Ground Breakers: America’s first SMR fizzles out as uranium continues to ride high

The collapse of a deal to develop America’s first operating SMR could be a ‘serious setback’, says WoodMac
It comes amid a renaissance for nuclear power and uranium miners
Lab stock ALS up as battery metals light up metallurgy revenue

Small modular reactors — they’re the technology the nuclear power industry hopes will mainstream the controversial energy sector and prove it can expand without the massive scale of traditional nuclear energy.

But the emerging market has been dealt a blow just as enthusiasm for a nuclear renaissance hits a new level of intensity.

It came in the form of a decision from the Utah Associated Municipal Power Systems and advanced SMR developer NuScale to dump a plan called the “Carbon Free Power Project”.

That would have been the first SMR rolled out in the States, six minireactors due to be constructed in Idaho Falls from 2026. But NuScale and UAMPS deemed it unviable after subscriptions fell well below the level required to underwrite the project’s construction.

It came despite strong political support, including from the Biden Administration, amid long delays and cost overruns for conventional plants.

Wood Mackenzie vice-chair of Americas Ed Crooks said it was a serious setback for the SMR industry.

“But while the end of the Carbon Free Power Project was not entirely unexpected, it is still a serious setback for nuclear power in the US, and for hopes of reducing greenhouse gas emissions globally,” he said in a note.

“It is increasingly likely that no new SMRs will be built in the US or Europe in the 2020s.”

According to Crooks the levelised cost of energy for the power to be delivered by the dumped project was over double that of utility-scale solar and materially higher than gas turbines.

“Estimates published in January set a target levelised cost of energy (LCOE) for the plant of US$89 per megawatt hour, up from an earlier estimate of US$58/MWh, including the benefit of tax credits and federal government support,” he wrote.

“But even that revised target relied on some favourable assumptions. Hitting that US$89/MWh target depended on cutting US$700 million from the Carbon Free Power Project’s estimated cost of US$5.1 billion.

“Without that, the LCOE would be US$105/MWh, and there were clear risks that it could rise higher.

“Wood Mackenzie calculated last year that the average LCOE from a combined-cycle gas turbine power plant in the US was US$58/MWh, while utility-scale solar was US$43/MWh.

“That makes the Carbon Free Power Project’s cost estimates seem expensive, even before any additional overruns.”

Enthusiasm for nuclear continues

Despite that news, SMR developer NuScale has, predictably, rebutted a short seller’s report from Iceberg Research on its operations last month.

Its stock is down 81% over the past year.

Yet enthusiasm for the nuclear renaissance is still strong, with a massive new build program in China and decade-strong contracting from existing nuclear utilities providing hope new uranium producers could see enough demand soon to support new mine developments.

Prices have lifted around 50% to almost US$74/lb for U3O8, or yellowcake, this year.

That is around four times higher than the bear market lows of 2016-2018, with plans to phase out fossil fuels giving hope to uranium producers that governments worldwide will turn to nuclear to provide baseload power in the decades to come.

Uranium stocks rose strongly today, with Boss Energy (ASX:BOE) 4.75% higher and Paladin Energy (ASX:PDN) up 4.54%.

$1.6 billion Boss and $2.9b Paladin are expecting to restart production at the Honeymoon mine in South Australia and Langer Heinrich in Namibia early next year.

Also up this morning were African explorers Deep Yellow (ASX:DYL) and Lotus Resources (ASX:LOT), along with a number of smaller players.

ALS up on half-year results with battery metals providing strong demand

One of the world’s top assay companies, ALS (ASX:ALQ), says drilling for battery metals is providing strong demand in its metallurgy division while geochemistry remains resilient despite a cyclical downturn.

ALS saw its statutory NPAT fall 9.4% YoY to $134 million for the first half of FY24, hit by the underperformance of its Nuvisan biotech business, one-off items and the sale of the Asset Care business.

But its underlying continued NPAT came in at $158m, 2.2% above the top end of its guidance range, with a 19.6c interim dividend coming in just 3.4% below 2023 and at almost 60% of H1 NPAT.

ALS said clean energy and battery metals exploration now made up 40% of total budgets, with lithium exploration budgets up 78% YoY, making it the third most explored for commodity in 2023.

That rising tide has offset a fall in demand from gold explorers.

Underlying NPAT is expected to be around 1% lower at the midpoint of its full year forecast of $310-325m, with geochemistry margins above 30%.

“Within Commodities, the Geochemistry business to benefit from market share growth across the total value chain, maintaining overall margins above 30%,” ALS said.

“Increased uptake of high-performance methods and additional market share growth to support overall margin resilience.

“Metallurgy project pipeline remains strong, reflecting continued growth in demand for clean energy related metals and expected to deliver high single-digit organic growth and margin improvement YoY.”

ALS shares lifted 6.74% this morning, with the broader materials sector up 1.14%, led by lithium miners MinRes (ASX:MIN) and IGO (ASX:IGO), iron ore giant Fortescue (ASX:FMG) and base metals producer South32 (ASX:S32).