One industry that is beginning to penetrate our collective consciousness is the emerging small modular nuclear reactor (SMR) industry. This industry is remarkable because of its technological potential and its potential ability to alleviate the problems facing the entire planet and everything that lives on it.
In fact, there are two urgent needs to be solved: 1) closing the gap between the amount of energy we need and the amount we will have (even if all the renewables planned are working perfectly) and 2) decarbonizing the world. SMRs can provide continuous, affordable and secure energy that is clean and will allow us to achieve our zero emissions goals. The time for SMRs has come.
Like many great challenges, we all know the word nuclear comes with its share of baggage. This word conjures up emotional thoughts and feelings of reactor explosions in places like Fukushima, Chernobyl, and Three Mile Island, as well as the idea of nuclear weapons. Even now, due to the ongoing Ukrainian crisis, some European countries recognize that SMRs would give them a greater degree of energy independence and security, but are also concerned about the increased presence of nuclear power. and what that might mean from a risk perspective.
What makes SMR technology so exciting, however, is how it changes the paradigm of what has defined nuclear power before. First, the passive nature of the newer reactors (Gen-IV) makes them ‘safe’ and therefore incapable of the ‘meltdown’ that is possible with older reactors. Many systems exist in legacy reactor designs specifically to prevent meltdown, so SMR designs can be greatly simplified compared to legacy systems. The availability of simpler modular systems also means that the risks of cost overruns are reduced as these components can be fabricated off-site and then delivered, reducing the civil engineering burden and construction complexity. Additionally, significant concerns about proliferation and potential structural damage from a kinetic attack are largely due to the increasing health and stabilization of fuel form factors.
SMRs are a game changer, but the market is still developing. To predict or validate how the potential success of the SMR market might develop, it might be helpful to look at another industry that shares similar characteristics: New Space.
SpaceX has become the dominant creator in this industry. How is the development of SpaceX and the SMR industry similar, and what could SMR innovators learn from SpaceX’s journey?
SpaceX and the SMR innovators share several common models:
- Private, mission-driven capital combined with public capital: These companies have founders who used their private wealth to solve some of the toughest problems out there. These efforts were then supported by the US government through rewards (the Department of Energy Advanced Reactor Demonstration Program) or contractual mechanisms offering funding that left ample room for the contractor to develop a system.
- Regulated environment: Both industries are highly regulated globally, and since many SMR companies are based in the United States, space and energy have been overseen by the US government.
- Technology-driven approaches: Rather than “space” or “energy” companies, they see themselves primarily as technology companies. It’s exciting to see – and remember – what happens when a strong need drives innovation “bottom up, first principles”, starting with a “clean sheet”, applying basic scientific principles and proven technologies, unconstrained by prior assumptions or design, to develop a simpler, cheaper and more effective solution.
- Business spirit : Much of this approach centers on mindset: a willingness to ask how things could be done differently and not be constrained by the rules and entrenched issues of the past.
In his founding of Spacex, Elon Musk is an example of these principles embodied. Even before joining Tesla, Mr. Musk was recirculating his e-commerce-created money back into disrupting space travel with the founding of SpaceX. It may be hard to remember today, given the massive success of SpaceX, but the number of voices that proclaimed its task impossible was enormous.
Similarly, Kam Ghaffarian, founder of SMR X-energy company, doubled his business success by applying significant private capital to create a unique Gen IV SMR company called X-energy, which is evolving very rapidly to solve business problems and government customers. A third example is a capital provider like Bill Gates. Gates has long supported the need for decarbonization and he has backed another SMR company called Terrapower.
The above models and committed leaders give us confidence that these ingredients increase the likelihood of future success. With these inputs, we expect the technological benefits to outweigh the risks and that progress can be sustained. However, the similarities of these examples can also provide clues and questions we should ask ourselves. What can the future SMR industry learn from SpaceX’s 20 years of experience? What patterns and issues should he consider? Here are some possibilities:
- Uneven progress of value chain elements. Following the shuttle’s retirement on July 21, 2011, the United States gave up its human-lift capability for much of the decade. As a former leader in this field, the United States now depended on Russia to transport American astronauts into space. Similarly, the United States has relinquished its leadership in uranium enrichment to Russia, and unless bold and creative changes are made, it could depend on Russia for a supply of uranium of increasingly essential.
- Inspiration of new talents. SpaceX inspired a whole generation of engineers to re-engage in the space industry. The war for talent is as strong in the space industry as anywhere else. The number of SpaceX veterans now working for space companies in launch or other parts of the space value chain is immense and has benefited the industry. Will the same thing happen in the nuclear industry? Can we, the United States, engage its K-12 education system to inspire not only a new generation of nuclear engineers, but also a wide diversity of leaders and capabilities needed to grow this ecosystem?
- Commercial market penetration following government commitment. SpaceX now controls almost 50% of the launch market and is considered the central player in the industry. The company’s success ensured cheaper launch capability for the United States and its allies as well as a range of commercial market players. This success came despite years of constant skepticism and the belief that a guy with no space experience could succeed in this highly technical field. It also followed a relentless focus on experimenting, learning, and trying again. This will to fail and to learn is a characteristic principle of all successful innovation. Despite the simplicity, modularity, computer-aided design and other engineering best practices that will most certainly reduce final design and construction costs by an order of magnitude less than historic reactor projects, there is will have delays, adjustments and changes. Will the United States be willing to continue making progress in the development of this industry, even if the development path is not perfect?
- Public education. SpaceX has done a great job of attracting its share of headliners, including a charismatic leadership presence, Teslas rockets launched into the solar system, and brilliantly produced marketing pieces. How will the SMR industry educate citizens to understand value and reduce traditional fear?
So which patterns will continue and which will change?
Companies like SpaceX and leaders like Elon Musk have reminded us of the power of innovation, inspiration, belief, skill and execution in pursuit of worthwhile purpose. Leaders like Kam Ghaffarian and Bill Gates have taken up this torch by tackling an extremely difficult new problem. Understanding the power and importance of these industries, and then recognizing the patterns they share and the challenges they face will shape the future of the United States. It will also provide the clarity needed on the solutions needed to solve some of the world’s biggest problems.
Kurt Scherer is managing partner of Impact Partners C5.