A Word of Caution on NuScale Power Before You Buy the Dip

A University of Colorado Boulder study estimates NuScale's SMR operating costs at more than $93/MWh—$17.42/MWh for fuel, $3.55/MWh in variable O&M and $72.26/MWh in fixed O&M—versus historical power-market prices of roughly $42-$45/MWh. The researchers concluded that, even with zero construction cost, the reactors may not recover their costs over an expected 60-year life. The analysis heightens concerns after NuScale's canceled Carbon Free Power Project saw estimated costs rise from $4.2B in 2018 to $9.3B in 2023, leaving the company needing to demonstrate both viable construction and operating economics.

Analysis

The relevant valuation question for SMR is not whether nuclear demand exists, but whether its contracted power price can clear an all-in operating-cost floor before debt service and construction recovery. If the cited cost framework is directionally correct, SMR’s prospective projects require either regulated cost-of-service treatment, government support, or premium 24/7 clean-power offtake; merchant-market comparables are largely irrelevant. This shifts investor focus over the next 1-3 months toward customer contract structure, escalation clauses, fuel assumptions, staffing requirements, and federal subsidy eligibility rather than reactor-design milestones.

SMR’s lack of operating history creates asymmetric downside because each new engineering or cost disclosure can reset both terminal margins and the probability of financing. A project cancellation, customer delay, or revised EPC estimate would likely impair the equity more than a conventional guidance miss, since the business still trades principally on commercialization optionality. OKLO faces a similar sector de-rating risk, although its fuel-cycle strategy and customer model differ; broad retail sentiment may initially treat both as interchangeable nuclear-beta.

Contrarian point: the study is not peer-reviewed and may be poorly suited to sites where hyperscalers, utilities, or industrial customers value firm clean capacity materially above average wholesale power. A credible long-duration offtake at a premium price, paired with DOE-backed financing or a regulated utility recovery mechanism, would invalidate a simple merchant-power bear case. Until such evidence emerges, rallies driven by AI-power-demand headlines should be viewed as opportunities to reduce unhedged exposure rather than confirmation of economics.

The structural beneficiary is not necessarily SMR vendors but incumbent operators with licensed assets and established operating workforces. Constellation Energy (CEG) and Cameco (CCJ) offer more direct exposure to rising demand for firm nuclear generation and fuel, while avoiding first-of-a-kind project-execution risk; the trade-off is that both already embed substantial nuclear-demand optimism.

Key Decisions for Investors

• Maintain an underweight/short bias in SMR over the next 1-3 months, preferably expressed as long CEG / short SMR to isolate operating-asset economics from nuclear-theme beta. Reassess if SMR discloses a binding offtake with price escalation and a financing structure that transfers construction-cost risk away from SMR.
• Treat OKLO as a sympathy-risk watch rather than a direct short: use any SMR-led sector selloff to compare project-level economics, fuel availability, and customer deposits. A high-correlation decline without an OKLO-specific financing or licensing setback may create a relative-value long opportunity.
• For 6-18 month nuclear exposure, favor CEG and CCJ over pre-revenue reactor developers. CEG captures scarcity pricing for dispatchable clean generation; CCJ benefits if new-build ambitions translate into procurement demand, though both should be trimmed if power-price forwards or uranium prices weaken materially.
• Set a catalyst alert around SMR’s next project updates: an EPC capex revision, customer commitment, NRC/licensing milestone tied to a funded build, or a disclosed levelized-cost estimate. The thesis is falsified by independently supported operating-cost assumptions below contracted realized power pricing with adequate return after capital recovery.