Could an old form of energy combined with new technologies offer an answer to the net zero conundrum? Small modular reactors (SMRs) — a cheaper, quicker-to-deploy alternative to the large nuclear power plants (LNPPs) that have traditionally dominated the sector — potentially offer a form of fossil fuel–free electricity that could help the world reach its emissions targets. However, a wide range of SMR designs exist or are in development — 68 are listed by the International Atomic Energy Agency (IAEA) — and the lack of a dominant, proven model could curb commitments from utilities and investors.
Most SMR designs are being developed in the US, Russia, and China, but the sector is attracting companies from a large number of countries, even those with limited or no nuclear experience, such as Argentina and Poland. In a major signal of progress, Rolls-Royce was named in June 2025 as the preferred bidder by Great British Energy - Nuclear to build the UK’s first SMRs — a milestone that brings the promise of this technology closer to reality and underscores growing confidence in its commercial viability.
An even wider range of nations is thinking about adopting SMR designs developed by other countries, with over 30 considering, planning, or starting new nuclear power programs, amid projections that meeting 2050 net zero targets may require up to 800 GW of new nuclear capacity — more than double what has been built over the last six decades.
The designs gaining the most traction — along with the costs, regulatory conditions, and supply chains they will need to gain a solid foothold in the market — are summarized below and explored in full detail in the report.
SMRs are defined by the IAEA as having power capacity of up to 300 MWe, and broadly fall into two categories:
The coolants and fuels used in Gen IV reactors may enable them to operate at much higher temperatures than LNPPs without the need for significantly pressurized containment vessels. This would greatly improve safety — a key issue for nuclear power — and enable new industrial applications beyond low-emission power generation, including the production of green steel and ammonia.
A key advantage of SMRs is their modular, factory-based construction. Components are built using standardized processes, which cuts costs and deployment times compared with often bespoke LNPPs.
However, to get SMRs into the market, the firms behind the technology need to prove that it is fit for purpose. While China and Russia have begun to produce power using SMRs, some promising projects elsewhere have faced setbacks. NuScale’s Idaho Falls project was cancelled in November 2023 due to growing concerns over cost overruns, construction delays, and a declining willingness among project stakeholders to bear the risks associated with FOAK development. This is because China and Russia have comparatively fewer regulatory hurdles, and Western utilities want to know that SMRs can work in jurisdictions with regulations and operating environments similar to their own before they commit.
We believe that only a handful of the currently active SMR designs will reach successful commercial deployment, but high uncertainty exists around which will prevail. What appears more certain is that whichever SMR manufacturer achieves the first successful deployment in the West will secure a significant competitive advantage.
Bringing an SMR to market will depend on more than just the manufacturer. An entire ecosystem of stakeholders, including energy companies, regulators, numerous firms along the supply chain, and investors will all be involved.
The financial challenges companies face in rolling out SMRs means that governments must create strategies and legislation to help SMRs along the way. The Danish government’s work with the wind power sector provides a successful path — plans, tariffs, and R&D funding initiatives it put in place during the 1990s encouraged development of the industry, and wind power now produces 54% of Danish electricity, while the country boasts numerous world leaders in the sector.
The costs SMRs will have to achieve to compete with other forms of baseload power will vary by country, with analysis showing the average cost of producing electricity over their lifetime needs to be between €52 €/MWh in Sweden and €119 €/MWh in Greece.
For this to be attainable, SMRs and their components must be compatible with large-scale production to reach economies of scale. In terms of supply chains, SMR designs based on light water technology and that operate in a similar way to conventional reactors may have an advantage over Gen IV designs, as an extensive LNPP international supply chain already exists.
However, while LNPPs are normally tailored to specific customer needs and local regulations, SMRs will rely on common, standardized components manufactured centrally and shipped to the construction site. This is a completely new concept in the nuclear industry that poses challenges for all SMRs. Its viability needs to be proven to win investor support.
The SMR market faces a classic “chicken and egg” dilemma. Many elements within the supply chain will not develop until long-term demand becomes clearer, yet SMR technology will not be deployed unless the supply chain supporting it is in place. Success requires everything to fall into place simultaneously.
A recent surge of investments has expanded the global SMR project pipeline by 65% since 2021, pointing to SMRs’ potential as an attractive value proposition. The industry and its ecosystem are clearly at a tipping point, with major progress toward commercialization. However, with no Western SMR near completion, the promise of this new nuclear technology still has a long way to go to become reality.
Achieving this will require a coordinated push by the entire nuclear ecosystem, led and encouraged by governments through financial subsidies, supportive environments, and harmonized international guidelines. Only in this way will dominant SMR designs emerge, de-risking investments and enabling an industry that can safely deliver green power globally.
Download and read Arthur D. Little’s “The Growth & Future of Small Modular Reactors” in full to find out more.
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