Washington (Platts)--20Jan2012/426 pm EST/2126 GMT

Pittsburgh-based engineering company Westinghouse Friday said it will apply for government funding to advance nuclear technology that would produce a new type of small reactors.

The US Department of Energy announced earlier Friday that it is seeking applications for two grants, estimated to total $452 million over five years. The funds will pay up to half the cost of developing and deploying up to two small modular reactor designs.

The DOE's announcement launches an Obama administration initiative to position the US to lead the world in SMR technology, which the president and Energy Secretary Steven Chu have said will boost exports and create domestic manufacturing jobs. But the program has been delayed for more than a year by congressional standoffs on how to fund the federal government. The DOE's SMR program received $67 million for fiscal 2012, which ends September 30. Funding levels in future years will depend on congressional appropriations.

The department defines SMRs as reactors of 300 MW or below. "The government is particularly interested in SMR designs that incorporate passive safety features," which rely on physics -- such as gravity -- instead of mechanical means or human interference to keep the reactor safe, DOE said Thursday in a draft funding opportunity notice Thursday.

It also said DOE will only consider applications for SMR designs that can be licensed by the US Nuclear Regulatory Commission and begin commercial operation in the US by 2022. Applications that propose an earlier deployment date will be considered favorably, it said.

Westinghouse said it will apply for the DOE grant "with a consortium of utilities," but did not disclose its partners. The firm is developing a 200-MW reactor design.

Westinghouse has benefited before from a similar government program. Through the DOE's Nuclear Power 2010 program, the government shared the licensing costs for the design certification of the company's AP1000 reactor, approved late last year by the US Nuclear Regulatory Commission, said Leslie Kass of the Nuclear Energy Institute, the Washington lobbying house for the nuclear industry.

Kass, senior director of business policy and fuel supply at NEI, said the government can speed deployment of SMRs with its new funding initiative by reducing the investment needed by companies developing reactor designs. Three other companies in the US are known to be developing SMR designs that could be deployed in the next 10 to 15 years -- Babcock & Wilcox, Oregon startup NuScale Power and Holtec International.

While existing conventional large reactors have been built with thousands of pieces assembled at the plant site, SMRs "could be made in factories and transported to sites where they would be ready to 'plug and play' upon arrival, reducing both capital costs and construction times," DOE said in its Friday statement.

"The small size also makes SMRs ideal for small electric grids and for locations that cannot support large reactors, providing utilities with the flexibility to scale production as demand changes."

DOE is taking industry comments on the draft funding opportunity notice before making it final, the statement said. --Yanmei Xie, yanmei_xie@platts.com --Bill Freebairn, william_freebairn@platts.com