Rolls-Royce says its plan to fuel the artificial intelligence boom with nuclear energy could propel it to the top of the UK’s corporate rankings.
The engineering giant has struck agreements to supply small modular reactors (SMRs) to both the UK and Czech governments, a move it believes could drive unprecedented growth.
READ ALSO: Rolls-Royce Boss Forecasts More Profit Growth
Since 2022, AI has surged in global popularity, but its vast energy demands have sparked environmental and logistical concerns. Rolls-Royce argues its SMRs offer a clean, reliable solution capable of powering data-hungry AI systems while cutting carbon emissions.
Chief executive Tufan Erginbilgic has overseen a ten-fold increase in Rolls-Royce’s share price since taking over in January 2023.
However, he has ruled out the idea of Rolls-Royce seeking to list its shares in New York as British chip designer Arm has done and the likes of Shell and AstraZeneca have considered in the search for higher valuations.
“It’s not in our plan,” said Mr Erginbilgic, a Turkish energy industry veteran. “I don’t agree with the idea you can only perform in the US. That’s not true and hopefully we have demonstrated that.”
Rolls-Royce already supplies the reactors that have powered dozens of nuclear submarines. Mr Erginbilgic said the company has a massive advantage in the future market of bringing that technology on land in the form of SMRs.
He estimates that the world will need 400 SMRs by 2050. At a cost of up to $3bn (£2.2bn) each, that’s another trillion dollar-plus market he wants and expects Rolls-Royce to dominate.
The company has signed a deal to develop six SMRs for the Czech Republic and is developing three for the UK.
But it remains an unproven technology. Mr Erginbilgic conceded he could not currently point to a working SMR example but said he was confident in its future potential.
There are also concerns about the demands on water supplies from the data centre and SMR cooling systems.
In response, companies including Google, Microsoft and Meta have signed deals to take energy from SMRs in the US when they are available. Rolls-Royce sees SMRs as key to its future, but its biggest business is aircraft engines.
Already dominant in supplying engines to wide-bodied aircraft like Boeing 787 and Airbus A350, it plans to break into the next generation of narrow-bodied aircraft like the Boeing 737 and Airbus A320. This market is worth $1.6tn – nine times that of the wide-bodied .
Rolls-Royce is a bit player in a market that has powerful and successful leaders, and that rival Pratt and Witney lost $8bn trying and failing to break into.
The market is dominated by CFM International a joint venture between US-based GE Aerospace and French company Aerospace Engines.