On Wednesday November 8, NuScale and the Utah Associated Municipal Power Systems (UAMPS) announced their mutual decision to cancel the proposed 462 mw small modular reactor dubbed the Carbon Free Power Project. The obstacle cited was the co-op's inability to sign up more customers for the already expensive power. The terms of their agreement specified that UAMPS would attempt to find subscribers for 80% of the power produced from the reactor. If they failed to do so by late January of next year, they retained the right to cancel the reactor and receive refunds. UAMPS officials recently stated publicly that they only had buyers for about one quarter of the proposed reactor’s output.
Our first observation concerns timing. UAMPS didn’t have to cancel for at least another three months, until the end of January. So this early cancellation suggests they had no hope of reaching the 80% subscription rate. This isn’t surprising given that planned power prices for NuScale’s SMR rose from $55 to $89 per mw and the co-op members would be financially responsible for future cost escalations. Let’s put this a different way. Is a modest sized, 50 member electric power cooperative in the Intermountain West really the best funding vehicle to finance a first-of-its-kind small modular reactor with a planned 2029 in-service date? We think they reached the same conclusion and collectively decided to finally pull the plug. Related: U.S. Oil Rigs Continue To Fall
Yesterday’s contract termination by UAMPS will also enhance scrutiny of the deal announced last month with Standard Power for two twelve reactor modules, a total of 1848 mws, and a long-term contract supposedly valued at $37 billion according to the company. This company, with one identified reactor site in Ohio, presently purchases 40 mws for crypto miners and data center developers. A short seller's report in late October implied that Standard Power and its management team were not credible financial partners for a contract of this magnitude and we can’t disagree.
NuScale’s reactor design is the only one in the US that has thus far received preliminary approval from the Nuclear Regulatory Commission. However, they just lost their first and most credible customer which also had an easy-to-license site in Idaho Falls, ID at the federal government's Idaho National Engineering Labs. NuScale’s shares are down about 30% in after-hours trading suggesting the UAMPS cancellation was somewhat of a surprise. When we last wrote about this for OilPrice on October 26 we noted that the single biggest risk for NuScale investors was a potential contract cancellation by UAMPS. Frankly, after all the public attention this issue has received we were surprised investors were surprised. Attention will now likely turn to NuScale’s largest shareholder, Fluor Corp., as well as the US Department of Energy which has provided significant funding for this project. All we can conclude is that this seems to be a case of a potentially viable SMR technology suffering from problematic funding sources.
In the end, though, the NuScale-UAMPS falling out highlights a major problem with US nuclear policy, which depends on a variety of subsidies and unlucky local consumers. If nuclear power is in the national interest, it should not depend on the willingness of Utah farmers or Georgia consumers to pay high prices in order to further national aims.
By Leonard Hyman and William Tilles for Oilprice.com
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