Nuclear energy is once again emerging as a beacon of hope in the search for sustainable energy solutions. As the world grapples with decarbonization goals, nuclear power could be a game changer, providing reliable baseload energy that can help meet increasing demand for clean energy.
The momentum is undeniable. In September, fourteen prominent financial institutions announced their support to triple global nuclear capacity by 2050. Their support follows support from several countries endorsing the Declaration to Triple Nuclear Energy, which was launched at COP28 and heralded a new era for nuclear technology.
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According to investment bank Craig-Hallum, we are at the beginning of a multi-decade megatrend centered on nuclear energy. NuScale power(NYSE: SMR) is a company that wants to lead this energy revolution, focusing on small modular reactors (SMRs) that rethink the way nuclear energy is deployed.
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With a regulatory edge, NuScale is uniquely positioned to lead the way. However, it may take years for the innovative nuclear power company to generate meaningful profits. Here’s what you need to know if you’re considering investing in NuScale today.
There has been a resurgence in support for nuclear energy in the past year. Part of this is due to the growing demand for energy from data centers to power the latest and greatest artificial intelligence (AI) algorithms, which power everything from chatbots to image and video generation.
The problem is that growing energy demand conflicts with decarbonization goals. The truth is that renewable energy sources are not yet advanced enough to support technology’s growing demand for uninterrupted energy.
Nuclear energy has the advantage of burning cleaner, while also providing the required amount of energy and keeping the electricity flowing 24/7. For this reason, many technology companies have turned to nuclear power to meet their growing energy needs.
Microsoft signed a twenty-year power purchase agreement with Constellation Energy Company in October. As part of this agreement, the Three Mile Island Unit 1 would restart. Amazon also recently entered into an agreement with Energy Northwest and Dominion energy to enable the development of four advanced small modular reactors (SMRs).
SMRs make nuclear energy modular and scalable and can meet the energy needs of remote areas or even industrial or technological facilities with large energy needs. At the time of 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 factory and transported to site for assembly. The exciting technology could potentially reduce costs and the time it takes to become operational, which is a key reason it has such broad appeal.
That said, this technology is still developing and it may be years before it is ever deployed on a commercial scale. Regulators have approved NuScale’s 50 megawatt electricity (MWe) reactor. However, to make its SMRs more cost-effective, NuScale had to scale up its reactors to 77 MWe. The company expects its larger SMR to be approved in July 2025. However, full certification is expected to take a few years after that.
A problem with SMRs at the moment is that they appear cheap at first glance, but cost overruns have made them unrealistic for the time being. For example, last year the Utah Associated Municipal Power System (UAMPS) terminated a 2015 agreement with NuScale.
As part of the agreement, NuScale would build 12 reactor modules to generate up to 600 MWe. Initially, the project was planned to be operational in 2023. Initially, the project was expected to cost approximately $3 billion. These estimated costs increased 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 the 77 MWe modules, which will produce 1,848 MWe of energy at both locations. Standard Power believes this facility could not be operational until 2029 at the earliest.
NuScale is currently the only company with an SDA for its NRC small modular reactor, giving it a first-mover advantage. However, the company still needs to get the larger design approved by the committee, and even then, there are still a number of steps to go before it can begin commercial operations.
NuScale is a story-driven stock today, where investor sentiment will drive the stock based on its performance (or setbacks) combined with the broader nuclear story. However, there is still a lot of work to be done before SMR technology is proven and operational, so it’s best for most investors to watch NuScale from the sidelines for now.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Courtney Carlsen holds positions at Microsoft. The Motley Fool holds and recommends positions in Amazon and Microsoft. The Motley Fool recommends Constellation Energy, Dominion Energy, and NuScale Power and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Is NuScale Power Stock a Buy? was originally published by The Motley Fool
