Struggles and Setbacks

Monday 13 November 2023

The promise of small modular reactor technology was hit hard this month as NuScale, a Portland, Oregon based SMR developer, suffered a full cancellation of its first major project, located in Utah. Skyrocketing costs were the main cause, which in turn led the consortium of western utilities—lined up to purchase future power from the project— to back away. In coverage of the story, for example, Eric Wessoff of Canary Media notes that NuScale’s cost estimates rose sharply earlier this year, from $58/MWh to $89/MWh. More disheartening is that NuScale’s design had been approved the NRC, the only approval of its kind, so far.

The SMR approach to nuclear deployment was aimed specifically at bringing down costs through offsite construction, and its potential scaling effects. In the same way wind and solar power are largely manufactured offsite, and at scale, the hope was to realize a similar deployment sequence for nuclear: standardization of parts and equipment, and, onsite assembly. But even the best manufacturing learning-rate outcomes historically have always begun with high-cost early prototypes, and poor margins per unit until volume begins to rise. Furthermore, it’s far easier to eventually produce cost-decline effects when you are producing millions of simple units, like PV panels. When you are trying to produce the very first SMR, the challenge is exponentially harder.

Share prices of clean energy manufacturers have taken a beating in the second half of the year as rising interest rates take their toll. The iShares Global Clean Energy ETF, ICLN, is down roughly 30% year-to-date. Former high flying superstars like Enphase, SolarEdge, First Solar, and the giant lithium producer Albemarle have fared even worse. Broader markets meanwhile seem to think that interest rates have definitely seen their peak. But energy infrastructure companies across the battery, lithium, solar, wind, and EV space may need confirmation that the long-end of the interest rate curve has at least stabilized before investors are willing to return with enthusiasm.

The US offshore wind supply-chain is still being formed, and that’s one reason why we’re seeing project cancellations. While the US has done a great job so far of refurbishing ports, marshaling equipment, and even building a single fit-for-purpose ship, we are still at the very front-end of establishing the kind of resilient and efficient deployment system that Europe, by contrast, has enjoyed for years. Tactically, that means we don’t yet possess the kind of flexibility to dampen rising costs.

Unsurprisingly, these struggles and setbacks have delighted clean energy naysayers, whose pattern is well-established by now: for 2-3 year periods when clean energy is going gangbusters they lie in the grass, saying nothing. And then they spring forth, in a year like 2023. But strong trends are in fact built on the wrinkles of pullbacks.

As solar growth marches forward across the planet, one of the world’s largest countries, India, has fallen far behind. Despite India’s impressive electrification program, which has effectively brought power to previously unconnected populations over the past decade, the country is simply not taking advantage of solar, and its cheap & fast deployment. This is really bad. India’s population is set to overtake China’s this year, for example, and the country is now the #2 coal consumer. We simply can’t afford to have solar lagging in a domain of 1.4 billion people. Hence, the kWh per capita measure in the chart below best reveals the problem.

India represents therefore a very large block of current and future emissions from the power sector that is not decarbonizing fast enough. From a global accounting standpoint, this block joins another problem sector as represented by US transportation emissions from the existing vehicle fleet. Last month, at the Clean Power Hour podcast, I identified these two blocks as significant global impediments to getting fossil fuel consumption into decline.