America’s Energy Savior

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

There's lots of talk about how shale oil and gas are the answer to all of America's energy problems. One fuel source people are discounting is nuclear. Last month the Department of Energy, or DOE, announced a $450 million grant to Babcock and Wilcox (NYSE: BWXT  ) to develop small modular nuclear reactors. Read on to find out why this is important and how small modular reactors will benefit the U.S.

Small modular nuclear reactors
Small Modular Reactors, or SMRs, have all the qualities you might expect from the name. They are meant to be small enough to be transported by train and generally have a capacity of under 300 MWe. They are meant to be modular, in that it's composed of just one design, so each new build isn't a custom project. Finally, they are meant to be nuclear reactors in that, well, they make electricity through harnessing a nuclear reaction.

The advantages of SMRs include lower construction time, risk, and cost, enhanced flexibility, ease of adding additional capacity, and lower financing requirements. While some economies of scale will be lost from their smaller size, the ease of adding capacity at relatively low cost will make up for them.

Department of Energy program
The DOE announced the SMR design program in January 2012 in an effort to spur development of the reactors in the U.S. The program provides for two 50/50 cost-sharing grants of up to $450 million each over five years for the development and deployment of SMRs. That means a company could spend $900 million developing SMRs and the government would split the cost with them.

Four developers submitted applications for consideration:

  1. Babcock & Wilcox, with partner Bechtel Power, submitted an application for B&W's mPower reactor, a 180-MW light water reactor. The partners have a signed an agreement with the Tennessee Valley Authority to build a reactor by 2020.
  2. Toshiba's Westinghouse, with Burns & McDonnell and Ameren Missouri, submitted an application for a 225-MW integral pressurized water reactor.
  3. Holtec International, with support from the Shaw Group and AREVA, submitted an application for a 160-MW passively safe plant.
  4. NuScale, majority owned by Fluor, submitted an application for a 45-MW reactor.

Conspicuously absent was General Electric (NYSE: GE  ) . It is developing its own technology with Hitachi for a liquid sodium cooled reactor called the Power Reactor Small Innovative Module (PRISM), however it is not far enough along in the design process to be submitted.

First winner
Last month the DOE announced the first winner was Babcock & Wilcox and its mPower Reactor. Analysts speculated that a key factor was having a customer already lined up and that the reactor only needed refueling once every three to four years, compared to every year or two for the competitions'. 

Source: Babcock & Wilcox

A second winner has yet to be announced. While SMRs won't be ready until at least 2020, they are worth keeping in the back of your mind. Longer term, the development of SMRs would be a big boost for uranium suppliers Uranium Energy (NYSEMKT: UEC  ) , Cameco (NYSE: CCJ  ) , and USEC (NYSEMKT: LEU  ) if it is still around.

Foolish bottom line
With a head start on the competition Babcock & Wilcox could be an acquisition candidate for General Electric or another major industrial conglomerate.

If you are looking for other ways to invest in nuclear, consider Exelon. As the nation moves increasingly toward clean energy, one company in this space that is perfectly positioned to capitalize on having the largest nuclear fleet in North America is Exelon. This strength combined with an increased focus on renewable energy, along with its recent merger with Constellation, puts Exelon and its best-in-class dividend on a short list of top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2166562, ~/Articles/ArticleHandler.aspx, 10/25/2016 6:55:22 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:02 PM
BWXT $39.05 Up +0.29 +0.75%
BWX Technologies CAPS Rating: *****
CCJ $7.88 Down -0.16 -1.99%
Cameco CAPS Rating: ****
GE $28.92 Down -0.06 -0.21%
General Electric CAPS Rating: ****
LEU $3.81 Up +0.03 +0.73%
Centrus Energy CAPS Rating: *
UEC $0.91 Up +0.01 +1.11%
Uranium Energy CAPS Rating: **