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Small is beautiful

Publish Date:

Friday, April 7, 2017 7:15 am PDT

News Organization:

Physics World

Jose Reyes is the co-founder and chief technology officer of NuScale, an Oregon-based firm that designs and markets small modular reactors. Here, he shares his experience of starting the company

What was your career like before you founded NuScale?

I’d always been focused on safety research related to nuclear power. I started my career at the Office of Research at the US Nuclear Regulatory Commission, and in 1987 I joined the nuclear engineering faculty at Oregon State University. While I was there, I got to work on Westinghouse’s AP600 nuclear power plant, which was the first design that used passive safety systems to cool the nuclear core. Then, in 2000, I got a grant from the Department of Energy to develop a small reactor that could be manufactured in a factory and shipped to a site where it would operate for roughly 8–10 years with a sealed nuclear core. The idea was that when you needed to refuel, you would just swap out a module, ship it back to some refurbishing plant and insert another module in its place – kind of like replacing a battery.

At what point did you decide that this was no longer a project, but a potential company?

The lights came on when I saw there was a global market for it. In 2004 I spent a sabbatical year working with the ­International Atomic Energy Agency (IAEA) in Vienna, and in talking to representatives from IAEA member states, I learned that they were looking for something that was clean, easy to deploy and small – many countries don’t have grids big enough to support a 1000 MW plant. The design I was working on fitted their requirements. However, they also told me that before they would ever deploy a concept like mine, it needed to be built in the US first, because that would mean it had gone through some serious vetting in terms of its financial viability. They also wanted to see it certified in the US, because they wanted to know that this was not an experiment, and that it had been approved in terms of safety. So when I came back to the US in 2005, I got involved in a commercialization programme at Oregon State, which teamed me up with a business partner to get started.

Who did you bring in to help you?

My first partner was Paul Lorenzini, a former president of Pacific Power and Light. He was the first person to earn a PhD in nuclear engineering from Oregon State, and on top of that he was an attorney – it was a great combination. Between 2005 and 2007 we spoke to some investors and I continued developing the initial patents. When it came time to form the company, Paul agreed to serve as the CEO while I served as the chief technology officer. His function was primarily to interface with investors and potential customers; mine was to hire the critical personnel and create an organizational structure for the design teams. The first people we brought in were professional engineering and operations staff, typically with 10 to 20 years of commercial nuclear power experience. Many of them had strong ties to Oregon State; I thought about some of my best students and gave them a phone call.

How did you get funding?

An angel investor gave us money to travel and try to garner investment from larger entities, and then our first big investor, a group called CMEA Capital, put in about $9.5m in early 2008 to get us going. We opened our doors at a small former bank building in February that year and fairly quickly got up to a staff of about 35. But the process of getting a new nuclear design certified is very lengthy and very expensive, and if you tell a venture capital organization that it’s going to be 10 to 15 years before they receive a return on their investment – well, that doesn’t align well with most venture capital models! What helped us significantly was that in 2011 Fluor Corporation became our strategic partner. Fluor is an engineering and construction firm and wants to build the nuclear power plants, so is looking to receive most of its return on investment then.

As a side note, I also came across some pharmaceutical companies that understood the kind of investment we were after. To take a new drug from the lab to the market these days requires about 10 years and $5bn; to build a nuclear power plant it’s more like a 15-year investment and $1bn. There are also similarities in terms of innovation and patents. The US Congress passed a bill to extend the lifetime of patents for pharmaceuticals, mostly because it takes so long to develop a new drug that by the time you do it, your patents are about to expire. We have a similar situation: some of our patents will be expiring by the time the plants are in operation. Having a patent extension would really encourage innovation in nuclear.

What are your plans for the future?

We’ve just submitted our design for regulatory approval, which was a huge event. A total of around 800 people worked on it, expending about 2 million labour hours to complete our 12,000-page application. If the application is accepted as complete, the next step will be an approximately 40-month review process. After that, we have a first customer lined up, which is a utility called Utah Associated Municipal Power Systems (UAMPS). It would like to build a 12-module NuScale plant at the Idaho National Laboratory and have it go into operation by 2026. Like many other utilities in the US, UAMPS has quite a few ageing coal-fired plants, and they would like to replace some of them with nuclear. In addition, our modular structure gives them a lot of flexibility. If they close down a 150 MW coal-fired plant, they can put in three of our 50 MW modules, and then if they close down more, they can just add modules as needed.

What do you know now that you wish you’d known when you were just starting out?

I think with any innovative design, perhaps especially any innovative nuclear design, it’s very difficult to scope out the magnitude of the effort (and funding) required. Now that we’ve submitted our design certification application to the regulator, hopefully the lessons that we’ve learned will make the next start-up a bit easier. We now have actual data on how many labour hours were spent on the design, how much money we needed, and how many staff were required to move the design forward. That’s something we will share with others.

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