Key Points
Oklo plans to build and operate small nuclear reactors, selling electricity to customers through long-term agreements.
Its reactors could be cheaper to build than conventional power plants, but initial deployments will still have high costs.
If you've been on the fence about Oklo (NYSE: OKLO) this year, enjoy the view. Oklo, the small nuclear reactor developer, has plenty of ambition, and I certainly understand the temptation to buy shares before its Aurora design becomes a commercial operation.
But before investing in this nuclear stock, I think a clearer picture of when its power plants will start generating electricity, as well as the cost of building them, is needed. Here's why I think most investors can afford to wait.
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Oklo still has to prove its power business
For starters, Oklo is a nuclear reactor developer with plans to build and operate its Aurora power plants, selling electricity through long-term agreements. Its potential clientele includes tech companies and data center operators -- who need exactly the kind of around-the-clock juice Oklo plans to sell -- as well as other large power users, like industrial facilities and military bases.
So far, so good. The problem I foresee right now isn't that Oklo will be without interested clients (it has a potential customer pipeline of 14 gigawatts). Rather, it's the uncertainty about what these nuclear power plants will cost that gives me reason to pause.
Here's the thing: We already know that conventional nuclear power plants are very expensive to build. Small nuclear reactors promise to be cheaper, but as the U.S. Department of Energy has pointed out, their initial deployments will still carry a high price tag.
Consider, for example, NuScale Power (NYSE: SMR), another small-reactor developer. Earlier this decade, NuScale was working with Utah Associated Municipal Power Systems, a group of public power utilities, on a proposed six-reactor plant at Idaho National Laboratory. The estimated cost for this project jumped from $5.3 billion to $9.3 billion before it was canceled in November 2023.
A 2023 report by the Institute for Energy Economics and Financial Analysis put that $9.3 billion price tag into perspective. Per kilowatt, NuScale's 462-megawatt plant would have been as expensive as the two newest reactors at Georgia's Plant Vogtle. Together, those reactors have a capacity of about 2.2 gigawatts -- nearly five times what NuScale's plant was designed to generate.
Therein lies my concern for Oklo: Small reactors don't mean cheap reactors, at least not at first. Higher prices, in turn, could discourage potential buyers and increase Oklo's funding needs, potentially diluting existing investors if it needs to issue more shares.
That's why, for me, a long list of interested customers isn't enough to convince me that this stock is a strong buy. I'd want a clearer picture of what those projects will cost and, ultimately, what shareholders stand to earn before I recommend this growth stock to investors.
Steven Porrello has positions in NuScale Power and Oklo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.