Small nuclear reactors are experiencing a boom, but they face significant hurdles in production.

Investor optimism drives the industry, but the reality is complicated

Nuclear energy is experiencing a period of rapid growth. Startups operating in this sector are attracting increasing investments, and by 2025, the market capitalization has already reached $1.1 billion. Market optimism stems from the belief that smaller, modular nuclear reactors will be a solution to the challenges that traditional nuclear industry has ineffectively addressed over the past years.

Conventional nuclear power plants are massive infrastructure projects. The latest facilities of this type built in the United States — Vogtle 3 and 4 reactors in Georgia — require tens of thousands of tons of concrete, have fuel that stands 14 feet tall, and each is capable of generating over 1 gigawatt of energy. However, their construction took eight years longer than planned, and cost overruns exceeded $20 billion.

Scaling production as a way to solve problems

Young companies in this field see an opportunity in reducing scale. Applying mass production techniques could enable the construction of such devices with fewer delays and within budget. The logic is simple: instead of building one giant facility, build several smaller units, which — thanks to increased production volume — will become cheaper to manufacture.

However, transitioning from small batches to mass production is not an industry-friendly process. Tesla’s history illustrates these difficulties — the company faced significant challenges in scaling Model 3 production, despite operating in the well-established North American automotive industry. American nuclear startups are not deprived of this advantage.

Unhealed wound: material and skills shortages

An increasingly visible obstacle concerns the supply chain and human resources. Milo Werner, general partner at the investment fund DCVC and co-founder of NextGen Industry Group, which monitors capital flows in the manufacturing sector, points out critical gaps. Many specialists in the nuclear industry can list five to ten basic materials that the United States does not produce in sufficient quantities — and meanwhile, they must be imported.

“We forgot how to produce them,” Werner says, who previously led product deployment at Tesla, and before that, managed the launch of four factories in China for Fitbit, a wearable device company. Her experience allows her to see deep dysfunctions in the manufacturing ecosystem.

Capital is not everything — people are missing

Every manufacturing enterprise, regardless of size, faces two main difficulties. The first is capital commitment — factories require enormous financial outlays. For the nuclear industry, this issue should be less burdensome due to the availability of investment funds.

The second obstacle — which the nuclear sector has not overcome — relates to a shortage of skilled personnel. “For forty years, we didn’t build any facilities in the United States,” Werner notes. This temporal gap can be compared to someone sitting still for a decade and then trying to run a marathon. Skills fade.

As a result of decades of moving production abroad, the United States has lost a reservoir of workers with practical experience in both designing and managing manufacturing facilities. Although specialists in these areas exist, there is not enough critical mass for every startup to have a full-time team of experienced professionals — from plant managers to board members and CFOs.

Proximity to innovation centers as a strategy

Protection against waste is an approach Werner observes in many startups across various sectors. Building initial product versions near technical teams allows for continuous iteration of the manufacturing process. This strategy brings production closer to innovation hubs in the United States.

To fully benefit from mass production, the start should be modest. Modular product design is a strategic element — it allows companies to initially produce small quantities while collecting data on process efficiency. These data, ideally showing progress over the long term, should reassure investors about potential risks.

However, economic benefits do not materialize immediately. Companies sometimes assume too optimistically that production experience will quickly reduce costs. Reality shows that achieving this goal takes years, sometimes even decades.