Small Modular Reactors: The Future of Nuclear Power?

Dylan Saue*

In 1951, the Experimental Breeder Reactor became the first nuclear reactor to produce electricity in Idaho.¹ Then, in the 1960s, interest in nuclear power grew nationwide, with orders placed for large reactors with capacities exceeding 1,000 Megawatt electrical (MWe).² However, fast-forward to today, of the hundreds of reactors the United States has commissioned, only about fifty-seven plants remain operational, with plans to continue decommissioning more nuclear power plants in the coming years.³ 

While large reactors are still the most common type constructed and are extremely energy efficient, they are an economic nightmare due to their high initial costs, custom designs, location challenges, and propensity for significant delays, all of which drive up expenses.⁴ For example, Georgia Power in 2006 commenced a project to build two new 1,100 MWe reactors, with an initial budget of about fourteen billion dollars and a projected completion date of 2016.⁵ Unfortunately, due to delays, the project ballooned to a twenty-seven-billion-dollar cost with an estimated operation date of 2021 or 2022.⁶ This example shows that even though nuclear power is highly reliable, with a capacity factor of about 92 percent compared to solar and wind, which are below 50 percent,⁷ its high costs and public fear of a potential meltdown still discourage investors and make legislative support more difficult.           

However, one possible solution to some of the nuclear industry’s current problems is the use of Small Modular Reactors, or SMRs. SMRs work in much the same way as traditional nuclear reactors, but they are much smaller and usually produce less than 300 MWe of electricity.⁸ That smaller size comes with several advantages. For one, SMRs can be built in factories instead of entirely on-site, which may increase efficiency and lower construction costs.⁹ They are also easier to transport, making them suitable for use in remote or isolated areas.¹⁰ In addition, SMRs could help fill in the gaps when renewable sources like wind and solar are not producing enough power.¹¹ Many designs are also considered safer because they operate at lower power and pressure levels and often rely on built-in passive safety systems.¹² Finally, because they can be factory-produced, SMRs may help reduce some of the regulatory and licensing complications that come with building traditional nuclear plants.¹³

Many of those advantages stem from the fact that, unlike traditional reactors, which often rely on a custom design for each new project, SMRs follow a “nth of a kind” (NOAK) model, allowing manufacturers to use one design and mass-produce reactors through a more consistent development process.¹⁴ This uniformity can streamline construction, reduce production costs, and make the licensing process more efficient by allowing providers to purchase a pre-approved Nuclear Regulatory Commission reactor.¹⁵ Their smaller size and lower radioactive fuel inventories may also help improve public perception of nuclear energy.

A few states have already enacted incentives to encourage SMR development. First, Indiana recently enacted the Small Modular Nuclear Reactor Manufacturing Expense Tax Credit, which allows taxpayers who make a qualified investment in SMR manufacturing in Indiana to claim a credit against their state tax liability equal to twenty percent of that investment.¹⁶ Second, Virginia has adopted a different approach to recover development costs associated with SMRs or SMR facilities.¹⁷ Rather than offering a tax credit, Virginia’s program allows utilities to petition the state utility commission for approval of a rate adjustment to recover SMR project development costs, including evaluation, design, federal approvals, and licensing expenses.¹⁸ In effect, the program allows utilities investing in SMR development to recover certain costs from ratepayers before operation, increasing the likelihood that a project will move forward.

           However, this raises an obvious question: Why couldn’t those same tax-credit or rate-recovery programs be used for large reactors as well? The answer is that large reactors are generally too expensive for states to support through those kinds of incentives, and a program like Indiana’s would likely look more like a bailout than a development tool. For example, Georgia Power’s plan to build two new nuclear reactors, as discussed above, was projected to cost around twenty-seven billion dollars after major delays. If that same project had taken place in Indiana and qualified for a program identical to the SMR credit, the taxpayer could have claimed a credit of more than five billion dollars, assuming the full cost qualified. A state could not realistically extend that kind of credit without risking serious debt, reducing funding for other priorities, or undermining the credit program itself.¹⁹

Another challenge facing large reactors, beyond their high costs and regulatory hurdles, is that nuclear energy has struggled to compete with renewable sources in part because federal subsidies have historically favored renewables.²⁰ For example, the Internal Revenue Code provides a renewable electricity production credit for qualifying renewable facilities for ten years after they are placed in service.²¹ Still, that credit does not apply to nuclear energy, and unlike the production credit for advanced nuclear power facilities, the renewable credit contains no nationwide capacity limitation.²² Instead, Congress created a separate production credit for advanced nuclear power facilities, which applied only to facilities placed in service before January 1, 2021.²³ Because large reactors have lengthy construction timelines, they often cannot take advantage of these programs; the Georgia Power reactors discussed earlier, for instance, would not qualify.

Another benefit of SMRs is modularity, which allows individual modules to operate independently and begin producing electricity without waiting for the completion of other modules, potentially enabling earlier qualification for production tax credits.²⁴ That advantage matters even more under Congress’s recent Clean Electricity Tax Credit, which allows zero-emission facilities, including nuclear facilities, placed in service after December 31, 2024, to receive a production tax credit based on the amount of electricity produced and sold, with the credit beginning to phase out after 2032.²⁵ Large reactors are unlikely to benefit, but SMRs are better positioned to do so because their design allows for earlier operation. In a March 2021 report, the Nuclear Energy Institute projected that a first-of-a-kind SMR could be constructed in about thirty-six months, while an nth-of-a-kind SMR could require as little as thirty months,²⁶ making it more likely that SMRs could qualify for these tax incentives sooner than large reactors.

Small modular reactors offer the nuclear industry a realistic opportunity to renew development and strengthen its position in the modern energy market. Their modular design, mass-production potential, and shorter construction timelines reduce the financial risks associated with traditional large reactors while making SMRs more responsive to supportive state and federal policy incentives. When paired with targeted financial support, SMRs may place nuclear energy on a more competitive footing with other energy generation sources and position it as a practical option for the next generation of development.

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*Dylan Saue, J.D. Candidate, University of St. Thomas School of Law, Class of 2027 (Associate Editor).

1. Outline History of Nuclear Energy, World Nuclear Ass’n  (last accessed Mar. 7, 2026), https://world- nuclear.org/information-library/current-and-future-generation/outline-history-of-nuclear-energy [https://perma.cc/V2VE-NTC2].    ↩︎
2. Gage M. Stewart, Honey, I Shrunk the Reactor: A Comment on the Journey of Small Modular Reactors Through the Nuclear Regulatory Process, 10 LSU J. Energy L. & Resources 559, 563 (2022). ↩︎
3. Id. at 564. ↩︎
4. Id. at 572. ↩︎
5. Id. at 571. ↩︎
6. Id. ↩︎
7. Ryan Ockenden, Nuclear Energy for the Table, Please, 50 Syracuse J. Int’l L. & Com. 183, 205 (2023). ↩︎
8. Carl Stenberg, Energy Transitions and the Future of Nuclear Energy: A Case for Small Modular Reactors, 11 Wash. J. Env’t. L. & Pol’y 57, 76 (2020). ↩︎
9. Ockenden, supra note 7, at 215. ↩︎
10. Ockenden, supra note 7, at 215. ↩︎
11. Ockenden, supra note 7, at 216. ↩︎
12. Ockenden, supra note 7, at 216. ↩︎
13. Ockenden, supra note 7, at 216. ↩︎
14. Stewart, supra note 2, at 574. ↩︎
15. Stewart, supra note 2, at 574; Stenberg, supra note 8, at 82. ↩︎
16. Ind. Code § 6-3.1-45-1. ↩︎
17. Va. Code Ann. § 56-585.1:14. ↩︎
18. Id. ↩︎
19. See Leslie Bonilla Muñiz, Gov. Braun Signs Indiana’s Next $44B Budget Into Law, Ind. Cap. Chron. (May 7, 2025), https://indianacapitalchronicle.com/2025/05/07/gov-braun-signs-indianas-next-44b-budget-into-law/ [https://perma.cc/D6YB-ZVJF] (illustrating that a five billion dollar tax credit would account for about 1/9 of Indiana’s state budget). ↩︎
20. Stenberg, supra note 8, at 66. ↩︎
21. 26 I.R.C. § 45. ↩︎
22. 26 I.R.C. § 45; 26 I.R.C § 45j. ↩︎
23. 26 I.R.C. § 45j. ↩︎
24. Stenberg, supra note 8, at 76–77. ↩︎
25. 26 I.R.C. § 45y. ↩︎
26. NUCLEAR ENERGY INST., THE ECONOMICS OF SMALL MODULAR REACTORS 8, 22 (2021). ↩︎