Nuclear power is reemerging as a beacon of hope in the quest for sustainable energy solutions. As the world grapples with decarbonization goals, nuclear energy could be a game-changer, offering reliable baseload power that can help meet the increasing demand for clean energy.
The momentum is undeniable. In September, 14 prominent financial institutions announced support to triple global nuclear capacity by 2050. Their backing comes on the heels of several nations endorsing the Declaration to Triple Nuclear Energy, which was launched at COP28, signaling a new era for nuclear technology.
According to the investment bank Craig-Hallum, we are at the dawn of a multidecade megatrend when nuclear energy takes center stage. NuScale Power (SMR -10.59%) is one company looking to lead this energy revolution, focusing on small modular reactors (SMRs) that rethink how nuclear power is deployed.
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With a regulatory head start, NuScale is uniquely positioned to lead the charge. However, it could take years for the innovative nuclear company to generate a meaningful profit. Here's what you should know if you're considering investing in NuScale today.
The sentiment around nuclear power is shifting
Over the last year, support for nuclear power has had a resurgence. Part of this is due to growing energy demands from data centers to power the latest and greatest artificial intelligence (AI) algorithms, powering everything from chatbots to image and video generation.
The problem is that growing energy demands conflict with decarbonization goals. The truth is that renewables aren't far enough along to support technology's growing appetite for uninterruptable energy.
Nuclear energy has the benefit of being cleaner burning while also providing the scale of power needed and keeping electricity flowing 24/7. For this reason, many tech companies have turned to nuclear energy to meet their growing energy needs.
Microsoft signed a 20-year power purchase agreement with Constellation Energy Corporation in October. As part of this agreement, it would restart Three Mile Island Unit 1. Amazon also recently entered an agreement with Energy Northwest and Dominion Energy to enable the development of four advanced small modular reactors (SMRs).
NuScale is the only company with regulatory approval in the U.S. for its SMRs
SMRs make nuclear energy modular and scalable and can meet the energy needs of remote regions or even industrial or technology facilities with large energy requirements. As of this writing, NuScale Power is currently the only company with a Standard Design Approval (SDA) from the Nuclear Regulatory Commission (NRC) in the United States for its 50 MWe small modular reactors (SMR).
The modular design allows SMRs to be prefabricated in pieces at NuScale's plant and transported for assembly on-site. The exciting technology could potentially reduce costs and the time it takes to become operational, which is a big reason it has such broad appeal.
With that said, this technology is still under development, and it may be years before it is ever deployed on a commercial scale. Regulators have approved NuScale's 50 megawatts of electricity (MWe) reactor. However, for its SMRs to be more cost-effective, NuScale had to scale up its reactors to 77 MWe. The company expects its larger SMR to be approved by July 2025. However, full certification is still projected to take another couple of years after that.
The technology is unproven and will take years to commercialize
One problem with SMRs right now is that they appear cheap at first, but cost overruns have made them unrealistic for the time being. For example, the Utah Associated Municipal Power System (UAMPS) terminated a 2015 agreement with NuScale last year.
As part of the agreement, NuScale was going to construct 12 reactor modules to generate up to 600 MWe and was initially planned to be up and running by 2023. At first, the project was expected to cost around $3 billion. These estimated costs rose to $6.1 billion in 2023 and $9.3 billion in 2023, and finally, the project was too expensive for UAMPS to pursue further.
Last year, NuScale agreed with Standard Power to develop two facilities in Ohio and Pennsylvania powered by its SMR technology. The plan is to build 24 units of its 77 MWe modules, producing 1,848 MWe energy from both sites. Standard Power thinks this facility could be operational by 2029 at the earliest.
Is it a buy?
NuScale is the only company currently with an SDA for its small modular reactor from the NRC, which gives it a first-mover advantage. However, the company still needs its larger design to be approved by the commission, and even then, there are still several steps to go before it begins commercial operations.
NuScale is a story-driven stock today, where investor sentiment will drive the stock based on its accomplishments (or setbacks) along with the broader narrative around nuclear energy. However, much work remains before SMR technology is proven and operational, so most investors are best off watching NuScale from the sidelines for now.
