The Obama administration has touted nuclear energy as part of the next step in America’s clean-energy future. An innovative nuclear energy firm has developed a smaller, economically viable nuclear plant that may revitalize the nuclear industry and related exchange traded funds (ETFs).
Nuclear energy already accounts for 20% of U.S. energy consumption. After a lull that has lasted two decades, the sector is poised to see a major revival.
Tennessee Valley Authority (NYSE: TVE), First Energy Corp. and Oglethorpe Power Corp. signed an agreement with McDermott International Inc.’s (NYSE: MDR) Babcock & Wilcox subsidiary to get the new type of small-sized nuclear reactor approved for commercial use in the United States, reports Rebecca Smith for The Wall Street Journal.
The smaller Babcock & Wilcox reactor generates 125 to 140 megawatts, or a tenth of what a big one can produce, but utilities believe that the smaller, simpler reactors can be quickly manufactured and installed at many existing nuclear sites or replace coal-fired plants. [Nuclear ETFs: The Wave of the Future?]
Nuclear energy investors worry that big companies who are planning large reactors that cost between $5 billion to $10 billion apiece will have a greater probability of things going wrong with the projects that take five years to complete. Jim Hempstead, senior vice president at Moody’s Investors Service, warns that utilities may face possible credit downgrades in their gamble to go nuclear. The small reactors are expected to cost around $750 million each, and the projects may take half the time to be completed as compared to larger projects. [5 ETFs to Play the Clean Tech Budget.]
The small reactors aren’t required to be located near large sources of water, which allows opens up the arid West for nuclear development. Utilities may also add more small reactors on site as needed. In addition, the power reactors will store their waste on each site for the estimated 60-year reactor life. [China Goes Nuclear.]
Experts believe that small reactors are safer than large ones. Small reactors are simpler and have less parts that fail, and they also have a smaller nuclear reaction, which makes it easier to shut down. [16 Ways to Play the State of the Union.]
For more information on the nuclear industry, visit our nuclear energy category.
- PowerShares Global Nuclear (NYSEArca: PKN)
- Market Vectors Nuclear Energy (NYSEArca: NLR)
- iShares S&P Global Nuclear Energy (NYSEArca: NUCL)
Max Chen contributed to this article.