Artificial Intelligence Drives New Nuclear Power Demand, Small Modular Reactors Usher in a Development Window

Artificial Intelligence Drives New Nuclear Power Demand, Small Modular Reactors Usher in a Development Window

Small modular reactors (SMRs) are at a critical development juncture. The urgent electricity demand brought by artificial intelligence provides SMRs with an unprecedented market opportunity, while funding support from government institutions such as the European Investment Bank helps address the industry’s long-standing financing challenges. Although the path to commercialization still requires time, the involvement of more government funding will gradually promote project implementation, creating a more favorable conversion environment for developers such as Oklo (OKLO) and NuScale (SMR). This trend constitutes a long-term structural positive, and its effectiveness depends on whether enough SMR systems can successfully enter operation in the coming years. Although the cost per megawatt of SMRs is typically higher, their construction speed is highly attractive in the current environment.

European Investment Bank Releases Positive Signal

The European Union’s lending institution, the European Investment Bank, has recognized the potential of SMRs. On September 4, the institution announced a 40 million euro loan to Finnish SMR developer Steady Energy. According to Reuters, this loan is the first in a series of SMR investments planned by the European Investment Bank. Although SMR stocks such as NuScale Power and Oklo Inc. were not directly involved in this transaction, this announcement should be viewed as a positive signal by shareholders.

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Why Government Support Benefits Oklo and NuScale

As previously mentioned, the SMR concept has existed for decades, but only two systems worldwide have achieved commercialization. Historically limited adoption has largely stemmed from a lack of demand to pay a premium for smaller reactors. Energy demand growth has long been stable and predictable, enabling utility companies to take a long-term view and focus on minimizing costs as much as possible. Today, artificial intelligence companies plan to invest billions of dollars in energy infrastructure in the near term, and there are currently more than 80 SMR projects worldwide at various stages of development.

However, the problem is that many projects remain at the concept or financing stage, and firm financial commitments across the entire SMR industry remain scarce. Given that previous SMR deals have fallen through in recent years due to rising cost estimates, this situation is understandable. For the SMR sector, the best scenario is to have more SMR systems enter operation to demonstrate their execution capability and economic viability.

It is precisely for this reason that increased support from European institutions and other national governments is crucial to the long-term development of NuScale and Oklo. More direct funding input will increase the likelihood of more SMRs successfully achieving commercialization in the coming years, adding more real-world validation to the technology. If multiple projects successfully achieve commercialization, Oklo and NuScale will be more likely to convert their customer pipelines into revenue-generating projects with firm financial commitments.

To be sure, this is a long-term positive. Increased government funding may take years or even more than a decade to bring about a sufficient number of SMR systems entering operation. But more capital and government attention should gradually help SMR developers, including Oklo and NuScale, achieve project conversion.