They're smaller, cheaper, but still cost billions. How can TVA fund new nuclear reactors?

The Tennessee Valley Authority is finalizing the design of its small modular nuclear reactors , which received $150 million in additional funding from the TVA Board of Directors in August as the utility prepares to submit a construction permit to the U.S. Nuclear Regulatory Committee next year.

But the $350 million allocated by the board for TVA's new nuclear reactors since 2022 is only meant to cover initial design and permitting. The full price tag on the reactors will be in the billions, a sign of the high value TVA and other utilities are putting on carbon-free, dependable nuclear reactors that could be built across the country.

When it comes to paying for the first-of-a-kind small reactor technology, TVA leaders say they do not want electricity customers to foot the bill alone. The utility is looking to multiple sources of funding, including tax credits in the Inflation Reduction Act and federal reimbursements for pricey licensing.

Though the federal utility has not publicized a projected cost for its small modular reactors, which are based on the GE Hitachi BWRX-300 design, data from planning documents provides some hints.

The first small modular reactor at the Clinch River Site near Oak Ridge could cost $17,949 per kilowatt, or around $5.4 billion for a 300 megawatt plant before tax credits or potential interest costs, according to data in a draft of TVA's 2025 Integrated Resource Plan.

The price could be reduced to around $3.7 billion as TVA builds more small reactors.

TVA is not fully committed to finishing the project, and CEO Jeff Lyash told Knox News the utility is several years away from the point of no return. Nuclear energy already accounts for 43% of TVA's power, and the utility wants to expand its fleet of reactors to meet growing demand for carbon-free power.

"In order to be able to maintain a reliable, affordable and sustainable power supply and long run, we've got to expand our nuclear fleet," Lyash said in an interview. "We're confident every time we take a step forward, that it's a step in the right direction."

At the COP28 global climate summit in December, representatives of 20 nations endorsed a declaration to triple their nuclear power by 2050. Small modular reactors are integral to U.S. goals to grow from 100 gigawatts to 300 gigawatts of nuclear power.

TVA: Rate increase to fund small reactors would be 'highly unusual'

TVA is taking a gated approach to funding what could be the nation's first small modular reactors in the early 2030s. It received the nation's first early site permit for the advanced reactors from the Nuclear Regulatory Committee in 2019, and the TVA Board of Directors allocated $200 million for the project in 2022.

One funding mechanism is cost sharing between multiple utilities. TVA entered a partnership with GE Hitachi, Canada's Ontario Power Generation and Poland's Synthos Green Energy to support the $400 million standard design process for the 300-megawatt boiling water reactors, with a long-term goal to deploy the reactors in each partner country.

As the TVA board approved an additional $150 million for the small modular reactors, it also approved a 5.25% rate increase for the utility's electrical customers, the second rate increase in two years.

The rate increase will help fund construction of new gas plants and updates to existing nuclear and hydroelectric plants. It would be "highly unusual" for TVA to raise electricity rates specifically to fund the small modular reactors, spokesperson Scott Brooks said.

TVA has a lower tolerance for risk than investor-owned utilities that can pass risk of new technologies onto shareholders, said Joe Hoagland, vice president of enterprise relations and innovation for TVA.

Even at investor-owned utilities like Southern Company, the high costs of large gigawatt-scale nuclear plants can fall on ratepayers. The company's third and fourth units at Plant Vogtle in Georgia came online seven years late and billions of dollars over budget, leading to rate increases.

"Those kinds of costs are very difficult for us to pass to the ratepayer because there's a chance it might not work. And if it doesn't work, then our ratepayers are left with all of those costs and nothing to show for it," Hoagland told Knox News. "People struggle to afford their power bills, and so passing those kinds of risks onto them is just really not fair."

Instead, TVA is seeking out other funding opportunities for new nuclear technology, including from federal clean energy programs. Since 2022, the utility has secured more than $300 million in federal funding for itself and its partners and local power companies.

TVA looks to federal, state governments for funding help

Several high-profile pieces of clean energy legislation could help fund TVA's small modular reactors. The Inflation Reduction Act includes a 40% investment tax credit for new nuclear plants, which TVA could receive as direct funding, Lyash said.

The ADVANCE Act, signed into law by President Joe Biden in July after receiving strong bipartisan support in Congress, lowers the regulatory burden on nuclear companies and operators seeking to build new reactors. It includes an opportunity for companies to be reimbursed for licensing fees for advanced nuclear technology.

Licensing for two recent reactor designs certified by the NRC, widely considered one of the strictest regulatory bodies in the world, cost between $45 million and $70 million in fees, according to the NRC.

The Department of Energy announced it would award $800 million for up to two teams of utilities and their partners working to build small modular reactors and $100 million to address problems that have held the U.S. back on small reactors. The funding was enabled by appropriations led by U.S. Rep. Chuck Fleischmann , an advocate of new nuclear plants whose district includes Oak Ridge.

TVA intends to compete for the funding and is in a good position because of its early site permit and design partners, Lyash said. Other companies are developing small modular reactors, including Bill Gates' TerraPower in Wyoming , which submitted a construction permit for its salt-cooled reactor earlier this year.

Tennessee state funding could also support TVA's new nuclear plants. A $60 million nuclear fund created by Gov. Bill Lee has already helped attract nuclear fusion and uranium enrichment companies to the Oak Ridge area.

TVA takes on debt to finance new construction, though its debt limit was capped at $30 billion by Congress in 1979 and has not been raised since. Though some advocates want Congress to raise the limit – and Lyash called it "a historic constraint" on the utility – TVA executives say the limit does not impede their ability to meet power demand.

Daniel Dassow is a growth and development reporter focused on technology and energy. Phone 423-637-0878. Email daniel.dassow@knoxnews.com .

Support strong local journalism by subscribing at knoxnews.com/subscribe .

This article originally appeared on Knoxville News Sentinel: They're smaller, cheaper, but still cost billions. How can TVA fund new nuclear reactors?