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(Reuters) – The first U.S. small-scale nuclear power project, grappling with cost overruns and delays, faces another challenge: the defection of cities that had committed to buying its power. The more than 30 members of the public power consortium Utah Associated Municipal Power Systems (UAMPS) have until Sept. 30 to decide whether to stick with the project and devote more funds to NuScale Power LLC’s first-of-a-kind reactor.
But two cities, Logan and Lehi, Utah have walked away from the project, and a third is now considering dropping its support because of risks and a lack of backers, according to officials.
Allen Johnson, the power department director for Bountiful, Utah, said chances are greater than 50-50 it will withdraw.
“You’ve got to have enough people to support it and some of the players I thought would be interested are not,” he said.
The defections are bad news for U.S. efforts to develop modular nuclear energy, which is regarded by some as a critical carbon-free technology that power grids will need to supplement intermittent sources like wind and solar.
Combined, cities have so far committed to buying just under 200 megawatts of the plant’s planned 720 megawatts of power.
The U.S. Department of Energy has pumped more the $280 million into the project since 2013, and is expected to commit another $1.4 billion over the next nine years. The department did not respond to requests for comment.
UAMPS spokesman LaVarr Webb said “the project is very much alive” noting that just two of 35 cities have officially left.
The consortium earlier this year pushed back the project’s commercial operation date to 2030 from 2026, Webb said, to provide more time for public input and opportunities for cities to reconsider their participation at various phases.
CITIES RETHINK COSTS
NuScale, based in Portland, Oregon, is majority owned by construction and engineering firm Fluor Corp (NYSE:FLR).
The project would include 12 60-megawatt modules at the Energy Department’s Idaho National Laboratory (NYSE:LH).
The Nuclear Regulatory Commission last week approved NuScale’s design, the first such green light for a modular reactor.
Small modular reactors are meant to be cheaper and quicker to build than traditional reactors because they can be manufactured in factories. But critics say economies of scale are lost with the smaller plants.
The NuScale project’s projected cost of $6.1 billion has risen from $3.6 billion in 2017, Mark Montgomery, head of the municipal utility in Logan told officials there last month ahead of their vote to abandon the project.
Lehi withdrew from the project due to a lack of interest from other entities and increased costs, according to the Aug. 25 resolution approved by its city council.
“These cities should not be acting as venture capital investors,” said Rusty Cannon, vice president of the Utah Taxpayers Association, which has been pushing cities to leave.
Previous cost estimates did not account for financing and decommissioning, as well as higher labor, construction and materials costs over ten years, UAMPS spokesman Webb said, explaining the change.
NuScale said the project delay had been requested by UAMPS. It did not comment specifically on the city defections.
A Wednesday report written by M.V. Ramana a professor of disarmament and human security at the University of British Columbia said Fluor had cut its own investment in the project and excluded NuScale expenses from its financial forecasts because it was expecting additional funding from third party investors.
Financial analyst Jamie Cook of Credit Suisse (SIX:CSGN) said last year that Fluor could improve earnings by reducing underperforming assets, including NuScale.
In a statement to Reuters, Fluor said it had seen new investor interest since the NRC’s design approval and added that the investment community “has struggled with” its NuScale relationship because it is unusual for a construction and engineering firm to invest in research and development.
