With federal funding windfall, X-energy advances small nuclear reactor

The federal government has thrown its weight into reviving America’s long-stagnant nuclear industry, and X-energy’s first-of-a-kind reactor project is among the biggest beneficiaries so far.

The U.S. Department of Energy last month said it would award $1 billion to X-energy, an Amazon-backed advanced nuclear startup working to bring four novel 80-megawatt electric reactors online at a Dow Chemical facility in Seadrift, Texas, in the early 2030s.

The award nearly doubles the federal government’s commitment to X-energy, following a $1.2 billion investment in early 2021. Both tranches were structured as 50-50 cost-sharing agreements under the DOE’s Advanced Reactor Demonstration Program, launched in 2020 to commercialize next-generation nuclear technologies.

X-energy’s Seadrift project now enjoys a level of federal funding that rivals any other advanced nuclear development in the nation. The Bill Gates–backed TerraPower’s commercial demonstration project in Wyoming, which broke ground earlier this year, has also been awarded up to $2 billion in cost-sharing funds through the ARDP.

The X-energy project does not yet have a license from the Nuclear Regulatory Commission, though it received a key environmental approval in May and expects the regulator to green-light reactor construction in early 2027. Only TerraPower and the Google-backed startup Kairos Power currently have NRC construction permits.

Nuclear energy has struggled in recent decades in America, but surging energy demand and a desire by some states and companies to secure carbon-free electricity have revitalized the industry. Tens of billions of dollars in public and private funding are now flowing into a crop of startups looking to build advanced reactors — as well as efforts to restart or build new large-scale reactors like the 96 America already has.

For the nuclear renaissance to truly arrive, however, these new projects need to be completed on a reasonable timeline and at a reasonable cost. Blown deadlines and blown budgets have dogged the industry, and in 2023 contributed to the dissolution of the first small-modular reactor project with an NRC-approved design.

In early 2023, before it had fully engaged with Dow or selected Seadrift for its commercial debut, X-energy estimated the cost of completing the full ARDP scope between $4.75 billion and $5.75 billion.

X-energy has not publicly updated its cost estimates since then, though the federal funding of up to $2.1 billion implies at least $4.2 billion will be spent on the project. In securities filings this year, however, it said that it faces the same broad inflationary and trade-related pressures that have pushed up costs for natural gas, renewables, and other types of energy infrastructure.

CEO J. Clay Sell told investors and stock analysts on an Aug. 13 earnings call that he expected the government to contribute more funding as needed.

“I’m confident to the extent more dollars will be required, they will be provided by our partners at the Department of Energy and Commerce,” he said. ​“We’ll see where the number ends up.”

Andrew Kleiman, an energy transition research analyst with Wood Mackenzie, said there’s no indication yet that X-energy’s final project costs will be substantially higher than its 2023 estimate.

As of June 30, the DOE had reimbursed X-energy for about $546 million in spending under the ARDP agreement.

The agreement covers the design and licensing of the Xe-100, its standard plant; design, licensing, and construction of TX-1, its first commercial fuel-fabrication facility near Oak Ridge National Laboratory in Tennessee; and construction of its first commercial plant at Dow’s Texas site. The company remains on track to open TX-1 in the first half of 2028, it said last month.

Unlike conventional reactors, which use water to control the nuclear reaction and transfer heat for power generation, high-temperature gas reactors like the Xe-100 use graphite to control the reaction and helium or another inert gas to transfer heat. The Xe-100 also uses a special type of uranium-based fuel, called TRISO, that is expensive but designed to withstand the superhot conditions in the reactor core.

The Xe-100’s high operating temperatures and stability make it ideal for providing both heat and power to industrial operations like Dow’s Seadrift petrochemical plant. If built, the Seadrift reactors will replace Dow’s aging steam and power generation assets, reducing the facility’s annual greenhouse gas emissions by approximately 440,000 metric tons.

The chemicals giant is expected to make a final investment decision on the project in 2028 at the earliest.

“Dow’s partnership with X-energy is not purely financially motivated,” Kleiman said in an email, pointing out that the firm aims to reduce its annual emissions by 5 million metric tons from 2020 levels by 2030. Backing out of the project and instead using fossil-fueled alternatives ​“would require the company to take a step backward in reaching its sustainability goals.”

X-energy’s original ARDP partner was Energy Northwest, a Washington electric utility. In 2023, it backed out of the arrangement as Dow stepped up.

“As an at-cost developer and provider of electricity to public power utilities, Energy Northwest does not have the significant development capital on hand to initiate this project without a committed off-taker, compared to a company such as Dow,” it said at the time.

Energy Northwest eventually found that offtaker in Amazon, which is bankrolling up to 12 Xe-100s at a central Washington site controlled by the utility. That project is at an earlier stage of development than Seadrift.

In total, X-energy’s commitments with Dow, Amazon, and the United Kingdom–based energy company Centrica call for as many as 144 Xe-100 reactors built worldwide, the company said in a securities filing last month.

X-energy’s current cost estimates cover the Seadrift project and the company’s TX-1 fuel facility, making it hard to know exactly how much one reactor would cost and at what price it could deliver power.

Estimates are more readily available for other advanced reactor designs. Wood Mackenzie expects the Tennessee Valley Authority and GE Vernova Hitachi to spend more than $14,000 per kilowatt to bring a 300-MW electric BWRX-300 reactor online in Tennessee early next decade, Kleiman said. (The federal government is chipping in for that project, too, and the NRC is ​“approaching a decision” on the development.)

Wind and solar developers spent well under $2,000 per kilowatt to bring utility-scale projects online in 2022, according to the U.S. Energy Information Administration, though their costs have risen in recent years.

X-energy’s initial reactor is likely to be more expensive than the BWRX-300. The Xe-100’s underlying high-temperature gas technology has limited operational history and relies on costly TRISO fuel, whereas the BWRX-300 is ​“an evolution of GE’s conventional [reactor], which makes up one-third of operating U.S. nuclear fleet and utilizes conventional fuel which is already licensed, produced at scale and has an established supply chain,” Kleiman said.

Ontario Power Generation is expected to bring the world’s first BWRX-300 online in 2030.

It’s inevitable that the first commercial advanced nuclear reactors will be more expensive to deploy than more mature power-generation technologies — and costlier than the next iterations of those same reactors.

That’s why Judi Greenwald, president and CEO of the Nuclear Innovation Alliance, said the best way to drive down the cost of nuclear development is to build more of the same design. The second AP-1000 reactor at Georgia Power’s Plant Vogtle cost about 30% less than the first, she noted.

“There is a huge difference between these early-mover projects and what’s going to happen when we get to ​‘nth-of-a-kind.’… It’s expected that early-mover projects are going to have higher costs,” she said.

“We have to get to the point where we’re doing order books” for multiple reactors in sequence, Greenwald said. 

X-energy has certainly built out a meaningful order book. Now, it needs to deliver on the reactors.