Small nuclear reactors have been around since the 1950s. They mostly have been used in military ships, like aircraft carriers and submarines. They have the specific advantage that such ships could remain at sea for long periods of time without needing to refuel. But small modular reactors have never taken off as a source of grid energy. The prevailing opinion for why this is seems to be that they are simply not cost effective. Larger reactors,  which are already expensive endeavors, produce more megawatts per dollar. SMRs are simply too cost inefficient.

This is unfortunate because they have a lot of advantages. Their initial investment is smaller, even though the cost per unit energy is more. They are safe and reliable. They have a small footprint. And they are scalable. The military uses them because the strategic advantages are worth the higher cost. Some argue that the zero carbon on demand energy they provide is worth the higher cost, and I think this is a solid argument. Also there are continued attempts to develop the technology to bring down the cost. Arguably it may be worth subsidizing the SMR industry so that the technology can be developed to greater cost effectiveness. Decarbonizing the energy sector is worth the investment.

But there is another question – are there civilian applications that would also justify the higher cost per unit energy? I have recently encountered two that are interesting. The first is a direct extension of the military use – using an SMR to power a cargo ship. South Korean company, HD Korea Shipbuilding & Offshore Engineering, has revealed their designs for an SMR powered cargo ship, and has received “approval in principle”. Obviously this is just the beginning phase – they need to actually develop the design and get full approval. But the concept is compelling.

The SMR has a smaller footprint overall than a traditional combustion engine. They do not need space for an exhaust system or for fuel tanks. This saved space can be used for extra cargo – and that extra cargo offsets the higher cost of the SMR. The calculus here is different – you don’t have to compare an SMR to every other form of grid power, including gigawatt scale nuclear. You only have to compare it to other forms of cargo ship propulsion. You have to look at the overall cost effectiveness of the cargo delivery system, not just the production of watts. As an aside, the company is also planning on incorporating a “supercritical carbon dioxide-based propulsion system”, which is about 5% more efficient than traditional steam-based propulsion system.

Shipping accounts for about 3% of global greenhouse gas emissions.  Decarbonizing this sector therefore will be critical for getting close to net zero.

The second potential civilian application is for powering datacenters. Swiss company, Deep Atomic, is developing an SMR that is purpose-built for large data centers, again by leveraging advantages specific to one application. Their design provides not only 60 MWe of power, but 60 MW worth of cooling. Apparently it can use its waste heat to power cooling systems for a data center. The SMR design is also meant to be located right next to the data center, even close to urban centers. The company also hopes to produce these SMR in a factory to help bring down construction costs.

Right now this is just a design, and not a reality, but it’s the idea that’s interesting. Instead of thinking of SMRs as just another method of providing power to the grid, they are being reimagined as being optimized for a specific purpose, which could possibly allow them to gain that extra efficiency to make them cost effective. Data centers, which are increasingly critical to our digital world, are very energy hungry. You can no longer just plug them into the existing grid and expect to get all the energy you need. Right now there is no regulatory requirement for data centers to provide their own energy. In late 2024, Energy Secretary Jennifer Granholm “urged” AI companies to provide their own green energy to power their data centers. Many have responded with plans to do that. But it would not be unreasonable to require them to do so.

Without a plan to power data centers their growing energy demand is not sustainable. This could also completely wipe out any progress we make at trying to decarbonize energy production, as new demand will equal or outstrip any green energy production. This is what has been happening so far. This is another reason why we absolutely need nuclear power if we are going to meet our carbon goals.

There is also the hope that these niche applications of SMRs will bootstrap the entire industry. Making SMRs for ships and data centers could create an economy of scale that brings down the cost of SMRs overall, making them viable for more and more applications.