By Timothy Gardner
HOUSTON (Reuters) – Everyone from the U.S. energy secretary to Big Tech touts small modular nuclear reactors as a potential answer to booming power demand, but the technology is struggling to become commercial due to costs and regulatory hurdles.
Energy-hungry data centers powering artificial intelligence are expected to spike electricity demand, including in the United States where its use has been mostly flat for two decades.
Backers of small modular reactors say the technology will eventually be cheaper and faster than today’s nuclear power plants because it would be built out of mass-produced parts rather than as massive bespoke projects. The reactors can theoretically produce virtually emissions-free electricity.
But the only countries that have built SMRs also have centralized governments, which has helped projects secure financing and decide which SMR fuel types and coolants to use. Russia opened a floating SMR in the Arctic in 2019 and China opened an SMR in 2023.
The U.S. regulatory framework is underdeveloped, other power sources are cheaper, and there are nagging concerns about uranium supplies and radioactive waste.
Greg Jaczko, former chairman of the U.S. Nuclear Regulatory Commission, or NRC, said the players pushing SMRs are not utilities with decades of experience dealing with the intricacies and safety requirements of nuclear plants, but rather AI companies, the data center community and vendors.
“To really move forward aggressively with a new nuclear build (of SMRs) you really want the established, experienced players to be driving the trend,” he said.
‘AT THE BEGINNING’
Global gas supplies are growing and solar power and battery storage costs are falling, providing stiff competition for advanced nuclear technology to emerge.
“We are truly at the beginning of a new industry,” U.S. Energy Secretary Chris Wright told Reuters in an interview at the CERAWeek conference in Houston.
The first SMRs will not be able to compete with gas but they will become cheaper as technologies develop, and the U.S. government will try to help them clear regulations and with financing, said Wright, who sat on the board of SMR company Oklo until becoming secretary.
Oklo signed a non-binding agreement in December to deploy SMRs to data center operator Switch over 20 years. Oklo hopes to get a license from the Nuclear Regulatory Commission in late 2027, after the regulator initially rejected the application in 2022.
Oklo’s founder and CEO Jacob DeWitte blamed the rejection on difficulties with remote work during the COVID-19 pandemic.
“We pushed the envelope,” DeWitte told Reuters. “But we got a ton of valuable progress and feedback.”
It can take years for the NRC to approve reactors, which generate radioactive waste and must control operating and proliferation risks. Complicating matters, many plan to operate with special fuels, new technologies, and alternative coolants.
“The regulatory framework really hasn’t been implemented or built yet,” said Rahul Vashi, a partner at law firm Gibson, Dunn & Crutcher. Vashi estimated it could take multiple presidential administrations before a commercial SMR is built.
NRC spokesperson Scott Burnell said the agency is working with vendors to “meet our mission of enabling safe reactor deployment as efficiently as possible.”
But even an NRC license is not a guarantee of success. The only commercial SMR that the NRC has approved so far axed its project. NuScale terminated its Idaho project in 2023 after costs nearly doubled, despite a 2020 Energy Department contract for $1.35 billion over 10 years.
NuScale CEO John Hopkins said on an earnings call last week that the company has yet to land a deal with any U.S. data center operator due to the complexities of putting projects together, but continues to advance a project in Romania.
Amazon.com and Alphabet’s Google signed agreements late last year with emerging nuclear companies to power data centers with SMRs.
“Nuclear has to be a part of the mix,” Ruth Porat, president and Chief Investment Officer of Alphabet and Google, told CERAWeek. “If we don’t start now in a focused way and replicate a number of them …we’re not going to be able to be able to drive down the cost curve.”
A spokesperson for Kairos Power, the company partnering with Google, said it believes the NRC has the “technical breadth necessary to review our technology, while recognizing they need to continue innovating to be positioned to field the large number of applications anticipated in the coming years.”
DEEPSEEK CLOUDS DEMAND
Many SMRs plan to run on high-assay low-enriched uranium, or HALEU, fuel that is up to 20% pure uranium instead of up to 5% for traditional reactors. The U.S. government is beginning to fund efforts to produce HALEU domestically as it implements a ban on uranium imports from Russia, a top producer.
But some physicists question the fuel’s safety.
The National Nuclear Security Administration is commissioning a study on HALEU’s proliferation risks after physicists warned it could be used to make a nuclear weapon. The scientists recommended limiting HALEU to 10% to 12% enriched. Such limits could lower SMR efficiency.
Amazon said it is adding nuclear to its energy portfolio because “it’s carbon free, scalable, safe and reliable.”
X-Energy, an SMR company partnering with Amazon, has applied for a license at a fuel plant in Tennessee and its fuel will be proliferation-resistant, said X-Energy spokesperson Robert McEntyre.
Another potential industry headwind is uncertainty over the speed of future power demand growth.
Much of the excitement for SMRs has been fueled by projections that AI will trigger a massive increase in electricity consumption. But Chinese start-up DeepSeek’s announcement earlier this year that open-source AI models would use far less power raised questions about those forecasts.
“If (AI) models continue to get smaller and efficient, we could have an enormous AI boom that increasingly can run on regular consumer devices locally and thus does not need such enormous energy,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics.
(Reporting by Timothy Gardner; editing by Richard Valdmanis and Nia Williams)
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