De-risking the commercialization of advanced nuclear reactors through innovative financing vehicles
PI: Nonna Sorokina (Business Division)
Plan for funding tuition for graduate students, or the remainder of the researcher’s salary for postdoc and research faculty: Self funded
As global energy demand continues to grow, the need for reliable, scalable, and clean energy solutions has become more urgent than ever. Advanced nuclear reactors, particularly microreactors, offer significant advantages in this transition, including scalability, lowcarbon emissions, and the ability to provide power to remote or underserved areas. Recent commitments from leading technology companies like Microsoft, Amazon, and Google to explore nuclear energy highlight the growing recognition of its potential in achieving energy resilience and sustainability.
Despite their promise, nuclear microreactors face substantial financial barriers, including high upfront costs, slow returns on investment, and delays tied to regulatory and technical challenges. This project seeks to address these challenges by developing innovative financial tools to attract investment and accelerate the deployment of microreactors.
We aim to design and test three innovative approaches to overcome these barriers. First, we will create models that pool investments across multiple microreactor projects, spreading risks and providing more stable returns for investors. Second, we will explore ways to turn future revenue from these reactors into tradeable financial products, making investments in clean energy more attractive. Third, we will design a government-backed insurance-like tool to protect investors against project delays while encouraging timely completion.
This work brings together experts in nuclear engineering, finance, and sustainability to address the financial challenges that hinder clean energy innovation. The results will lay the foundation for broader research and funding proposals, advancing practical solutions to scale nuclear microreactors and build a more sustainable and resilient energy future.
Projective Objective and Relevance to External Opportunities: The goal of this project is to develop innovative financial frameworks that attract investment and facilitate the scalable deployment of advanced nuclear reactors, addressing challenges related to high initial costs, slow returns, and operational delays. This effort will focus on preparing preliminary models, data, and insights tailored to external fundings such as Sloan Foundation’s Energy and Environment Program priorities, NSF Economics, DOE grants, NRC grants, U.S. Energy Foundation grants and other funding opportunities related to promotion of sustainable energy. Our research aligns with objectives of those grants fostering energy resilience, equity, and decarbonization. By laying a foundational understanding of investment strategies, this project will provide the groundwork for advancing comprehensive solutions to support the commercialization of advanced nuclear reactors.
Research Scope: We plan to create and analyze investment models specifically tailored to advanced nuclear reactor deployment. These models will focus on how portfolio theory and securitization can be adapted to attract and sustain funding for microreactors, addressing both investor risk and capital scarcity.
Portfolio theory suggests that by pooling investments across various nuclear microreactor initiatives, the overall risk profile can be reduced through diversification, providing a more stable return for investors. This approach is crucial for mitigating the high risk associated with deploying new energy technologies on a large scale. By developing portfolio-based models, we aim to establish frameworks that encourage investment across multiple reactor types and projects, lessening the impact of any single project’s underperformance.
Similarly, securitization offers potential for financing by converting projected revenue streams from microreactors into financial instruments that can be traded. This model has been successfully applied in infrastructure and real estate markets and shows promise for energy sectors. We propose creating and testing these securitization-based models using quasi-simulations based on historical market data, allowing us to estimate their viability and effectiveness in a controlled environment before real-world application. Additionally, incorporating government-backed instruments or loan guarantees into these models could provide extra security for investors, further enhancing attractiveness.
Furthermore, to enhance investor confidence and mitigate financial risks associated with nuclear microreactor investments, we propose a Credit Default Swap (CDS) – like financial instrument with government backing. This instrument would provide a hedge for investors in securitized products tied to projected reactor revenue streams, offering insurance against potential delays or project failures while encouraging timely milestone completion. Under this model, the government issues the CDS to investors, who pay a premium to secure this protection. These premiums could offset the costs of related government-backed loan guarantees or other support mechanisms offered to the reactor project. Unlike traditional CDS instruments, this CDS-like contract would define default events as specific construction and operational milestones within the reactor project. If a milestone is missed, the instrument triggers a payout to investors, protecting their investment. To align incentives, a portion of the payout liability could be shared with the reactor company, creating a collaborative risk model. This shared responsibility ensures both the government, and the reactor company are invested in meeting project timelines, strengthening the likelihood of successful project delivery.
By building and testing these models, we hope to enable financial frameworks that facilitate the large-scale adoption of nuclear microreactors, supporting the transition to cleaner, more reliable energy sources.