Small modular nuclear reactors could be unprofitable. NuScale halted construction on a Small Modular Reactor (SMR) after a partner pulled out.
NuScale (NYSE: SMR) and the Utah Associated Municipal Power Systems (UAMPS) terminated an agreement to build an SMR in Idaho, on 8 November 2023, a press release announces. The termination ends the Carbon Free Power Project (CFPP) which was building a 77 megawatt NuScale VOYGR™ SMR at the Idaho National Laboratory, near Idaho Falls.
Termination could kill the CFPP because UAMPS was the customer for the SMR’s electricity. UAMPS is a consortium of Utah utilities and the only customer for the CFPP’s electricity. Preparation of the CFPP site and construction of the reactors was underway at the time of termination, IEE Spectrum reports.
SMRs cannot compete with Solar
“It appears unlikely that the project will have enough subscription to continue toward deployment,” a NuScale press release admits.
UAMPS left the CFPP because of rising costs, IEE Spectrum claims. Bloomberg claims the estimated cost of CFPP’s electricity grew by 53%. NuScale had already cut the CFPP’s size from 12 reactors to six reactors.
If Bloomberg’s allegations are true, SMRs cannot compete with solar. Solar photovoltaic (PV) is the cheapest electricity source, the International Energy Agency (IEA) estimates. The IEA estimates a megawatt hour (MWh) of Solar PV electricity costs $60 while an MWh of gas generated electricity costs $80.
Solar PV is the cheapest electricity source because it requires no fuel (sunlight is free) and has no mechanical parts that can break. Hence, Solar PV maintenance costs are lower.
Consequently, UAMPS could buy two or three megawatts of Solar PV electricity for each MWh of SMR electricity. Thus, it could be hard for NuScale to find customers for CFPP power.
My guess is it will be cheaper and easier for UAMPS to build solar farms than SMRs. Moreover, solar creates no radiation risk or hysteria about nuclear power.
What is an SMR?
A small modular reactor (SMR) is a smaller nuclear reactor they build on a production line. Theoretically, you could build hundreds of SMRs. The hope is that SMRs can provide cheap electricity that produces no greenhouse gases.
The CFPP is using NuScale’s VOYGR™ SMR. NuScale has received $1.4 billion from the US Department of Energy to build the CFPP. South Korean contractor Doosan Enerbility will build the CFPP. The CFPP has passed environmental review and received a Phase III site-use permit.
They hoped to have the CFPP in commercial service by 2030. Instead, the US Department of Energy, Doosan Enerbility, and NuScale could wind down the project, IEE Spectrum speculates.
Is NuScale (SMR) Making Money?
NuScale Power Corporation (SMR) is not making money despite incredible growth. NuScale’s revenues grew by 638.98% in the quarter ending on 30 June 2022 and 110.8% in the quarter ending on 30 June 2023.
Notably, NuScale’s quarterly revenues grew from $2.75 million on 30 June 2022 to $5.79 million on 30 June 2023. However, NuScale reported a quarterly operating loss of -$56.12 million on 30 June 2023. In contrast, NuScale reported a $300,000 quarterly gross profit on 30 June 2023. The quarterly gross profit fell from $1.01 million on 30 June 2022.
Plus, NuScale reported a -$39.23 million quarterly operating cash flow on 30 June 2023. There was also a -$37.74 million quarterly ending cash flow on the same day. NuScale reported a $252.35 million quarterly ending cash flow on 31 March 2023. I imagine those funds were federal grant money.
NuScale is borrowing money. Its quarterly financing cash flow fell from $339.44 million on 30 June 2022 to $2.75 million on 30 June 2023. Yet, NuScale’s net debt fell from $350.82 million on 30 June 2022 to $154.41 million on 30 June 2023.
NuScale (SMR) has less value
NuScale (SMR) has less cash and value. The cash and short-term investments fell from $350.82 million on 30 June 2022 to $154.41 million on 30 June 2023.
Similarly, NuScale’s Total Assets fell from $407.23 million on 30 June 2022 to $309.46 million on 30 June 2023. Thus, NuScale was losing value before they terminated the CFPP.
Mr. Market thinks NuScale and SMRs have little value. NuScale’s share price fell from $11.53 on 15 November 2022 to $2.68 on 15 November 2023.
I think NuScale’s experience at the CFPP shows small modular reactors (SMRs) may not be a viable business. Hence, solar could be the future of electricity.
Thus, investors could be better off with solar stocks such as Tesla (TSLA). To explain, Tesla Energy builds the giant megapack batteries they use at solar farms. Tesla battery energy storage system (BESS) deployment grew by 90% to 3.98 gigawatt hours (3.98 billion watt hours) of electricity in the third quarter of 2023, Inside EEVs estimates. Similarly, Tesla BESS deployment grew by 11.522 MWh or 182% in the first three quarters of 2023.
Data shows Elon Musk is right. Solar PV and battery storage are the future of electricity. If this trend continues, the only place to find SMRs could be in nuclear submarines and other warships.
Thus, investors need to avoid NuScale (SMR) because data shows SMRs are not a viable business.