Actions to Commercialize
Small Modular Reactors
Actions Needed to
Commercialize
Small Modular Reactors
January 2017
United States Department of Energy
Washington, DC 20585
Executive Summary
The U.S. nuclear industry has made substantial progress toward the development and
certification of several new, light-water based Small Modular Reactor (SMR) designs, and in the
permitting and licensing of these technologies on a few selected sites. These strides have been
made with the support of the U.S. Department of Energy (DOE) under the SMR Licensing
Technical Support (LTS) program. SMRs could set a new standard for passive nuclear safety,
lower the total capital cost for a new nuclear plant, shorten construction times, and carry out
non-electricity missions. The United States will not know what the true potential of SMRs is,
however, until the first unit is built and operating.
An SMR has never been licensed in the United States, and there remains significant uncertainty
as to how they will be regulated. Current natural gas prices and electrical demand growth are
also low by historical standards and the cost of carbon emissions is not included in the cost of
electricity generation. These uncertainties and challenges currently work in concert to
discourage utilities from being first-movers on SMRs. To achieve deployment, the United States
needs to put in place the right combination of incentives to overcome these barriers. Creating
another, more affordable nuclear energy option would assist the United States in meeting its
energy and environmental goals. As Secretary of Energy Moniz explained at COP21, “Switching
from coal to natural gas is already reducing the U.S. carbon footprint, but it’s not enough to get
the deep CO2 cuts envisioned in the President’s Climate Action Plan.”
On June 22-23, 2016, DOE held a public workshop to solicit industry input on what steps would
support the pathway to commercialization. The focus was placed on deployment because this
will resolve regulatory questions, minimizing private sector exposure and providing answers to
the United States at an earlier time for its evolving energy strategy. A recent Secretary of
Energy Advisory Board report discussed ways that the federal government could advance SMR
development, including production payments, power purchase agreements, and facilitating the
licensing process for SMR applicants.
A final SMR design is necessary for the first power plant to begin construction and to take
advantage of factory fabrication. Even after an SMR design certification application has been
submitted to the U.S. Nuclear Regulatory Commission, there is still significant cost and
uncertainty involved in the design certification approval process, as well as work to finalize the
design. A cost-sharing program for design finalization activities would help reduce the risk for
first-mover reactor design companies and increase the probability that a final SMR design is
produced to enable factory fabrication. The low price of natural gas poses a challenge to lowcarbon technology deployment, and a production tax credit (PTC) would help to value the
carbon-free benefits of SMRs and close this price gap. Power purchase agreements (PPAs)
would help to create demand for new, low-carbon technologies that need to cross the “valley
of death” in an era of slower electrical demand growth. PPAs between SMR operators and
Department of Energy | January 2017
federal facilities would align with the directive to support low-carbon technologies codified in
Executive Order 13693, as well as promote national security. The second installment of DOE’s
Quadrennial Energy Review recommended that the time frame for the existing nuclear PTC be
extended—which would allow SMRs to qualify—and further recommended that federal
agencies be allowed to negotiate 20-year power purchase agreements for clean energy, which
would include SMR power.
Beyond the current site partners that DOE is working with, incentivizing more utility partners
through cost-sharing of COLs could help to grow the customer base for SMRs, and make use of
potential economy-of-manufacturing learning curves to reduce cost. Investments in advanced
manufacturing could help to reduce cost and construction time for SMRs, and create
manufacturing jobs for components that currently have to be made outside the United States
for the large light water reactors. Demonstrating alternative energy missions for SMRs could
improve their attractiveness to utilities, and could also aid integration with greater renewable
energy on the electrical grid.
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Department of Energy | January 2017
Actions Needed to
Commercialize Small Modular Reactors
Table of Contents
I.
II.
III.
IV.
V.
Background .......................................................................................................................... 1
Accelerate Design Finalization for Factory Fabrication ....................................................... 3
Incentivize the First Wave of SMRs ..................................................................................... 4
Lower Manufacturing Costs and Enhance Market Applications ......................................... 6
Conclusions .......................................................................................................................... 8
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Department of Energy | January 2017
I.
Background
In June 2013, President Obama released the Climate Action Plan to reduction carbon pollution.
One element of that strategy was an investment in small modular reactors (SMRs), which could
provide new standards for passive nuclear safety and modular construction. They also offer
greater affordability in the form of lower capital cost investments than traditional gigawattscale nuclear plants. SMRs could also supply process heat for applications such as desalination
and transportation fuel production, thereby helping to de-carbonize other sectors of the world
economy beyond the electricity sector. Finally, their size makes them excellent candidates to
replace aging coal plants with zero-emitting baseload power.
The successful deployment of SMRs would provide the United States with another low-carbon
option for decarbonizing its economy, mitigating the risk from climate change, and reducing air
pollution. President Obama’s Executive Order 13693 (Planning for Federal Sustainability in the
Next Decade, March 2015) recognized SMRs as a source of clean energy that could help federal
facilities meet sustainability targets.
SMRs could also provide reliable electricity in other countries to improve their quality of life
without producing air pollution or increasing the risks from climate change. The U.S.
Department of Commerce’s International Trade Administration released a report, “Commercial
Outlook for U.S. Small Modular Reactors,” that examined 27 countries as potential export
destinations. The report noted the opportunity to create U.S. manufacturing jobs to support
SMR construction in the United States and in other countries.
Related to exports, there are national security reasons to develop and deploy U.S. SMR designs.
Other countries are developing SMR concepts to try and reach the international market first,
and those programs are typically backed by their respective governments. The DOE-National
Nuclear Security Administration (NNSA) report, “International Safeguards, Security, and
Regulatory Aspects of U.S. Light Water Small Modular Reactors” summarizes some of the
national security implications that would result from the United States developing and
exporting SMRs:
The United States realizes several nonproliferation points of influence when a country selects a U.S.-origin
reactor (or one that contains U.S. technology) for deployment, which then creates a requirement for that
country to enter into a nuclear cooperation agreement with the United States, resulting in agreement to a
number of conditions as detailed in Section 4. Most significantly, these conditions give the United States the
ability to ensure international safeguards and physical security at the facility, to control the fate of nuclear
materials produced in the facility, and to apply conditions to the further spread of transferred technology. In
contrast, the United States would not have these points of influence if reactors were supplied by other
nations. Over time, if foreign-designed reactors are consistently chosen over U.S. designs, this would decrease
the ability of the United States to influence global supplier norms.
For the reasons mentioned above, DOE initiated the SMR LTS program in Fiscal Year 2012 to
accelerate the availability of SMR designs. The FY2017 President’s Budget Request indicated
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that FY2017 would be the final year of the SMR LTS program. The Department has since been
exploring what elements could be part of a follow-on SMR program. On June 22-23, DOE held a
public workshop to solicit industry input on what steps would support the pathway to
commercialization. The focus was placed on deployment because this will resolve regulatory
questions, thereby minimizing private sector exposure and provide answers to the United
States at an earlier time for use in its evolving energy strategy.
The Secretary of Energy Advisory Board (SEAB) Task Force on the Future of Nuclear Power
recently presented its findings and recommendations1. The Task Force was charged with
describing the changing landscape of nuclear over the coming decades and included an
assessment of SMRs. In particular, it discussed ways that the federal government could
advance SMR development, including production payments, developing low-cost
manufacturing of reactor modules, power purchase agreements with federal facilities, and
facilitating the licensing process for SMR applicants. The Task Force also noted, “An active U.S.
nuclear power industry has the important added national security benefit of advancing
nonproliferation policy objectives...”
The rest of this report is organized as follows: Section II describes actions to support reaching a
final SMR design to enable factory fabrication; Section III describes incentives to utilities to
deploy SMRs; and Section IV describes actions that could increase the long-term commercial
success of SMRs. DOE sees value in all of these actions. Section V provides concluding
thoughts.
1
http://energy.gov/seab/downloads/draft-report-task-force-future-nuclear-power
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II. Accelerate Design Finalization for Factory
Fabrication
Design finalization is nominally defined as the design information required to assure an
accurate cost estimate can be made for the execution of an engineering, procurement and
construction contract with a customer. Work supported under the DOE SMR program to date
has been focused on developing the safety case for SMR technology and proving to the
regulator that the design can adequately avoid or mitigate potential accident conditions. This
typically involves safety systems design and engineering, fuel qualification, analysis of potential
accident scenarios, risk assessment, and computational analysis focused on the response of the
reactor primary system to specific conditions.
Even after a design certification application has been submitted, there remains a large amount
of work to define the plant layout and system configurations, commodity and material
requirements, secondary side capability and operation, instrumentation and control systems,
and other aspects important to the owner/operator. Based on DOE’s experience with the
Westinghouse AP1000 during the Nuclear Power 2010 program, the Government investments
made on design finalization activities while the design certification application was being
reviewed by the U.S. Nuclear Regulatory Commission were instrumental in ultimately
accelerating the design to market. The result of that investment is the on-going construction of
four AP1000 units in the Southeastern United States.
A final SMR design is necessary for the first power plant to begin construction, and even after
an SMR design certification application has been submitted to the NRC, there is significant cost
and uncertainty involved in the design certification approval process, as well as cost to finalize
the design. A cost-sharing program for design finalization activities would help reduce the risk
for first-mover reactor design companies and increase the probability that a final SMR design is
produced and ultimately that an SMR is built. An SMR company cannot build a factory to
fabricate reactor modules without a final design. Such factory fabrication could improve
quality, and reduce both cost and time for construction.
Figure 1: Illustration of a factory-fabricated reactor module being transported to a plant site.
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III. Incentivize the First Wave of SMRs
The largest challenge facing new nuclear energy builds is the low price of natural gas, combined
with a lack of a price on carbon dioxide emissions and slow electrical demand growth. Utilities
have the alternative of building a natural gas combined cycle (NGCC) plant to meet rising
demand or retiring power plants. There are currently no state or federal tax incentives specific
to SMR deployment, nor state equivalents of renewable electricity standards that specifically
support SMR deployment. This challenging set of circumstances could mean that SMRs are not
developed at an optimal pace and are consequently not available when natural gas prices rise
and/or a price on carbon comes to pass, further delaying and adding expense to efforts to
decarbonize the U.S. economy. Several actions could help accelerate the growth of the SMR
enterprise through public/private partnerships.
A.
Production tax credits
The Energy Policy Act of 2005 provided a production tax credit (PTC) in order to stimulate the
first new nuclear build orders since the early 1970s. These incentives, along with the Nuclear
Power 2010 program, contributed to the four AP1000 builds taking place in Georgia and South
Carolina. A PTC for SMRs would help to close the economic gap with natural gas plants for firstmover projects and could help account for the greenhouse gas emissions avoided from the
utility not operating a natural gas plant. The existing PTC for new advanced nuclear power
facilities requires the plants to be put in service before January 1, 2021, which is before SMRs
could conceivably reach deployment. The second installment of DOE’s Quadrennial Energy
Review recommended that the time frame for the existing nuclear PTC be extended—which
would allow SMRs to qualify—and further recommended that the current PTC capacity cap of
6,000 MW be increased.2
Earlier this year, DOE carried out a study, “Assessment of Small Modular Reactor Suitability for
Use On or Near Air Force Space Command Installations,” that examined the effect of such a PTC
on the economics of an SMR plant built in the United States. It found a PTC of $18/MWh (the
same rate as found in the Energy Policy Act of 2005) would reduce the levelized cost of
electricity from an SMR by $8/MWh for a project built by an investor-owned utility, which
would help to substantially narrow the gap between an SMR and an NGCC plant. The SEAB Task
Force report recommended that new deployments of technology-ready LWRs, including LW
SMRs, should receive a production payment of about $0.027/kWe-hr.
2
https://energy.gov/epsa/quadrennial-energy-review-qer
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B.
Power purchase agreements
A power purchase agreement (PPA) is a legal contract between a seller who owns the
electricity-generating project and a buyer. PPAs between federal facilities and SMRs are
another mechanism that could further incentivize domestic utilities to pursue SMRs. Executive
Order 13693 set clean energy targets for federal facilities to meet over the subsequent decade
and SMRs are among the set of technologies that count toward meeting those clean energy
targets. In an era of slower electrical demand growth, PPAs with federal facilities for electricity
from SMRs would create additional demand for low-carbon SMR technologies. The SEAB Task
Force report discussed the possibility of DOE or Department of Defense offering a federal site
and take-or-pay electricity off-take contracts to reduce risk for initial SMR owner/operators.
The second installment of DOE’s Quadrennial Energy Review recommended that Congress
authorize all Federal agencies to negotiate 20-year power purchasing authorities for clean
energy, which would include SMR power.
Federal power purchase agreements could also recognize the national security benefits of SMR
development, as well as potential national security missions that SMRs could carry out. For
example, specific federal facilities may require a certain level of reliability for missions of
national security importance. An SMR-powered microgrid could provide enhanced reliability
and other advantages for federal facilities. SMRs have several inherently robust features and in
combination with microgrid technologies and transmission and distribution systems, could be
incorporated as part of a system that is less vulnerable to intentional destructive acts or natural
phenomena.
C.
Cost-sharing combined operating licenses
As part of the NP2010 program, DOE cost-shared combined operating licenses (COLs)
development for the two AP1000 projects at the Vogtle plant in Georgia. In 2012, the NRC
issued the first-ever COL to the Southern Nuclear Operating Company. As part of the SMR LTS
program, DOE has established cost-share agreements with two first-mover utility customers—
the Tennessee Valley Authority and Utah Associated Municipal Power Systems—to begin SMR
site permitting and licensing activities.
Additional domestic customer growth could be incentivized by providing financial assistance for
multiple site-specific COLs that refer to an initial Reference-COL (R-COL). A Subsequent-COL (SCOL) for the same SMR design at a different site than the R-COL will require the collection of
site environmental data and conducting site specific environmental analysis, emergency
planning, and other information typically required for early site permits. DOE expects there
could be significant cost savings in the ability to reference and extrapolate from plant specific
safety analysis information developed in an R-COL for all S-COLs. Incentivizing a larger order
book for SMRs could help to drive learning curves for manufacturing reactor modules and lower
the per module cost over time.
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IV. Lower Manufacturing Costs and Enhance
Market Applications
There are also investments that could be made in technologies that underpin the SMR
enterprise. Research, development, and demonstration (RD&D) on advanced manufacturing
technologies could improve cost, quality and throughput for SMR components. Demonstrations
of SMR/hybrid energy systems could help increase the market applications to de-carbonize
sectors of the U.S. economy beyond electricity production.
A.
Advanced manufacturing
RD&D in advanced manufacturing technologies to make complex SMR parts and components in
shorter amounts of time, with less cost, and with higher quality could also aid the long-term
economic success of SMRs. Consistent with nationally-driven advanced manufacturing
initiatives, DOE has been examining the potential for advanced manufacturing techniques to
improve nuclear supply costs and quality through the Office of Nuclear Energy’s Nuclear Energy
Enabling Technologies program. To date, the program has supported the development of
technologies that are applicable to the broadest spectrum of nuclear reactor designs, not just
SMRs.
Applied research focused on reducing the cost and schedule of factory-based SMR component
builds could aid the transition from prototype fabrication capability to a robust SMR
manufacturing enterprise. Manufacturing and fabrication technologies such as electron beam
welding or other advanced joining practices, laser cladding processes, powdered metal hot
isostatic pressing processes, and advanced and real-time inspection techniques are all examples
of advanced technique or process that could result in time and cost savings in a mass
production environment.
B.
Hybrid energy system demonstration
Less than half of the energy consumed in the United States comes in the form of electricity, and
the same is true globally. A few nuclear power plants around the world have non-electricity
missions such as district heating and water desalination, but all nuclear power plants in the
United States are focused on electricity generation. SMRs have the potential to help
decarbonize other sectors of the U.S. economy by replacing fossil fuel use in, for example, the
transportation and industrial sectors.
DOE could demonstrate SMR capabilities beyond electricity production and thereby expand the
market and reach for SMRs. For example, an SMR could potentially respond to greater solar or
wind energy coming onto the electrical grid by reducing its electrical output by devoting one or
more modules to process heat applications, such as desalination, making hydrogen, or
transportation fuel production. Correspondingly, the demonstration could show that when
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solar or wind energy falls off, an SMR could switch one or more modules back to electricity
production. This could help facilitate grid stability with higher penetrations of intermittent
renewable energy, and decarbonize other sectors of the economy at the same time. Individual
SMR modules could also be devoted full-time to non-electricity missions like district heating,
hydrogen production, or desalination.
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V.
Conclusions
Without a final design, there can be no deployment of an SMR or factory fabrication of reactor
modules. In addition, without utilities that are willing to be first-movers on SMR projects, there
can be no deployment. Getting the first power plant built is the hardest challenge for an SMR
design company as it tests the regulatory process for the first time. The costs for the first plant
have also not yet benefitted from a learning curve.
A cost-sharing program for design finalization activities would help reduce the risk for firstmover reactor design companies and increase the probability that a final SMR design is
produced. A PTC would help to close the cost gap between SMRs and natural gas plants in the
absence of a price on carbon dioxide emissions. PPAs would help to create demand for lowcarbon technologies in an era of slower electrical demand growth. PPAs between SMR
operators and federal facilities would also align with the directive to support low-carbon
technologies codified in Executive Order 13693, as well as promote national security.
Cost-sharing for additional COLs could potentially incentivize new customers that could either
become first-movers or help to build a critical mass of customers to create a more robust
business case for moving forward. Advanced manufacturing could help with bringing down the
cost of specific SMR equipment and help to shorten construction times. Hybrid energy system
demonstration could aid the marketability of SMRs and allow them to make inroads into nonelectricity missions like desalination and hydrogen production.
DOE is considering all of these actions as part of a successor program to the SMR LTS program.
The end goal for DOE is a complete enterprise, including end-users and a supply chain. Existing
policies do not fully account for the benefits that SMRs provide, and are likely insufficient given
current market conditions to support SMR deployment. In the absence of subsidies, NGCC
power plants are often the most attractive electricity generation option in the United States,
but by themselves NGCC plants cannot achieve the deep carbonization goals needed to
sufficiently mitigate the risk posed by climate change. The actions described in this report,
however, would help to accelerate SMR deployment in the service of meeting national goals for
clean, reliable, affordable electricity.
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