Small Modular Reactors (SMRs) and the Energy Transition: Why Advanced Nuclear is the Next Big Infrastructure Play

The energy transition is no longer a distant vision—it's a race against time. As artificial intelligence (AI) workloads surge and global electricity demand balloons, the world is grappling with a critical question: How do we power the future without compromising climate goals? Enter Small Modular Reactors (SMRs), a technology poised to redefine clean energy infrastructure. The recent Power Purchase Agreement (PPA) between Google and Kairos Power, facilitated by the Tennessee Valley Authority (TVA), is not just a corporate milestone—it's a seismic shift in how we think about energy procurement, risk mitigation, and the commercialization of advanced nuclear technologies. For investors, this signals a rare window to position in a sector that could become the backbone of the 21st-century grid.

The Google-Kairos Power PPA: A Blueprint for Risk Mitigation and Scalability

In 2025, Google's agreement to purchase power from Kairos Power's Hermes 2 Plant—a fluoride salt-cooled, high-temperature reactor (KP-FHR)—marks the first U.S. utility purchase of electricity from a Generation IV reactor. This 50-megawatt (MW) SMR, re-engineered to scale from 28 MW to 50 MW, is not just a technical achievement but a financial and strategic breakthrough. By locking in long-term energy contracts, Google and TVA have created a scalable model that reduces the financial and technical risks for early-stage SMR developers.

The three-party structure—TVA purchasing energy from Kairos Power, which in turn provides clean energy attributes to Google—demonstrates how corporate demand aggregation can de-risk capital-intensive projects. This approach aligns with Google's net-zero goals while enabling Kairos Power to optimize costs and accelerate deployment timelines. The Hermes 2 Plant, expected to begin operations in 2030, will serve as a demonstration project for future reactors, with lessons in design, cost, and regulatory efficiency.

For investors, the implications are clear: SMRs are no longer theoretical. They are transitioning from R&D to commercial reality, with corporate giants acting as both customers and partners. This shift mirrors the early days of renewable energy, where long-term PPAs provided the stability needed to attract capital.

Corporate Demand Aggregation: The AI-Driven Energy Gold Rush

The Google-Kairos Power deal is part of a broader trend: corporate demand aggregation for SMRs is accelerating. Tech giants like Amazon, Microsoft, and OpenAI are now direct stakeholders in nuclear energy, driven by the insatiable demand for AI infrastructure. U.S. data-center electricity use is projected to double by 2028, with AI workloads consuming ten times the energy of traditional computing. SMRs, with their high capacity factors (often exceeding 90%) and modular scalability, are uniquely positioned to meet this demand.

Amazon's $500 million investment in X-Energy and Microsoft's 20-year PPA for Three Mile Island output are emblematic of this shift. These companies are not just buyers—they're investors, developers, and policy advocates. Their involvement is creating a virtuous cycle: corporate demand attracts capital, which drives technological iteration and cost reductions, which in turn make SMRs more competitive with renewables and fossil fuels.

The financial metrics of SMR developers further underscore this momentum. Last Energy, for instance, has secured $32 billion in commercial agreements for 80+ reactor units, targeting a per-unit cost below $100 million. X-Energy's $700 million Series C-1 round in 2025—its largest funding round to date—reflects investor confidence in its Xe-100 reactor design, which can scale to 960 MW in multi-unit configurations. Meanwhile, TerraPower's $1 billion in funding, including a $250 million investment from SK Group, highlights the global appetite for advanced nuclear.

Why Now? The Convergence of Policy, Technology, and Market Forces

The SMR boom is being fueled by a perfect storm of factors:
1. Policy Tailwinds: The U.S. Inflation Reduction Act (IRA) and state-level initiatives like California's $1.4 billion loan for Diablo Canyon are creating a regulatory environment that rewards long-term energy planning. The Advanced Reactor Demonstration Program (ARDP) is also providing critical funding for first-of-a-kind projects.
2. Technological Advancements: SMRs leverage modular construction, passive safety features, and advanced fuels like TRISO-coated particles. These innovations reduce costs, shorten deployment timelines, and address public concerns about nuclear waste and safety.
3. Corporate Demand: As AI and electrification drive energy demand, corporations are no longer passive consumers—they're active participants in energy markets. This shift is creating a new class of creditworthy buyers willing to sign long-term PPAs, which are essential for SMR financing.

Investment Thesis: Positioning for the Grid of the Future

For investors, the SMR sector offers a compelling mix of high-growth potential and strategic infrastructure value. Here's how to approach it:
- Prioritize Proven Models: Companies like Last Energy and X-Energy, which have secured commercial agreements and regulatory milestones, are better positioned to scale than those in early-stage R&D.
- Diversify Across the Supply Chain: Beyond reactor developers, opportunities exist in uranium enrichment, fuel fabrication, and waste management. Newcleo's integrated ecosystem approach, for example, could capture value across the nuclear value chain.
- Leverage Public-Private Partnerships: The U.S. Department of Energy's $303 million in funding for Kairos Power and Radiant Industries' $303 million in ARDP support highlight the importance of government-backed risk mitigation.

The risks are real—regulatory delays, high upfront costs, and public skepticism remain. But the rewards are even greater. SMRs could unlock a $13.8 billion market by 2032, driven by the need for 24/7 carbon-free energy. For investors with a 10-year horizon, this is not just an energy play—it's a bet on the infrastructure that will power the AI economy.

Conclusion: The Next Big Infrastructure Play

The Google-Kairos Power PPA is a harbinger of what's to come. As corporate demand aggregation accelerates and SMRs move from niche to mainstream, the energy transition is entering a new phase. Investors who act now—targeting companies with strong corporate partnerships, regulatory progress, and scalable designs—will be well-positioned to capitalize on the next decade of grid decarbonization and AI-era energy security. The future isn't just clean; it's modular, modular, and modular.