What Are Small Modular Reactors?

Small modular reactors are nuclear fission reactors with electrical output typically below 300 megawatts, designed to be manufactured in factories and transported to installation sites as prefabricated modules. Unlike conventional gigawatt-scale nuclear plants that require decade-long bespoke construction projects costing $15 billion to $30 billion each, SMRs aim to reduce capital risk through standardization, factory fabrication, shorter construction timelines, and incremental capacity addition.

The SMR concept addresses the central paradox of nuclear energy: it produces reliable, carbon-free baseload electricity at scale, yet conventional nuclear projects have become economically unviable in most Western markets due to construction cost overruns, schedule delays, and financing risk. SMRs attempt to break this pattern by borrowing manufacturing principles from aerospace and shipbuilding, where complex systems are built in controlled factory environments and assembled on-site.

The SMR sector has attracted over $10 billion in combined private investment and government funding through early 2026, driven by the convergence of climate policy mandates, AI data center power demand, and geopolitical energy security concerns.

Reactor Types and Technologies

Four main reactor architectures are being pursued for commercial SMR deployment.

Light water small modular reactors (LW-SMR) use the same fundamental technology as existing nuclear plants, pressurized water cooling uranium fuel, but at smaller scale with passive safety systems that rely on gravity and natural convection rather than active pumps. NuScale Power's VOYGR is the leading LW-SMR design and was the first SMR to receive design certification from the US Nuclear Regulatory Commission (NRC) in 2023. However, NuScale's Carbon Free Power Project in Idaho was cancelled in late 2023 due to escalating cost estimates, underscoring the economic challenges even for the most advanced SMR designs.

Molten salt reactors (MSR) dissolve nuclear fuel directly in a molten fluoride or chloride salt mixture that serves as both fuel carrier and coolant. This approach offers inherent safety advantages (the fuel cannot melt down because it is already liquid), high operating temperatures enabling industrial heat applications, and the potential to consume nuclear waste as fuel. Kairos Power is the leading MSR developer, with its fluoride-salt-cooled Hermes demonstration reactor under construction in Oak Ridge, Tennessee. Kairos received an NRC construction permit in 2023, the first new reactor construction permit issued in the US in decades.

Sodium-cooled fast reactors (SFR) use liquid sodium as coolant and can operate on depleted uranium and recycled nuclear fuel. TerraPower, founded by Bill Gates, is building the Natrium demonstration plant in Kemmerer, Wyoming, with a planned operational date of 2030. The Natrium design combines a 345 MW sodium-cooled reactor with a molten salt energy storage system that can boost output to 500 MW during peak demand. TerraPower has received over $2 billion in combined DOE cost-sharing and private funding.

High-temperature gas-cooled reactors (HTGR) use helium gas as coolant and graphite-coated fuel particles (TRISO fuel) that can withstand extreme temperatures without melting. X-energy's Xe-100 is the leading HTGR design, targeting both electricity generation and industrial process heat at temperatures above 700 degrees Celsius. X-energy has secured deployment agreements with Dow Chemical for industrial heat and with multiple utilities for power generation. The company raised over $600 million and has DOE Advanced Reactor Demonstration Program funding.

The Nuclear-for-Data-Centers Phenomenon

The most dramatic demand signal for SMRs in 2025 and 2026 has come from hyperscale data center operators seeking reliable, carbon-free baseload power for AI training and inference workloads.

Microsoft announced a 20-year power purchase agreement to restart Unit 1 at Three Mile Island (renamed the Crane Clean Energy Center), a conventional reactor, signaling the tech industry's serious commitment to nuclear. Microsoft has also signed agreements with SMR developers for future data center power supply.

Google entered into a power purchase agreement with Kairos Power for SMR-generated electricity, marking the first corporate offtake agreement specifically for SMR power. The deal calls for multiple Kairos reactors deployed between 2030 and 2035 to supply Google data centers.

Amazon invested in X-energy and announced plans to deploy SMRs near data center campuses in the eastern United States. Amazon Web Services has engaged with multiple nuclear developers to secure gigawatts of carbon-free power for its expanding infrastructure.

These agreements represent a fundamental shift in the SMR business model. Rather than relying solely on utility procurement (historically slow and risk-averse), SMR companies can now point to creditworthy corporate offtakers willing to sign long-term contracts, dramatically improving project financeability.

AI data center power demand is projected to reach 35 to 50 gigawatts in the United States alone by 2030. With renewable energy intermittency and grid interconnection bottlenecks limiting solar and wind deployment speed, nuclear power, both conventional restarts and new SMR construction, has become central to data center power strategy.

HALEU Supply Chain

Most advanced SMR designs (all except light-water designs like NuScale) require high-assay low-enriched uranium (HALEU), enriched to between 5% and 20% uranium-235, compared to the less-than-5% enrichment used in conventional reactors. As of early 2026, HALEU is commercially available only from Russia's Tenex, creating an acute supply chain vulnerability given geopolitical tensions.

The US Department of Energy has invested over $3.4 billion in domestic HALEU production through two pathways: Centrus Energy's American Centrifuge demonstration cascade in Piketon, Ohio (operational at demonstration scale since 2023), and a planned larger-scale enrichment program. Several additional companies, including Urenco and Orano, are evaluating HALEU production at their existing enrichment facilities.

Solving the HALEU supply chain is widely considered the most critical near-term bottleneck for advanced SMR deployment. Without reliable, non-Russian HALEU supply at commercial scale (tens of metric tons per year), advanced SMR projects cannot proceed to fueling and operation.

Government Investment and Policy

Government support for SMRs has reached unprecedented levels across multiple countries.

The US Department of Energy has committed over $10 billion to advanced nuclear through the Advanced Reactor Demonstration Program (ARDP), the Civil Nuclear Credit Program, HALEU production, and the Inflation Reduction Act's nuclear production tax credit ($15 per megawatt-hour for existing plants, with similar support for new builds). The bipartisan ADVANCE Act, signed in 2024, modernized NRC licensing frameworks and reduced regulatory fees for advanced reactor applications.

Canada has positioned itself as an SMR deployment leader, with Ontario Power Generation constructing the first grid-scale SMR in the Western world at Darlington using GE Hitachi's BWRX-300 design, with operation targeted for 2029. The Canadian federal and provincial governments have invested billions in SMR development and site preparation.

The United Kingdom's Great British Nuclear initiative has selected Holtec, GE Hitachi, NuScale, and Rolls-Royce SMR as shortlisted designs for potential UK deployment, with government co-funding for detailed design and licensing work.

Key Companies

Beyond the major developers discussed above, the SMR landscape includes:

Rolls-Royce SMR in the UK is developing a 470 MW pressurized water reactor specifically designed for factory fabrication and UK deployment, with strong UK government backing and a consortium of investors.

Holtec International is developing the SMR-300, a 300 MW light-water reactor that incorporates passive safety features, and is repurposing the former Palisades nuclear plant site in Michigan.

Terrestrial Energy in Canada is developing the Integral Molten Salt Reactor (IMSR), a compact molten salt design targeting industrial heat and electricity generation.

Oklo (NYSE: OKLO), backed by Sam Altman, is developing a compact fast reactor design and went public via SPAC in 2024. Oklo targets microreactor applications for remote communities and defense installations.

Last Energy is taking a project development approach, packaging existing reactor technology with standardized engineering, financing, and power purchase agreements to accelerate European deployment.

Market Projections and Economics

The global SMR market is projected to grow from early-stage demonstration (sub-$1 billion revenue) in 2026 to $15 billion to $20 billion annually by 2035, with long-term projections exceeding $100 billion by 2040 as deployments scale. These projections depend critically on first-of-a-kind projects coming in on budget and on schedule, establishing the credibility needed for serial orders.

The economic case for SMRs rests on achieving levelized costs of electricity (LCOE) of $50 to $80 per megawatt-hour through serial factory production. First-of-a-kind costs will be significantly higher ($100 to $150/MWh), requiring government cost-sharing and premium power purchase agreements. If nth-of-a-kind costs reach projected levels, SMRs become competitive with natural gas combined cycle plants while providing carbon-free baseload power.

Frequently Asked Questions

What is a small modular reactor?

A small modular reactor is a nuclear fission reactor with electrical output typically below 300 megawatts, designed for factory fabrication and modular deployment. Unlike conventional large nuclear plants that require massive on-site construction over 10 or more years, SMRs are built in factories as standardized modules, shipped to sites, and assembled in shorter timeframes. Multiple modules can be deployed incrementally to match demand growth.

Are small modular reactors safe?

Modern SMR designs incorporate passive safety systems that rely on natural physical processes (gravity, convection, thermal expansion) rather than active systems (pumps, diesel generators) to prevent accidents. Many designs are walk-away safe, meaning they can safely shut down and cool themselves without human intervention or external power. Several designs physically cannot experience core meltdowns due to their fuel form or coolant properties. The NRC and international regulators apply the same rigorous safety standards to SMRs as to conventional nuclear plants.

Which companies are building SMRs?

Leading SMR developers include NuScale Power (light-water, NRC design certified), TerraPower (sodium-cooled, Bill Gates-backed), Kairos Power (molten salt, Google PPA), X-energy (high-temperature gas, Amazon-backed), GE Hitachi (BWRX-300, under construction in Canada), Rolls-Royce SMR (UK PWR), Holtec (SMR-300), Oklo (compact fast reactor), and Terrestrial Energy (molten salt). China and Russia also have SMR programs at various stages.

Why are tech companies buying nuclear power?

AI data centers require massive amounts of reliable, always-on electricity that cannot tolerate intermittency. A single large AI training cluster can consume 100 to 500 megawatts continuously. Solar and wind provide intermittent power and face grid interconnection delays. Nuclear provides 24/7 carbon-free baseload electricity with high power density on small land footprints, making it ideal for data center colocation. Microsoft, Google, and Amazon have all signed nuclear power agreements specifically to supply data center operations.

When will the first SMRs begin operating?

GE Hitachi's BWRX-300 under construction at Darlington, Ontario is targeted for operation by 2029, potentially making it the first grid-scale SMR in the Western world. Kairos Power's Hermes demonstration reactor in Tennessee is expected to achieve initial operation around 2027. TerraPower's Natrium plant in Wyoming targets 2030. China's HTR-PM, a high-temperature gas reactor, has been operating since 2023 at demonstration scale, making it the world's first operational Generation IV reactor.