|

Rolls-Royce’s Nuclear Ambitions Mushroom

Nuclear energy, which has in the past often suffered from much-missed deadlines and ballooning costs, is having a moment.

Photo of a nuclear power plant
Photo by Wim van’t Einde via Unsplash

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

Everything’s better under the sea. Including nuclear reactors. 

Just ask Rolls-Royce (a.k.a. Rolls-Royce Holdings, the aerospace and defense manufacturer, not to be confused with the luxury carmaker that’s been a wholly-owned subsidiary of BMW since 2003). On Friday, the company notched its biggest-ever contract with the UK government’s Ministry of Defence, worth £9 billion ($11.2 billion), to build nuclear reactors for Royal Navy submarines. This fits into a broader picture of Rolls-Royce’s expanding nuclear ambitions, which are starting to go beyond the submarine market.

Going Small

Nuclear energy, which has in the past often suffered from much-missed deadlines and ballooning costs, is having a moment. The AI hypecycle is driving demand for data centers, which in turn is driving demand for electricity. With tech companies scrabbling for whatever supply they can lay their hands on, nuclear has emerged as a big winner from the electric gold rush.

Even before the AI craze kicked off, governments were starting to nose around nuclear, specifically a new kind of reactor called small modular reactors (SMRs) to fill in gaps for dispatchable energy in their decarbonization plans. Rolls-Royce, which has been making reactors for nuclear subs for 60 years, has hitched itself to the SMR wagon:

  • In May last year, Rolls-Royce announced it was partnering with the University of Sheffield to build an SMR manufacturing and testing facility. 
  • Going beyond Albion’s shores, Rolls-Royce’s SMR division won approval in September from the government of Czech Republic to develop SMRs in the European nation.

Need for Speed: The problem is, you literally can’t build them fast enough. Goldman Sachs analysts released a report on Friday predicting electricity usage by data centers will double by 2030, and that by that deadline there would only be enough nuclear power online globally to fuel 10% of that demand. Of course, one quicker solution than building a power station from scratch is to fire up a retired one. That’s what Microsoft is doing to Three Mile Island, and last week, The Wall Street Journal reported South Carolina’s state-owned utility Santee Cooper is on the hunt for buyers to help it restart construction on two abandoned reactors that were mothballed in 2017.