Rolls-Royce (RR.L) stock popped on Tuesday morning in London following news that it had been cleared by a consortium of private investors and the UK government to develop small nuclear reactors.
The reactors, which would be part of the drive to generate clean energy, were backed to the tune of £195m ($264.5m) from private firms and a £210m grant from the government as part of the government’s green 10 point plan to kickstart the green economy over the next decade. The project is also set to receive a second phase top-up of £50m from Rolls-Royce.
The initiative could create 40,000 jobs by 2050.
About a fifth of the UK's energy is currently generated by nuclear reactors, but a gap looms as more than half of the country’s 7.8GW of nuclear capacity is due to retire by 2025.
A single Rolls-Royce SMR power station will occupy the footprint of two football pitches and power approximately one million homes.
It can support both on-grid electricity and a range of off-grid clean energy solutions, enabling the decarbonisation of industrial processes and the production of clean fuels, such as sustainable aviation fuels (SAF) and green hydrogen, to support the energy transition in the wider heat and transportation sectors.
“This is a once in a lifetime opportunity for the UK to deploy more low carbon energy than ever before and ensure greater energy independence," said business secretary Kwasi Kwarteng.
"Small Modular Reactors offer exciting opportunities to cut costs and build more quickly, ensuring we can bring clean electricity to people’s homes and cut our already-dwindling use of volatile fossil fuels even further."
The company said that nine-tenths of an individual Rolls-Royce SMR power plant will be built or assembled in factory conditions and around 80% could be delivered by a UK supply chain — a unique offering in energy infrastructure in the UK.
Much of the venture’s investment is expected to be focused in the North of the UK, where there is significant existing nuclear expertise.
Rolls-Royce stock was up 3.8% by 9am in London.
The government hopes the investment in SMRs will lead to a quicker and less costly roll out than traditional large-scale nuclear reactors. The 3,200 megawatt Hinkley Point C project was initially expected to cost £18bn but ended up pricing in at about £23bn as EDF and ministers struggled to agree a new funding framework for a successor project at Sizewell C in Suffolk.
Traditional nuclear reactors face huge construction risks which can lead to spiralling costs and delays.