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Not Oklo. Not X-Energy. This SMR Stock Just Signed a Contract to Start Building Reactor Components.
Key Points
NuScale Power signed a deal with Doosan Enerbility to start making key reactor components.
The company is securing nuclear components that can take three to five years to manufacture.
Despite an approval from the NRC, NuScale has yet to secure a major commercial agreement.
Small modular reactors (SMRs) promise cheaper, safer, flexible, zero-emission nuclear power by shifting construction from custom-built nuclear power plants to standardized factory production lines.
SMRs could change how nuclear power is deployed, and early-stage companies like Oklo, X-energy, and NuScale Power (NYSE: SMR) are building manufacturing capacity, securing regulatory approvals, establishing fuel supply chains, and signing commercial agreements.
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On Oct. 29, NuScale signed a manufacturing agreement with South Korean-based Doosan Enerbility to begin fabrication of key reactor components for its NuScale Power Module. NuScale is securing pressure vessels and building ahead of its order book, which still doesn't have a major anchor customer.
Image source: The Motley Fool.
NuScale is establishing its supply chain as it looks to ramp up manufacturing
NuScale's Power Modules are light-water small modular reactors that are factory-fabricated and can deliver up to 77 megawatts electric (MWe) of power per module. Up to 12 modules can be linked together, providing 924 MWe of power capacity, which is enough to power nearly 700,000 U.S. homes.
The SMR developer has an important first-mover advantage as the only company with a Standard Design Approval (SDA) from the Nuclear Regulatory Commission (NRC). This means the NRC has evaluated its safety mechanisms and confirmed its technical feasibility at a legal level, and it is an important hurdle toward commercial operations.
NuScale's agreement with Doosan Enerbility is a key step toward establishing its supply chain and shows the company is ramping up manufacturing capacity. Because forging and machining nuclear-grade pressure components takes up to five years, NuScale has secured the manufacturing capacity needed to meet its commercial operation target date in the early 2030s.
Doosan is a highly specialized supplier of nuclear components, and X-energy has also entered into a 16-unit capacity reservation agreement with the company. However, unlike NuScale, X-energy's agreement follows major customer agreements, such as Dow Inc.'s Texas plant, which will use its Xe-100 SMRs. X-energy also has major utility agreements and Amazon's backing to help it navigate regulatory and legal hurdles.
What needs to happen next for NuScale Power
Investors are hoping NuScale Power can secure similar firm commitments. Right now, it has one approved project in Romania for six of its NuScale Power Modules. The company is working closely with ENTRA1, which will help serve as a project developer, financier, and operator utilizing NuScale's Power Modules.
Last year, ENTRA1 and the Tennessee Valley Authority entered into a collaborative framework agreement to explore the deployment of up to 6 gigawatts (GW) of NuScale-powered SMR capacity. This would use 72 NuScale Power Modules, be the largest SMR deployment program ever in the U.S., and could completely rewrite the story for NuScale Power.
NuScale's recent move to secure manufacturing capacity for key nuclear components is a good sign that the company is establishing its supply chain for long-lead equipment as it targets deployment in the 2030s. That said, until it can secure more firm commercial commitments, NuScale Power remains a highly speculative bet on the future of nuclear energy.
Courtney Carlsen has positions in NuScale Power and Oklo. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.