The Three Mile Island Nuclear Plant near Middletown, Pennsylvania. The facility first came online in 1974.
The Three Mile Island Nuclear Plant near Middletown, Pennsylvania. The facility first came online in 1974. Jeff Fusco—Getty Images

Meet a Startup Making a New Kind of Safer, Smaller Nuclear Reactor

Updated: Mar 15, 2016 2:54 PM UTC | Originally published: Feb 04, 2016

When serial entrepreneur Kam Ghaffarian, an Iranian-American who co-founded space contractor SGT, went on a spiritual retreat years ago in the South of France, his soul searching kicked off a new found fascination with nuclear technology.

Ghaffarian isn’t the only successful businessman to suddenly become intrigued by new forms of nuclear energy. Microsoft (msft) co-founder Bill Gates plowed millions into a nuclear startup called TerraPower, while Amazon’s (amzn) CEO Jeff Bezos funded nuclear fusion startup General Fusion. Microsoft’s other co-founder Paul Allen became smitten with another nuclear fusion startup called Tri Alpha Energy.

While nuclear startups are quite rare compared to those that make mobile apps, connected devices, or data algorithms, dozens of ambitious nuclear startups are now vying to be the next big thing in nuclear energy. At stake is a chance to commercialize a much needed energy source that doesn't contribute to climate change and which could help revive a struggling nuclear industry.

The result of Ghaffarian’s French introspection is a nuclear startup called X-energy, and you’re forgiven if you’ve never heard of it. The company has been operating under the radar since 2009, and working on designs for a safer and smaller nuclear reactor that uses a technology first developed in Germany decades ago.

The company was outed last month by what could be a game-changing $40 million grant from the Department of Energy to build its advanced nuclear energy reactor. X-energy was one of only two companies to receive the government financing, and the firm competed against over a dozen companies, many well-established billion-dollar corporations.

The company doesn't receive all of the funds outright, but will have access to the money as, or if, milestones are met. The grant also requires cost-sharing, and Ghaffarian, who has already invested $20 million of his own money into X-energy, has agreed to provide millions of dollars more.

X-energy plans to spend the funds on doubling its staff to about 30 people, and continuing development of its reactor designs and fuel creation process. Through the grant, X-energy will also work with a handful of partners on the tech, including Oregon State University, Idaho National Laboratory, and Oak Ridge National Laboratory.

The economics behind clean energy:

For Ghaffarian—and for the tech billionaires, too—the intrigue into nuclear energy tech is largely about advancing technology that can have a big impact on a difficult, world-changing, problem. Despite that the energy markets are vast industries, investing in new nuclear technology is by no means a fast and easy way to make money.

Ghaffarian tells Fortune that his interest in the nuclear tech is “philanthropic” and is “about giving back.” Indeed, the DOE grant is a drop in the bucket when it comes to the roughly billion dollars needed to get a new type of nuclear reactor to market. But Ghaffarian, and X-energy’s President Harlan Bowers, are hopeful the DOE recognition will also lead to interest from new investors and new partners.

X-energy is working on a type of nuclear reactor called a pebble bed modular reactor. The pebbles are in reference to tennis-ball-sized spheres of graphite, which house tiny pellets of uranium that are coated in ceramic. Inside the company’s reactor they’ll pile up about 170,000 of these pebbles, which is enough to start a nuclear reaction, and generate heat.

An image of a cross section of the pebbles in the pebble bed nuclear reactor. 

Most of those older giant nuclear reactors you hear about use water to cool uranium rods. The fuel rods need a constant flow of water across them to keep them cool. If the water is removed for whatever reason, the reactor can overheat and meltdown. And that’s really bad.

The Fukushima nuclear disaster was caused when a massive earthquake shut down the water cooling system at three reactors in Japan. The utility eventually started pouring sea water onto the overheating reactors but by then it was too late and radioactive materials had been released.

Instead of using water, X-energy’s pebble bed reactor will flow helium across the pebbles to keep the temperature down. But in addition to a different coolant, X-energy's Bowers says the form of uranium they will use (Uranium 235) starts to cool down at a certain temperature threshold, so it can essentially self-regulate itself.

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Currently X-energy is designing its reactors at a much smaller scale than the typical gigawatt-scale nuclear plant. Each X-energy reactor, called the Xe-100, will generate 50 megawatts of electricity, or 125 megawatts of heat, just a fraction of what a gigawatt nuclear reactor would produce. But multiple Xe-100's could be strung together to make much larger nuclear generators.

An image of the helium coolant of the Xe-100, from startup X-energy. X-energy 

Because the tech is modular and safer than traditional nuclear, Ghaffarian and Bowers envision that it could be used by not just utilities for the power grid, but also companies that want to generate heat and electricity independent of the grid. Ghaffarian hopes that the tech could be deployed in the developing world where power grid access is a distant dream.

You're probably wondering if the pebble bed tech is so great, why haven't former efforts over the years come to fruition? Many groups in Germany, South Africa, the U.S. and China have tried over the years, and indeed built reactors, but scientists haven't been able to commercialize the technology economically or without technical issues.

Of course all of X-energy's ambitions are still just that. The company is only at the conceptual design phase, and will need many more years to complete its designs.

If the company gets its funding, in maybe seven to nine years, it plans to engage with the Nuclear Regulatory Commission, which doles out licenses to build reactors. X-energy plans to start operating a demonstration reactor within the next twenty years, or by 2035.

The long timelines and huge funding challenges are one of the main reasons there aren't more nuclear startups out there. It takes a brave, and stubborn, entrepreneur to tackle a project that will take 20 years to commercialize.