Small Modular Reactors Will Change CRE: Here's How

As energy demands from data centers, advanced manufacturing, and new tech sectors surge, Small Modular Reactors (SMRs) could offer a potential game-changing solution for commercial real estate down the line. If all goes to plan, these compact nuclear power systems will offer scalable, high-output electricity while meeting rigorous low-carbon standards.

This innovation comes as the push for sustainable energy continues. Now, titans of industry like Amazon, Microsoft, and Google are investing big money in the development of small modular reactors (SMRs). They view it as an innovative solution to meet their ambitious Environmental, Social, and Governance (ESG) goals in the future. 

And while we’re a few years away from their implementation, at full scale, they are poised to change the scope of real estate, technology, and innovation. Because their scalability and electrical power should make them reliable even for the most energy-hungry operations, which makes unprecedented things possible. And their full implementation may surprise you...

Read on to learn:

• How SMR's could reshape the landscape for data centers
• Why nuclear power adoption may be inevitable
• How leading tech companies like Amazon and Microsoft could leverage SMRs
  

What is a Small Modular Reactor (SMR)?

A Small Modular Reactor (SMR) is a new type of nuclear reactor designed to generate nuclear energy at a smaller, scalable capacity compared to traditional nuclear power plants. Unlike large reactors, SMRs are compact, modular units that offer flexibility for municipal power systems and industrial applications.

Developed under initiatives like the Advanced Reactor Demonstration Program and regulated by bodies such as the Nuclear Regulatory Commission (NRC), In theory, SMRs will integrate passive safety systems to ensure stability, even without human intervention. Experts suggest that nuclear power will be the next evolution in the energy transition toward sustainable electricity generation.

SMR's would be able to produce low-carbon power reliably, positioning them as a critical tool in the race for carbon neutrality. 

With their compact and efficient design, SMRs offer a promising answer for a variety of high-demand applications like data centers. And as technology advances and power demands continue to rise, SMRs may indeed be poised to play a pivotal role in the energy landscape. But is their adoption inevitable?

SMRs’ Impact on Data Centers and Industrial Real Estate

The data center sector, essential for cloud computing and digital infrastructure, is notoriously energy hungry.

Data centers require uninterrupted power, often relying on multiple backups and complex energy arrangements.

SMRs promise a reliable, clean alternative, offering stability for data centers without the need for extensive backup systems powered by fossil fuels.

SMRs pave the way for a shift in energy infrastructure. Here’s two examples how:

1. Location Flexibility and Reduced Grid Dependence
   SMRs can be located near data centers, distribution facilities, and factories, reducing dependency on traditional grid systems. This opens more flexible location choices for data center developers and industrial operators, especially in areas where renewable energy isn’t feasible.
2. Enhanced Operational Efficiency
   For sectors such as data centers or power authorities, uninterrupted energy is crucial for efficiency. SMRs can provide this reliability, particularly beneficial in regions prone to grid instability. They ensure continuous operations, which is a significant advantage for supply chain resilience.

New technology like the SMR is rolling out as the demand for data centers in the industrial sector continues to increase. It's worth mentioning that access to this technology will likely be isolated to hyperscalers even when it comes on line. Prohibitive costs and regulations will lock most players out of the game. Even so, they will most likely only appear in the most energy-hungry of causes like data centers. These facilities are booming with interest, much of which can be traced back to AI.

The data center industry, responsible for housing the internet, experienced a remarkable acceleration last year as both individuals and businesses widely adopted AI tools. The competition in this arena is fierce, with prominent tech companies such as Microsoft, Google, Oracle, and Amazon racing to secure a competitive edge on the new frontier of AI. 

And now as Amazon has gone fully in on SMR's, the rest will likely race to keep on top of the trend. Amazon CEO, Matt Garman explained why the corporation is looking to nuclear power in the future.

Google is also going all in. With major investments in companies developing the nuclear technology, it's not a matter of if, but when SMR's will become full-scale. 

Is Nuclear Power Inevitable? 

Renewable energy sources like wind and solar have made great strides, but they face two critical limitations: reliability and scalability. Wind and solar power are inherently intermittent, meaning they depend on weather and daylight conditions that can’t guarantee a consistent, round-the-clock power supply. While storage technology is improving, battery capacity remains limited and costly, making it hard to bridge the reliability gap. Even as renewable infrastructure scales, its spatial and land-use requirements are vast—land that could serve agricultural or natural purposes must often be repurposed for solar fields or wind farms.

Additionally, the energy density of renewables is far lower than that of nuclear power. With SMRs, the space required to generate a steady 4 MW of power is about the size of a tennis court. Compare this to a solar installation, which would need more than 100 times that area to produce comparable energy, and it’s clear why SMRs provide a unique advantage.

SMRs can eventually offer a quick, flexible way to replace fossil fuel-powered plants without compromising energy availability or reliability.

Their compact size and modular design allow them to be installed in diverse locations, including remote or off-grid sites, making clean energy accessible almost anywhere. Further, unlike traditional nuclear reactors, SMRs come with built-in safety features like passive cooling, reducing risks and the need for large exclusion zones.

Because they are built on modular designs, SMRs can be manufactured and deployed at scale quickly, potentially supplying customer sites and other urban locations with high-density energy solutions by 2028. This modular approach can allow production rates to ramp up to 50 units per year for businesses, accelerating the transition from fossil fuels.

Can SMR's Power Electric Semi Trucks?

With industry leaders like Amazon pioneering the shift, SMRs could even power the next evolution of logistics and help modern commercial real estate meet future energy demands. So let's take a quick look at what could be possible down the pipeline. 

Ambitious innovations like electric semi-trucks for industrial shipping are more feasible than ever. Because the massive roadblock up until this point has been generating sufficient power needed to charge these giants. 

These trucks require massive power for long hauls, a challenge that SMRs can meet by providing consistent, low-carbon electricity right where it’s needed most.

So, advancements with SMR's support the electrification of industrial shipping but also aligns with the broader push for sustainable practices in commercial real estate.

PepsiCo’s Modesto Facility was the first to integrate electric semis in their shipping. In the past few years, the company has worked in collaboration with the California state government and Tesla to cut 91% of their greenhouse gasses through a transition away from diesel to electric. This success is hard to ignore, and similar moves may be coming as states like California pledge to close their borders to diesel trucks by the year 2035.

It's important to note that PepsiCo was required to build out the power infrastructure beyond typical industrial scope on the Modesto Facility. They installed four megachargers, each capable of charging 750 kilowatts. Local utilities were not previously sufficient, and the infrastructure team had to bring additional power to the site. Such a system would take a single truck about an hour to charge with 400 miles of range.

This is exactly the major upfront investment that's withheld widespread implementation of electric semi-trucks. But in the next decade, SMRs may eliminate the infrastructural hurdles that currently impede the transition to electric fleets.

This would revolutionize the landscape, turning ambitious energy goals into achievable realities. Not to mention that the ability to harness this advanced energy technology could become a crucial competitive advantage. So, the race is on.

Takeaways for Tenants

Small Modular Reactors (SMRs) are paving the way for a transformative shift in modern industrial applications, particularly for corporate tenants in energy-intensive sectors. These compact, scalable power sources ensure reliable energy for data centers and advanced manufacturing, aligning with sustainability goals while enhancing operational efficiency. As corporate giants like Amazon invest in SMR technology, businesses can gain a competitive edge in the evolving market landscape.

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