Nuclear Developments: Are We on the Brink of a New Era?

Momentum behind new nuclear technologies is growing rapidly, according to Jefferies analysts following their annual Nuclear Supply Chain Conference.

Investor enthusiasm is at an all-time high, with “tens of billions of equity values” now attributed to small modular reactor (SMR) companies, a big jump from “single digits this time last year.”

The firm said three main factors are driving this renewed interest: DOE support, commercial support, and progress on licensing.

Jefferies said the DOE has provided loan guarantees to promising projects such as X-Energy and TerraPower, boosting confidence.

Commercial partnerships, including X-Energy’s collaboration with Dow and Amazon (NASDAQ:AMZN), are also said to be key, while licensing remains a hurdle, with NuScale the only company so far to have received construction approval from the Nuclear Regulatory Commission (NRC).

Jefferies notes that scale is critical to success, as it helps reduce technology risk and lower costs for future customers.

“X-Energy is the most advanced at this stage with two commercial orders,” they assert.

However, the cost structure is seen as a remaining challenge. According to Jefferies, inflation, high labor costs, and high interest rates are headwinds.

While Inflation Reduction Act incentives such as upfront investment tax credits (ITCs) of 30-50% could help, Jefferies says few companies disclose their levelized cost of energy (LCOE), which is likely to be higher than alternatives such as natural gas, wind, or solar.

The firm expects non-utility players, rather than risk-averse utility companies, to take the lead in deploying these technologies. Meanwhile, constraints on the nuclear fuel supply chain and uncertainty around uranium enrichment and processing are said to remain issues for both large and small reactors.

Looking ahead, Jefferies expects major developments, including nuclear-powered data center announcements by early 2025, with companies like Talen Energy and Vestra presenting compelling investment opportunities in this evolving landscape.