Rolls-Royce sees the future of net-zero energy in small nuclear reactors—and it’s got growing competition

November 9, 2021, 11:37 AM UTC

Rolls-Royce Holdings—the aerospace and defense firm, rather than the carmaker—has established a new business that will develop and make small, modular nuclear reactors.

The new unit is being set up with a mix of private- and public-sector funding: 210 million pounds ($286 million) from the British government, and 195 million pounds from Rolls-Royce Group, BNF Resources, and the U.S.’s Exelon Generation. The government cash comes as part of the U.K.’s “green industrial revolution” drive: The reactors can power not only millions of homes, but also the production of hydrogen and synthetic fuels, if embedded into industrial installations.

Shares in Rolls-Royce, which has been in the reactor business for over half a century, rose more than 6% on the news.

Small, modular nuclear reactors, or SMRs, are seen by some as an important tool in the energy transition. Nuclear energy is green in the sense that power generation does not produce carbon emissions, but nuclear plants are slow and expensive to build: The big promise is that SMRs will change all that.

The modularity of SMRs means their components can be made in a factory and assembled on-site. In the words of Rolls-Royce SMR CEO Tom Samson, the new unit will “deliver a low-cost, deployable, scalable and investable program of new nuclear power plants…based on predictable factory-built components.”

“With the Rolls-Royce SMR technology, we have developed a clean energy solution which can deliver cost competitive and scalable net-zero power for multiple applications, from grid and industrial electricity production to hydrogen and synthetic fuel manufacturing,” enthused Rolls-Royce CEO Warren East in the same statement, while also promising up to 40,000 new British jobs.

Rolls-Royce said the technology would be contributing to the U.K.’s grid “in the early 2030s,” with “unprecedented” export potential. The company said nine-tenths of one of its plants would be made in factories. Each power station will be around the size of two soccer pitches, and will be able to power a million homes.

The U.K. is, like France, one of the European countries that see nuclear as a crucial part of the post–fossil fuel mix. The French government announced its own, similarly export-hopeful SMR push less than a month ago, with a billion-euro ($1.16 billion) investment that will largely benefit the state-controlled utility EDF.

The continent’s other big beast, Germany, started winding down its nuclear-power capacity after the Fukushima disaster in Japan a decade ago; its last nuclear plant will go off-grid next year, and government-commissioned reports warned earlier this year that accepting SMRs would carry “enormous risks” around the proliferation of nuclear material.

This pullback is leaving Germany highly reliant on dirty coal for the near future. Europe’s division over nuclear is currently a live issue owing to a debate over whether nuclear power and natural gas should fall under the scope of EU green-finance rules.

Outside Europe, there is plenty of SMR competition brewing. The U.S. government stepped up its SMR funding back in 2014, and Portland, Ore.–based NuScale Power is preparing to deploy its still unproven technology in Romania. Meanwhile, China National Nuclear Corp. (CNNC) also announced a few months back that it was building the world’s first SMR demonstration project on the island of Hainan.

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