Reactors would cost around £2bn each and be about a tenth of the size of full scale plants
Up to 16 small nuclear reactors could be built across the UK following the creation of a firm by Rolls-Royce to develop the schemes.
A £195m cash injection from private firms and a £210m grant from the government has been used to set up the Rolls-Royce Small Modular Reactor (SMR).
The new firm will use the money to develop new designs for small modular reactors, which are about a tenth of the size of full-scale reactors.
The investment from Rolls-Royce Group, BNF Resources, Exelon Generation will then be used to take the designs through regulatory processes to get approved for use in the UK.
Each plant could generate 470mw of power, equivalent to more than 150 onshore wind turbines and enough to power around one million homes, the firm said.
The sites would cost around £2bn to build, compared to the £20bn construction cost of Hinkley Point C.
Parts for the reactors could be produced offsite factories and then transported to site by roads, further reducing cost and delivery times.
The firm will start searching for sites to manufacture the parts, with the majority of investment expected to be located in the north of the UK where there is more existing skills in nuclear energy.
Business secretary Kwasi Kwarteng said the creation of the firm was a “once in a lifetime opportunity for the UK to deploy more low carbon energy than ever before and ensure greater energy independence”.
He added that the reactors could be cheaper and quicker to build, “ensuring we can bring clean electricity to people’s homes and cut our already-dwindling use of volatile fossil fuels even further”.
Chris Ball, managing director of nuclear and power at Atkins, which has also worked on the scheme, welcomed the announcement and said both small and conventional reactors will “play a critical role in delivering reliable, carbon-free electricity to fuel the UK’s Net Zero ambitions.”
“The UK must achieve an unprecedented build rate to transform its energy infrastructure and the modular design and swift construction potential of these SMRs means they could play a significant role in meeting the UK’s ambitious targets.”
And CBI director-general Tony Danker said the investment was a “hugely promising milestone for a technology that can not only boost the economy but help deliver a greener and more secure energy system overall”.
But campaigners have said that the reactors are more expensive than renewable technologies and warned that the new reactors are unlikely to be operational before the end of this decade.
The government earmarked £120m for the development of small modular nuclear reactors in its net zero strategy, published last month.
It is eyeing a number of potential sites for the reactors, including Wylfa in Anglesey where two nuclear reactors have been decommissioned in the past decade.
Ministers have also committed to green lighting a new full-scale nuclear reactor scheme during this parliament, expected to be Sizewell C in Suffolk.
The Department for Business, Energy and Industrial Strategy has previously said negotiations over the £20bn scheme, which has come under fire from campaigners for its hefty price tag, would be subject to agreeing a value-for-money deal before a final decision to proceed can be taken.