Small Nuclear Reactors Offer Hope (MDR, TVE, FE)

With renewed interest in generating nuclear power and the high cost of setting up larger nuclear reactors, a new type small reactor by McDermott International Inc’s (NYSE: MDR) Babcock & Wilcox subsidiary offers new hopes. Three big utilities, Tennessee Valley Authority (NYSE: TVE), First Energy Corp. (NYSE: FE) and Oglethorpe Power Corp. have entered into an agreement with Babcock & Wilcox to get the new reactor approved for commercial use in the U.S. This week, President Obama announced more than 8 billion in loan guarantees for the first nuclear power plant in the U.S. in almost 30 years. The President also proposed tripling the loan guarantees given to nuclear reactors to speed up nuclear energy generation. Small reactors which are smaller than a rail car and cost one tenth the cost of a big plant, could attract more investors as many see the massive investments in a nuclear reactor as a hindrance to enter into the business as the risk is too high if the project fails or gets delayed. Also, the fact that these small reactors have in-house waste storage capability for their lifetime i.e. a period of 60 years, and that they do not need to be near water sources as they could also be air-cooled, make them attractive for customers. Experts also believe that these small reactors should be safer than the larger ones as they are simpler and have fewer moving parts that can fail. Critics however say that smaller nuclear plants can never be cost effective irrespective of their size as nuclear energy is inherently expensive because of special precautions and the tight security needed at the plants.