Companies and governments are striving to meet net zero carbon goals by 2050, and banks have realized that nuclear power will be an important part of these goals.
On Sept. 23, several major financial institutions expressed their desire to triple nuclear energy capacity globally by 2050. The declaration came during discussions at Climate Week in New York and has the backing of Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley.
With nuclear power becoming a more popular option for companies meeting carbon-neutral goals, small modular reactors (SMRs) are generating a lot of buzz. NuScale Power (SMR +0.33%) is one company working on advancing this technology and could be a critical part of growing nuclear infrastructure.
As long-term tailwinds favor nuclear power, does NuScale stock have millionaire-maker potential?
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Growing demand for nuclear energy could give NuScale a boost
Energy demand will explode over the next few decades as populations grow, emerging economies expand, and artificial intelligence becomes integrated into everything. However, this comes at a time when countries are trying to reduce their carbon footprints.
Small modular reactors are an exciting technological advancement in nuclear power generation that could change how we use nuclear energy. SMRs can provide flexible, adaptable energy for remote areas, industrial plants, or data centers that power artificial intelligence.
Since 2007, NuScale has invested nearly $1.8 billion in developing SMR technology. This modular design means the SMRs can be manufactured at NuScale's plant and transported to the site for assembly, potentially reducing construction costs and the time it takes to bring a plant up to operation. The design also allows for a scalable plant that can accommodate up to 12 modules supporting an output of 924 megawatts (MW).
Recently, there has been a renewed interest in nuclear energy. Last year, several countries, including the U.S., Canada, Japan, France, the U.K., and the United Arab Emirates, pledged to triple nuclear generation capacity by 2050 (compared with 2020). S&P Global Commodity Insights analysts forecast global nuclear capacity will grow by 58% by 2050.
Delays and cost overruns resulted in a major project cancellation last year
Last November, the Utah Associated Municipal Power System (UAMPS) terminated its agreement with NuScale for its Carbon Free Power Project. The agreement, initially made in 2015, would have involved the construction of 12 reactor modules to generate up to 600 MW, which would have been up and running by 2023.
The termination showed how expensive it could be to get the technology off the ground. Originally, the project's costs were estimated to be around $3 billion. These estimates rose to $6.1 billion in 2023 and $9.3 billion in 2023, finally becoming too expensive for UAMPS. As a result, NuScale's first planned operational SMR plant went up in smoke, and it had to take a $50 million charge.
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What's next for NuScale?
In August, NuScale signed an agreement to bring its SMRs to Ghana. Last year, Standard Power announced plans to develop two of NuScale's SMR-powered facilities in Ohio and Pennsylvania that will produce 2 gigawatts of clean energy to power nearby data centers.
NuScale is currently the only company to receive a Standard Design Approval (SDA) from the Nuclear Regulatory Commission. However, one thing to keep in mind is that this is for its 50 MWe modular reactors, not its current 77 MWe reactors. NuScale had to upsize its original design because the economics of its previous 50 MWe reactors didn't work.
The company has requested an SDA from the commission for its 77 MWe reactors and expects this version to be approved by July 2025. However, this isn't a full certification, and it is projected to take another couple of years after that, which means full commercialization is still years away.
According to The Fly, analysts at CLSA say much of NuScale's stock performance will be "sentiment-based" as the company achieves regulatory approvals and garners more customer interest. However, those analysts expect the company to continue losing money and don't see it achieving profitability until 2028 at the earliest.
Is NuScale a millionaire-maker stock?
NuScale is developing exciting technology that could transform nuclear energy as we know it. Its modular reactors are suitable for small communities, growing economies, data centers, or other industrial customers looking to reduce their carbon footprints.
However, at this point, it's hard to make projections of NuScale's millionaire-maker potential. The company still has a long way to go before it gets full approval and can achieve large-scale commercialization, and profitable operations may still be four years away at the earliest.
The range of outcomes for NuScale is quite wide right now, which is to be expected from a young, cash-burning company developing innovative technology that may (or may not) work out in the long run. Given its uncertain path to profitability, most investors are best off staying on the sidelines and seeing how things unfold over the next few years before investing in the innovative energy company.
