Going Nucular in Ghana

Last Thursday, August 29, the U.S. State Department brokered a deal between Ghana and NuScale Power to build a small modular nuclear reactor (SMR) in the country. The first stage of the deployment will be a simulator on which technicians can train.

This is a pretty big deal for NuScale and, small modular technology in general.

If you don’t know, a small modular reactor, or SMR, is exactly what it sounds like. They are essentially portable reactors that can provide up to 300 megawatts of power. This power would effectively be off-grid.

Small modular reactor technology has gotten a lot of attention lately because of the massive increase in power usage from data centers running AI applications. If you could just bypass the grid and build an SMR power station on the site of a data center, it would solve a lot of problems,

There are several start-up SMR companies, including one founded by OpenAI co-founder Sam Altman, called Oklo (NASDAQ: OKLO). And Bill Gates has invested at least $1 billion in another SMR startup called TerraPower.

But there’s only one SMR company whose technology has been certified by the Nuclear Regulatory Commission. It’s called NuScale Power (NYSE: SME) and it’s valued at $775 million.

It might sound like having regulatory approval from the NRC is a green light, but… it’s complicated. Because existing NRC regulations are archaic – they are designed for utility-scale reactors and basically haven’t been updated in decades. Regulations have not (yet) been changed to reflect the different standards of small modular reactors…

For instance, on June 11, I told you about one of the regulatory hurdles: pressure vessels, the structure that houses a nuclear core…

Pressure in a utility-scale reactor is a different matter. There’s a lot more pressure in a big reactor, so NRC standards for steel and concrete make these among the most costly components for building.

Which is why the Small Modular Reactor (SMR) nuclear reactor technology that we’ve discussed a few times (here and here) sounds so compelling. Smaller reactors mean less pressure, which lowers building costs, making the power generated more cost-effective…

Except the NRC doesn’t see it that way.

As an example, a company we’ve discussed, NuScale (NYSE: SMR), wanted to build a cluster of 12 small reactors that would generate 50 megawatts of power. Again, the appeal of the smaller reactors is they generate less pressure.

The NRC checked its archaic standards and said nope, your pressure vessels must be 20 TIMES LARGER!

The added cost, multiplied by 12, meant that NuScale had to ball up that plan and toss it in the bin. It has now submitted a plan for 6 SMRs that would produce 77 megawatts. Bigger reactors that create more power are the only way the company could absorb the added costs from outdated regulation.

Pretty dumb.

Make It So!

A quick Google search will tell you that there is a lot of interest in small modular reactor technology. It’s been my experience that when enough money from influential people like Bill Gates and Sam Altman gets thrown at a problem, the problem gets solved.

I expect that will apply to the NRCs archaic standards for nuclear power plants. The agreement with Ghana to build one of NuScale’s SMR power plants should be viewed as a test case that will lead to changes in regulations that will pave the way for more widespread deployment.

I first told you about NuScale on May 1. NuScale was trading around $5.75 at the time. The stock ran as high as $16.75 in July and has since come back down to ~$8.25. Its market cap is now $780 million.

NuScale is definitely worth a look at these levels. Roughly 20% of NuScale’s stock has been sold short after a hatchet job by short-selling firm Hunterbrook. Those shorts have to cover at some point and could send the stock higher.

Cheers,

Briton Ryle
Chief Investment Strategist
Outsider Club

X/Twitter: https://twitter.com/BritonRyle

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