this financial benefit also means that many more units -- and hence that much more learning -- can be built if and as the industry re-launches. (No reactors have been built in the United States since the early 1990s.)

There is a second benefit to the industry of this SMR standardization, namely that many more units can be built using the same amount of funds. In terms of the currently available loan guarantees, $13 billion in loan guarantees isn't enough to build a two-unit plant of an industry standard 1,400 MW unit. With SMR's, that same $13 billion can be stretched to support six to ten different projects all building out in serial fashion.

This assessment has been purely commercial and economic, but small reactors would likely also open new markets. First, utilities that can not finance the $10 billion or more needed for a conventional reactor and may not even need 1,400 MW of new capacity all at once, would likely be far more comfortable with the $300 million that a small reactor would require. Further, small reactors may open new markets, such as at some commercial facilities. What this means is that additional commercial applications could open up for nuclear power (further pushing the technology down the learning curve).

All of this is dependent on there being interest in building more nuclear plants at all, something that is very uncertain after the problems at the Dai-ichi reactor complex in Japan. Second, small reactors replicate the engineering demands -- and thus risks -- of multiple backup systems, and of multiple nuclear fuel management operations.

At this point the nuclear industry faces a range of issues; resilience of backup systems; waste management; cost; and public trust. While SMRs offer potentially attractive approaches to a number of design issues, many of the most pressing issues facing the nuclear industry today are not technological.