The promise of a nuclear energy renaissance, powered by smaller, safer, and more affordable reactors, suffered a severe blow late last year. In a move that sent tremors through the energy sector, NuScale Power Corp. and a Utah-based utility consortium pulled the plug on what was poised to be the United States’ first small modular reactor (SMR) power plant. The project’s demise was not due to a technological failure or a safety concern, but the familiar kryptonite of the nuclear industry: spiraling costs.

The cancellation of the Carbon Free Power Project, which was to be built at the Idaho National Laboratory, underscored a harsh reality check for an industry buoyed by billions in government subsidies and high-profile backers, including Bill Gates. The target price for power from the NuScale plant had surged by 53%, from a projected $58 per megawatt-hour to an untenable $89, as reported by Reuters. This price hike made the project economically unviable for the municipalities that were supposed to buy its electricity, forcing them to terminate the agreement and leaving the SMR dream teetering on a precipice of economic doubt.

For years, proponents have pitched SMRs as the solution to the nuclear industry’s historical baggage of colossal, budget-breaking gigawatt-scale plants. The vision was compelling: compact reactors, with a capacity of 300 megawatts or less, could be largely manufactured in a factory setting and assembled on-site. This “economy of mass production” was meant to replace the “economy of scale” enjoyed by their larger predecessors, theoretically driving down costs, shortening construction timelines, and expanding the potential market to include remote communities and heavy industry.

However, the fundamental economic challenge remains. A 2022 analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) argued that the pursuit of smaller reactors inherently works against the cost-saving principles of scaling up. The report, titled “Small Modular Reactors: Still Too Expensive, Too Slow, and Too Risky,” posited that the cost benefits of factory production have yet to be proven and may never be sufficient to overcome the economic disadvantages of smaller designs, a concern that the NuScale failure appears to validate, as detailed by the IEEFA.

Beyond the sticker shock, the timeline for SMR deployment is proving to be another significant hurdle. The promise of rapid, streamlined construction is colliding with the meticulous and lengthy demands of nuclear regulation and first-of-a-kind engineering challenges. NuScale’s design was the first and, to date, only SMR to receive full design certification from the U.S. Nuclear Regulatory Commission (NRC), a milestone that took years and hundreds of millions of dollars to achieve, according to World Nuclear News. Despite clearing this formidable regulatory barrier, the project still couldn’t break ground before its economics collapsed.

This protracted timeline presents a critical problem in a rapidly evolving energy market. While the SMR industry inches forward, renewable energy sources like solar and wind, paired with battery storage, continue to plummet in cost and can be deployed in a fraction of the time. The long wait for SMRs, now projected to come online in the early 2030s at the earliest, makes them a difficult sell for utilities and investors who need to meet decarbonization goals on a much tighter schedule. The very problem SMRs were meant to solve—providing firm, carbon-free power to complement intermittent renewables—is being eroded by the pace of innovation in those competing technologies.

The failure of the Utah project highlights the immense risk borne by the first customers of any new nuclear technology. The so-called “first-of-a-kind” (FOAK) costs for SMRs are proving to be astronomical, creating a classic chicken-and-egg dilemma: no company can achieve the cost savings of mass production without a robust pipeline of orders, but no utility wants to place an order until the costs have been proven to be competitive. The NuScale project was heavily subsidized by the U.S. Department of Energy, which had pledged $1.4 billion, yet even this substantial federal backing was not enough to de-risk the project for its municipal customers.

All eyes are now turning to other high-profile projects, such as TerraPower’s Natrium reactor, a sodium-cooled fast reactor slated for construction in Kemmerer, Wyoming. The project, backed by Bill Gates and also a recipient of major funding through the Department of Energy’s Advanced Reactor Demonstration Program, is positioned as the next major test case for advanced nuclear power in the U.S. Its success or failure will be a critical bellwether for investor confidence and the viability of non-light-water reactor designs, which promise greater efficiency and safety but come with their own unique set of technological and regulatory challenges.

The SMR challenge is not unique to the United States. Across the Atlantic, the United Kingdom has placed a significant bet on the technology as part of its energy security and net-zero strategy. Rolls-Royce SMR is developing a 470-megawatt pressurized water reactor and recently began the Generic Design Assessment process, a key step in the UK’s regulatory review. As reported by the BBC, the company hopes to have its first unit operational by the early 2030s, but it faces the same pressures of demonstrating commercial viability to attract the necessary private investment.

Globally, the case for SMRs often rests on their potential to replace retiring coal plants and provide stable grid power. Yet, as one OilPrice.com analysis notes, the persistent cost overruns and delays plaguing the sector make it difficult to justify choosing SMRs over cheaper, faster alternatives. The history of the nuclear industry is a cautionary tale of cost escalation. A comprehensive Stanford University study on global nuclear projects found that costs have been consistently high and have, in many regions, continued to rise over time, casting a long shadow over claims that a new generation of reactors can decisively break from this trend, according to Stanford News.

Despite the significant setbacks, proponents remain steadfast. They argue that the NuScale project’s failure was a commercial issue, not a technological one, and a valuable, if painful, learning experience. They maintain that as the world pushes for deeper decarbonization, the need for 24/7, carbon-free power that is not weather-dependent will become non-negotiable, a role that only nuclear or fossil fuels with carbon capture can currently fill. For them, the high upfront costs are a necessary investment to unlock a critical tool for fighting climate change.

The dream of a fleet of small, modular reactors powering the clean energy transition has not died, but it has been sobered by the stark laws of economics. The initial hype has collided with the immense financial and logistical gravity of building nuclear power plants, no matter their size. The future of the SMR industry now hinges less on innovative reactor physics and more on a far more challenging equation: proving it can deliver reliable power at a price the market is willing to pay. Without a clear and convincing answer, this next-generation nuclear technology risks becoming a permanent resident of the research lab rather than a cornerstone of the world’s energy future.