- Disruptive events such as the accelerating impact of climate change and more recently, the devastating war in Ukraine, has forced a broader pivot to renewable energy infrastructures.
- Though it’s a feel-good story, the harsh scientific reality is that human societies cannot live on renewable energy alone but by every reliable power source presently available.
- Therefore, while the sector has generated controversies, nuclear power remains a relevant and viable force in the race for energy sustainability and independence.
If one silver lining exists amid the catastrophic events following Russia’s unsettling decision to invade Ukraine, it’s that international policymakers woke quickly from their ideological slumber, recognizing the urgency of energy sustainability and independence. Naturally, the broader focus has turned to renewable energy infrastructure but eventually, those same eyes may zero in on nuclear power. And this dynamic brings the discussion to NuScale Power.
Easily one of the most compelling yet simultaneously controversial names among companies to recently launch their initial public offerings (IPOs), NuScale specializes in a novel subsegment of the nuclear energy industry called small modular reactors (SMRs). Unlike traditional nuclear power plants, SMRs feature — as the label suggests — a much smaller footprint. In turn, this revolutionary field can punch well above its weight while minimizing hazards should circumstances go awry.
But with incidents such as Three Mile Island, Chernobyl and more recently the Fukushima Daiichi Nuclear Power Plant, why would investors consider a nuclear-powered facility like NuScale? The answer, per the Office of Nuclear Energy, comes down to capacity factor. The namesake sector features a capacity factor of 92.5%, meaning that it’s always on and productive. On the other hand, wind and solar power facilities only put out 35.4% and 24.9%, respectively.
Bottom line, to promote a holistically clean energy infrastructure without compromising the intense power demands of modern, innovative societies, nuclear facilities cannot be arbitrarily removed from policy-guiding decisions. Thus, investors should think carefully about NuScale and its stock.
What Does NuScale Power Do?
NuScale Power is an advanced nuclear power facility. But unlike its traditional and legacy competitors, NuScale uses a proprietary and innovative carbon-free baseload and load-following power solution, thus representing “the only viable, near-term deployable U.S. advanced nuclear small modular reactor (SMR) technology.”
More importantly for surrounding residents and investors, “NuScale’s SMR technology is safe, reliable and scalable and the first and only to receive Standard Design Approval from the U.S. Nuclear Regulatory Commission.” In addition, SMRs feature these advantages, according to the International Atomic Energy Agency (IAEA):
- Small profile: Physically, SMRs only take up a fraction of the size of conventional nuclear power plants, enhancing wider integration and also mitigating possible problems.
- Useful modularity: Because of the subsegment’s adaptability, it’s “possible for systems and components to be factory-assembled and transported as a unit to a location for installation.”
- Reactor mechanism: Just like any other nuclear powerplant, SMRs harness nuclear fission to generate heat to produce energy — it’s just that SMRs are far more flexible in their integrative capacity.
In addition, NuScale enjoys company-specific advantages as detailed in its FAQ section. Some core catalysts are listed below:
- Competitiveness: Per the company’s website, “NuScale Power Modules are fully factory-manufactured with no in-field construction, erection or fabrication and they are transported to the power plant site — making our power plants less expensive to build, operate and maintain.”
- Complementary nature: Rather than view itself as a competitor to renewable energy infrastructures, NuScale approaches the arena in a harmonizing framework, aiming to serve as a baseload power source and “and provide flexible load-following power to complement generation from wind and solar.”
- Long-term necessity: NuScale’s management team notes that by 2030, “the U.S. will see 91 coal power plants enter into retirement, which translates to a loss of 97 GW [gigawatt] of capacity.” A highly reliable and space-saving solution will likely be needed, potentially benefiting NuScale’s SMRs.
Finally, SMRs are attracting attention worldwide because of their inherent safety profile. Generally, this subsegment “relies more on passive systems and inherent safety characteristics of the reactor, such as low power and operating pressure,” per the IAEA.
“This means that in such cases no human intervention or external power or force is required to shut down systems because passive systems rely on physical phenomena, such as natural circulation, convection, gravity and self-pressurization. These increased safety margins, in some cases, eliminate or significantly lower the potential for unsafe releases of radioactivity to the environment and the public in case of an accident.”
When Did NuScale Power IPO?
NuScale Power IPO’d on May 3, 2022 under the ticker NYSE: SMR.
What Analysts are Saying About NuScale Power Stock
According to The Wall Street Journal, no analysts had covered SMR stock — under the SPAC ticker SV — during the trailing three months. However, as of this writing, one analyst opened coverage with a buy rating. Mathematically, this setup affords NuScale with a 100% bullish profile, though of course this deduction is deceptive.
Frankly, it’s understandable that SMR stock is not generating the attention that it arguably deserves. For one thing, the manner in which NuScale is entering the Nasdaq is likely to draw skepticism. Peruse a list of business combinations over the last year or two and chances are, the performances will be dreadful.
Even if you make the argument that books shouldn’t be judged on their covers, NuScale fundamentally has a wall to climb. First, the reputational association to nuclear disasters is difficult to ignore. For instance, the HBO program Chernobyl broke viewership records, meaning the nuclear power industry has a massive product evangelism challenge.
Second, world leaders are pivoting to clean, renewable energy solutions, especially following Russia’s invasion of Ukraine. Further, Russian forces attacking Ukrainian nuclear power facilities doesn’t help to ease concerns about the energy source under the rudely imposed new global order.
Despite the sharp criticisms of nuclear power, the Office of Nuclear Energy maintains the trump card. The subsegment’s superior capacity factor means that to replace a 1 GW nuclear powerplant, “you would need almost two coal or three to four renewable plants (each of 1 GW size) to generate the same amount of electricity onto the grid.”
All the yelling, crying and screaming in the world will not usurp the physical laws of the universe. What is needed is a workable and sensible alternative to traditional nuclear facilitation and NuScale may provide just that.
NuScale Power Financial History
In addition, the transaction “includes a $181 million oversubscribed, fully committed common stock PIPE [private investment in public equity] anchored by global financial and strategic investors such as Samsung C&T Corporation, DS Private Equity and Segra Capital Management, with participation by Spring Valley’s sponsor, Pearl Energy.”
NuScale merged with a special purpose acquisition company (SPAC) called Spring Valley Acquisition Corp. (NASDAQ: SV).
Prior to pulling the trigger on SMR stock, you should conduct your due diligence, not only on the underlying company but also the historical performances of SPACs following their completed mergers.
Undeniably, SPAC-based investments are risky. From healthcare to financial technology (fintech) to the burgeoning space economy, aspirations have quickly turned into desperation, boding poorly for SMR stock, if only through guilt by association.
Additionally, the nuclear energy business is a tough one, presenting both health concerns and political frictions. Plus, in a world where skepticism towards corporate interests have justifiably increased, putting a positive spin on nuclear power is complicated.
Nevertheless, the inadequacies of renewable energy infrastructures alone may soon become apparent. Thus, SMRs provide a balanced approach to the energy equation, possibly lifting NuScale stock.
Where to Buy NuScale Stock
Frequently Asked Questions
Should you buy NuScale Power stock to enter the energy sector?
You can use NuScale Power stock to diversify into the energy sector, but there are also other stocks you can purchase.
Is NuScale Power the best nuclear power stock?
There are other stocks with exposure to the nuclear power sector, but NuScale is the first to produce power directly using nuclear energy that also trades publicly.